Systematic Macro Models: The Set Up Into ISM (03/08/26)
Proprietary systematic macro models · daily signals across rates, equities, FX, commodities and crypto
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Today's Tear Sheets
The full daily pack is attached below · six PDFs generated from the same computed data set as this note:
Macro Regime · curve regimes, growth x inflation quadrant, breadth, credit, vol term structure, liquidity, stock-bond correlation, crypto cross-asset, housing
Fixed Income · UST complex, global curves, Fed/ECB/BoE/BoJ implied policy paths, global 2Y and 10Y panels
Equities · index pages, relatives, vol suite, global relatives, Mag7+ quant sheet, options surfaces
FX · majors dashboards, correlations, COT positioning, crosses
Commodities · energy, metals, agriculture, COT crowding, term structure
Crypto · BTC ladders, ETH, macro correlations, ETF flow proxy
Every number in this note is computed by the desk's own systematic engines across 44 markets, then read in plain language. Five minutes and you're caught up.
Where We Stand
Yesterday we held IG at 80bp inside the carry regime, kept the September hike waiting on ISM, and stayed short the 2-year at 4.23%. This morning confirms all three: credit has not budged, front-end pricing is intact, and oil cracking removes an inflation tail without touching the growth read. We reaffirm the oldest thesis by name, investment-grade credit holds the carry regime below its 91bp mean, and we fade panic until decisively above it.
Today's Three · Highest-Conviction Signals
The three signals the desk engines rank highest right now, each with the level that proves it wrong.
EUR/JPY · mean-reversion long, conviction 87/100, new, on for 0 sessions. The fade targets the 21-day average at 184.9 and ends on a touch of it; a further stretch through 180.7 (one more average daily range against it) says the regime has turned and the fade is wrong.
AUD/JPY · mean-reversion long, conviction 81/100, new, on for 0 sessions. The fade targets the 21-day average at 112.9 and ends on a touch of it; a further stretch through 110.0 (one more average daily range against it) says the regime has turned and the fade is wrong.
FTSE 100 · momentum long, conviction 80/100, new, on for 0 sessions. The trend gate holds while the quote stays above the 21-day average at 10683; seven consecutive closes back below it kills the call.
Asset Market Pricing
Momentum Book · Sticky Regimes
Assets whose regime is sticky (Markov persistence 6+ days): trends run, so the momentum engine sets the direction, and conviction rises with the strength bar.
Mean Reversion Book · Choppy Regimes
Assets whose regime is choppy : trends get faded, so the mean-reversion engine sets the direction against the stretch from the 21-day average.
What's Driving the S&P 500
The S&P 500 is in a sticky regime (Markov persistence 12 days), so momentum is driving it: the trend engine reads bullish with conviction 24/100.
Across the 44-market universe, 27 are trend-driven (momentum) and 17 are range-driven (mean reversion).
Sector Snapshot & Breadth
Main Developments in Macro
TRUMP CANCELS IRAN STRIKE, CITES HORMUZ OPENING AND DENUCLEARISATION DEAL, NEGOTIATIONS BEGIN MONDAY AFTERNOON
WTI SEP TUMBLES 6.2%, BRENT 5.6%, ON GEOPOLITICAL RELIEF
US AND JAPAN CONFIRM JOINT YEN INTERVENTION, USD/JPY DIPS BENEATH 156.00
FED'S MUSALEM SAYS TREASURY SELL-OFF SIGNALS NEED FOR HIKES TO EARN CREDIBILITY
FED'S BARKIN SEES 'STRONG CASE' FOR ADDING RESTRAINT, TAKING BACK LAST YEAR'S CUTS
CHINA RATINGDOG MANUFACTURING PMI MISSES, MOFCOM SLAMS US FORCED-LABOUR LISTING
WARSH REPORTEDLY MULLS REDUCING FREQUENCY OF FED POLICY MEETINGS
The recent prints keep the split alive. GDP growth advanced at 1.5% against a 2.1% consensus, while Core PCE came in at 0.1% versus 0.2% expected. Growth softened while inflation cooled, so we treat the miss as disinflationary rather than recessionary, and it changes nothing for our short-duration stance.
The labour and activity data cut the other way. Initial jobless claims printed 197 thousand against a 200 thousand consensus, and Chicago PMI came in at 57.6 versus 56 expected. A firm labour market alongside a sticky Employment Cost Index at 0.9% is why the front end still prices hikes, and we hold the belly short into Monday.
The Tape
Discretionary did the heavy lifting Friday. Consumer Discretionary added 0.36pp on a 3.29% day, while Communications contributed 0.15pp. This is Amazon-led and does not mark a broad leadership turn, so we watch the narrow tape and do not chase it.
Cross-asset, the scoreboard flags a correlation break. SPX versus DXY sits at -0.33 now against -0.68 a month ago, a BIG SHIFT. The dollar has stopped driving equities, so a weaker DXY no longer mechanically lifts stocks, and we would size down any long-equity-short-dollar pairing. WTI cracking 6.2% this morning against gold up only 0.4% tells us this is oil-specific relief and stops short of a broad risk repricing.
Credit is our litmus and it stays green. IG OAS sits at 80bp against its 91bp mean, with HY at 284bp. If OAS breaks decisively above 91bp, then we flip to defending the far end and cut carry risk; until then, we fade panic and stay long the regime. HY at 284bp shows no stress bleeding through.
Rates & Fed Pricing
No month on the strip prices a cut, so the debate is about how much tightening. The first month with a hike at least half-priced is September at roughly 76% odds. We hold our short 2-year at 4.23% into ISM because that odds level survives a soft print.
The strip builds from there. The November meeting carries a hike at near-certain conviction, and cumulative tightening reaches +55.0bp at the June 2027 peak of 4.180%. The terminal repriced +5.0bp on the day but sits -5.5bp on the week, so the far end has drifted lower even as the near end holds. That divergence is why 2s10s at 45.00 extends the steepener we own.
Musalem and Barkin explain the front-end floor. Musalem said the Treasury sell-off signals the need for the Fed to earn its inflation-fighting credibility with hikes. If ISM prints above the 54 consensus, then we add through the belly on confirmed activity; until then, we hold the 2-year short and let September do the work.
Bottom Line
IG credit at 80bp holds the carry regime and fades panic short of its mean.
The September hike at 76% waits for Monday's ISM before we add through the belly.
The 2-year holds our short-duration stance despite the 1.5% growth miss.
2s10s at 45.00 extends the steepener as terminal drifts lower on the week.
WTI down 6.2% this morning watches whether Hormuz relief holds through the Monday negotiation.
The Week Ahead
Monday: ISM Manufacturing PMI, consensus 54. Above 54 keeps us short the belly and adding; below 53.3 challenges the hike conviction and we trim.
Tuesday: JOLTs Job Openings, consensus 7.25 million. A print holding near consensus keeps the front-end floor; a drop toward 7.0 million softens our short-duration read.
Tuesday: Factory Orders, consensus 0.5%. A recovery from the prior -1.3% confirms activity and holds the short; a second contraction argues for fading it.
Wednesday: ADP Employment Change, consensus 75 thousand. A print near consensus reaffirms the labour-driven hike case; a slide toward the prior 98 without follow-through into payrolls makes us wait.
Wednesday: MBA 30-Year Mortgage Rate, prior 6.76%. A move lower alongside the crude crack supports the disinflation read; a jump higher on the terminal reprice challenges it.
Our read into Monday is simple: oil cracking removes an inflation tail, the growth miss stays disinflationary, and the September hike still holds the front end. We think ISM decides whether we add. We would not act ahead of it because the labour and inflation signals genuinely disagree.
Vol Screen · Rich and Cheap Implied Vol
Positive IV-RV = options priced rich to what the tape is delivering (AVGO and USO richest today); negative = vol going cheap (AMZN and MSFT). Percentile ranks unlock at 60 archived sessions per name · currently 16/60 · the archive deepens automatically every build.
The Measured Books · Monday Edges
Five rules, each backtested on the desk's own data before it may speak; rules that failed the measurement are named as context, never traded.
E1 · Slow trend (12-1) · live on equities and crypto only (measured noise elsewhere): Nikkei 225 LONG · Russell 2000 LONG · Semiconductors LONG · FTSE 100 LONG · US Energy LONG · Dow Jones LONG · +9 more
E2 · FX carry · signal only when the policy differential is 1%+ wide: USD/CHF LONG (+3.75%) · AUD/JPY LONG (+3.35%) · USD/JPY LONG (+2.75%) · GBP/JPY LONG (+2.73%) · USD/CAD LONG (+1.50%) · the edge concentrates in the JPY-funded crosses
E3 · Curve (2s10s momentum) · slope 45bp, -5bp over 63 sessions → 63d trend FLATTENER (shorter-horizon state can differ · see appendix) · short 2Y (ZT) / long 10Y (ZN), roughly 2: 1 DV01
E4 · Variance risk premium · POSITIVE, harvest is on (long SPX) · 42nd percentile of its own history
E5 · Net liquidity (WALCL-TGA-RRP) · $5.82tn, +108bn over 13 weeks → rising, supportive for NDX/SPX
Disclaimer
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