Macro Observations
Small Caps Are Paying The 10-Year's Bill
The Nasdaq set a record on October 5 while the Russell 2000 sat 8.6% below its August peak. The index is not diverging from the economy. It is diverging from the price of money.
Macro Observations
Macro Observations
The Labor Market Stopped Hiring And Has Not Started Firing
Payrolls rose 29,000 in September, claims sit near 197,000 and wage growth hit its lowest since 2021. The recession signals are missing and the expansion signals are fading.
Macro Observations
The Yen Is The Other Side Of The 10-Year
The Bank of Japan has raised rates twice this year and the yen still trades near 158 per dollar. With the 10-year Treasury above 5%, the funding currency has nowhere to go.
Macro Observations
The Fed Is Hiking Into A Supply Shock
Gasoline is up 39% in a year and crude has round-tripped from $56 to $115 to $96, yet the Fed is raising rates against it. A central bank can tighten demand. It cannot produce a barrel.
Macro Observations
The Risk Did Not Leave the Market. It Changed Addresses.
The VIX sleeps at 15.31 while the 10-year climbed 104 basis points this year and TLT fell 11.1 percent. Volatility is not a number, it is a location, and in 2026 the location is duration.
Macro Observations
29,000 Jobs. Stocks Up. Bonds Down. One of These Markets Is Wrong.
September payrolls missed by two thirds, July revised to negative 10,000, and stocks rallied while the 10-year still closed higher at 5.28 percent. Stocks and bonds disagreed about the same number.
Macro Observations
The Fed Is Not Fighting Inflation. It Is Fighting the Gas Pump.
Core CPI sits at 2.4 percent, essentially at target. The headline gap is gasoline, up 27.4 percent on the year and over a third of August's entire monthly increase. The Fed hiked into it anyway.
Macro Observations
The Most Expensive Money of the Year Hides Inside the Cheapest Stocks
The 10-year climbed from 4.24 to 5.25 percent this year. Small caps already did the math: a -0.54 monthly correlation between rates and the Russell 2000, and an 11-point gap to the Nasdaq 100 since July.
Macro Observations
The Shock Absorber Is Gone
The mortgage-to-Treasury spread compressed from 320 basis points to about 185, in line with its 20-year average, just as the 10-year broke to 5.18%, its highest since 2007. Every basis point now lands on the buyer.
Macro Observations
The Delinquency Cycle Already Turned
Bank card delinquencies peaked at 3.22% in mid-2024 and have fallen five straight quarters to 2.85%. The consumer crack everyone braced for happened, quietly, and ended while nobody repriced it.
Macro Observations
The Eight Trillion Dollar Myth
Money market funds hold a record $8.44 trillion and the reverse repo facility has drained to zero. The cash is not dry powder waiting to buy stocks. It is the plumbing of the bill market.
Macro Observations
The Bond Market Never Believed In Three And A Half Percent
The one-year Treasury yields 62 basis points above the fed funds midpoint, and everything from two to ten years sits near five percent. The market is pricing a return to where the cycle began.