Macro Signal strength #24

Global macro view of 30+ countries

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The macro signal will examine the growth and inflation regime in the context of the market microstructure. That is, the data will not be monthly or quarterly, but daily and weekly. It is more of a high frequency approach given daily/weekly activity. By using machine learning and Bayesian inference, it is possible to get a pretty good signal out of large data sets.

What data goes into this regime classification? I try to put together a structure from all possible angles to account for the interactions between different variables. Every week the model gets retrained to keep up with the possibly of changing interactions between the data.

data groups:

1. commodities

2. interest rates

3. volatility

4. central banks

5. high frequency economic data

6. stock price movement

This is the basic structure of this analysis. So let’s start and have a look at the data.

2 Spotlights - market implied regimes

In this macro regime update we take another look at Brazil and show some additional information. For the updates, you will get India and also Brazil in detail. Both countries are currently signaling a strong long signal. This signal has been holding for 2 months now and remains strong. India is currently in reflation with a high probability of growth and a slightly higher probability of inflation. India is supported by macro signal strength, which is the stated measure of bullish price momentum with economic factors).

Spotlight: Brazil

Brazil has been showing positive economic momentum for 2 months. The leading indicator is trending upward, as is the stock market index. Together with rising real growth, the stock index continues to show higher values.

Brazil weekly regime probabilities

Brazil growth probability

After some time, the growth probability signals a regime change and approaches 100% probability. The last time this was achieved was after the Corona shock, when the country experienced a strong upswing due to strong governmental and monetary shocks.

EWZ - ETF analysis

Below you can see the EWZ ETF, which recently went into upward mode, gaining over 10% in the last 6 months. Turning now to the model exponents, we see that the Hurst exponents are getting stronger and both averages are reaching higher values. The forward return model currently points to a quantile 3, which basically means 0% for the next 15 days. It is likely that the small correction will continue for a few more days.

Brazil - industrial production

Brazil's industrial production is now trending upward, especially the mining and quarrying subindex. It is always a positive signal for an economy when production in the manufacturing sector improves. Brazil is the second largest exporter of iron ore.

Brazil economic conditions

In addition to the positive trend in industrial production, we can also see that several survey data are improving. The leading index is improving, and the consumer confidence index is also recovering significantly from the lows of 2022.

Yearly coupon:

monthly coupon:

Below you can see the template, which represents the overview of the 30+ countries and is an essential part of the weekly analysis.

Global macro overview: