🌍 Big Picture: Navigating the New Macro Regime

Ahmad Mortazavi
Sep 25, 2025
5 min read

Updated: Oct 7, 2025

The macro regime has just nudged into a new phase. The Fed delivered its first cut of the cycle and stressed caution. The ECB stayed patient, while the BoE held steady, easing its balance sheet runoff. Disinflation remains gradual, growth is uneven, and term premia have crept higher. In simpler terms, policy is easing at the front end while the long end stays sticky. This environment is friendly to quality carry, such as investment-grade credit and insurers, and keeps gold well-supported as real yields grind lower.

Current Economic Landscape

US Economic Indicators

A shallower path of cuts is now the base case. Labour indicators have softened, but services inflation and wage momentum argue against an aggressive pace. Markets will trade each data point for confirmation that growth is cooling without cracking.

European Economic Outlook

In Europe, inflation is near target on the headline but remains sticky in services. The ECB is comfortable with a "hold and watch" approach. European cyclicals need better demand signals; exporters are most concerned about the dollar path and China’s economic pulse.

UK Economic Conditions

The BoE has kept the Bank Rate at 4.0% and slowed quantitative tightening (QT) to reduce long-end pressure. Inflation is still the highest in the G7, but domestic activity is fragile. Rate-sensitive UK financials look increasingly interesting on any dip in yields.

Japan's Economic Situation

In Japan, JGB 10-year yields are at multi-year highs while normalisation remains incremental. A stronger JPY on any hawkish hint could briefly pressure global risk via factor rotations.

Commodity Market Insights

Crude oil prices are capped by demand concerns and refinery maintenance. Meanwhile, gold is holding near record territory due to safe-haven demand, a softer dollar bias, and steady central-bank buying.

Market Positioning

Equity leadership remains narrow, focusing on AI and quality. However, carry trades, including credit, insurers, and selective emerging market local assets, are beneficiaries if cuts proceed without a hard-landing scare. Implied equity volatility is still low compared to macro uncertainty, creating a fertile mix for barbell portfolios that combine defensives and quality cyclicals.

📊 Assets at a Glance

Equities Overview

US: The S&P 500 is near highs, but breadth remains narrow. Quality and AI leadership are intact, while small-cap beta is improving on hopes of cuts.
Europe: The STOXX 600 has changed little week-on-week. Financials are stabilising after early-September pressure, while energy has lagged due to softer oil prices.
Japan: The Nikkei is consolidating as higher JGB yields nudge factor rotations between growth and value.

Interest Rates Analysis

USTs: The 2-year is anchored by the cut path, while the 10-year is around 4.1–4.3% as term premium keeps the long end sticky.
Bunds: Yields are around 2.6–2.8%, with a modestly steeper curve post-Fed.
Gilts: Yields are approximately 4.5–4.8%, with slower QT reducing supply pressure at the long end.
JGB 10-year: Yields are around 1.6%, reaching multi-year highs, while the BoJ remains gradual.

Foreign Exchange Trends

DXY: The index reached highs in the 97s to ~98 but softens on dovish US data and pops on upside inflation surprises.
EUR/USD: The pair is rangebound around 1.16–1.18, reflecting ECB patience.
GBP/USD: Trading between 1.33–1.36, sensitive to UK CPI and BoE tone.
USD/JPY: Fluctuating around 147–149; watch BoJ rhetoric for yen spikes.

Commodity Market Overview

Gold: Trading around $3,650–3,700/oz, resilient near records due to lower real yields and risk hedging.
Oil: Brent is around $66–67, while WTI is at $62–63. Demand and USD strength cap rallies, with refinery maintenance posing a headwind.
Copper: Remains rangebound, reacting to China’s activity data.

Cryptocurrency Insights

Bitcoin: Currently around $115–120k, consolidating after a summer breakout. It remains sensitive to liquidity swings and macro volatility.
ETH: Firm on institutional flows and tracks the overall risk tone.

📅 Key Events Next Week

Mon 22 Sep — Global Flash PMIs (US, Eurozone, UK, Japan)

Bull: Manufacturing and services surprise higher (50+) → “no hard landing” narrative; cyclicals, small caps, and industrials bid; front-end yields steady, long-end drifts up; EUR/GBP firm.
Base: Mixed prints, modest expansion → range trading; quality and AI leadership persists; insurers and financials stable with long-end yields.
Bear: Broad contraction (<50) → growth scare; bonds rally (belly-led), dollar firmer; defensives and gold outperform; cyclicals and emerging markets ease.

Tue 23 Sep — Germany Ifo; US New Home Sales (Aug)

Ifo beat: Supports European cyclicals and exporters; Bunds up in yield; EUR edges higher.
Ifo miss: Renewed growth anxiety; defensives lead, periphery spread watch.
US housing beat: Homebuilders and building products pop; curve steepens on “resilient demand”.
Miss: Affordability bite; soft-landing narrative questioned; front end unaffected, long end rallies.

Wed 24 Sep — US Durable Goods (Aug); UK Retail Sales (Aug)

Durables ex-transport +: Capex resilience → cyclicals and semis bid; USD firmer, gold steady.
Durables weak: Growth concern → duration bid; gold firmer; dollar soft.
UK retail beat: GBP firmer, domestics (retailers, housebuilders) bounce; gilts up in yield.
Miss: Stagflation worry persists; gilts rally; GBP slips; insurers fine if long-end holds.

Thu 25 Sep — US Jobless Claims; ECB Accounts; BoE Speakers

Claims uptrend: Confirms labour softening → cut path intact; duration bid; gold supported.
Claims drop: Tempers cut enthusiasm; equities rotate to cyclicals; dollar firmer.
ECB/BoE tone: Any dovish tilt boosts European financials and carry; hawkish hints lift EUR/GBP and weigh on duration.

Fri 26 Sep — US Personal Income/Spending & Core PCE (Aug); Japan Tokyo CPI (Sep)

Core PCE cools (≤0.2% m/m): Seals gentle-cuts path; equities up (rate-sensitives shine); USD and real yields softer; gold extends.
Sticky PCE (≥0.3% m/m): Slows easing path; front-end reprices; USD higher; gold dips; insurers steady if long-end stays firm.
Tokyo CPI firmer: Yen bounces; Nikkei wobbles; global duration bid.
Tokyo CPI softer: Yen eases; Japan equities supported.

Weekend — China Official PMIs (Sun preview)

Beat: Risk appetite in Asia improves; copper and oil bid; emerging market FX steadier.
Miss: Growth concerns re-emerge; dollar and gold supported; emerging market risk trims.

💡 Investment Idea: Phoenix Holdings

Phoenix, the UK’s leading life and pensions consolidator, is a rate-sensitive play that benefits from high long-end yields and strong cash generation. At 676.5p, shares trade at a discount to embedded value while offering a high single-digit dividend yield.

Why Now?

The Fed’s cut, alongside sticky long-end yields, creates a supportive environment for insurers. Slower BoE QT also eases long-end supply pressures, improving solvency optics.

Illustrative Setup:

Entry: 6.50–6.90 GBP (current: 6.76 GBP)
Target: 7.20–7.60 GBP near term, with upside to 8.20 GBP if the sector re-rates
Stop: ~6.20 GBP on curve collapse or solvency concerns

Summary:

Phoenix offers attractive income and potential re-rating as the UK enters a cautious easing cycle. This presents a timely rate-sensitive opportunity.

Risk Disclaimer

The information provided in this newsletter is for educational and informational purposes only and should not be considered financial advice. Financial markets involve substantial risk, and investments can fluctuate in value, leading to potential losses. Past performance is not indicative of future results. Before making any investment decisions, readers should consider their own risk tolerance and financial situation and consult with a licensed financial advisor if necessary. The strategies and opinions expressed are based on current market conditions and may change without notice.