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EndGame Macro
Want Good Schools? Look at the Town’s Budget, Not Just the Ranking
If you’re planning to buy a home in the next few years, this is one of those moments where you really need to pay attention to the town, not just the house. We’re heading into a period where budgets are tightening, federal support is fading, and costs are rising for schools, infrastructure, and municipal services. That’s when you find out which communities are actually well run and which ones have been papering over problems during the good years. The last thing you want is to move somewhere that suddenly has to cut school programs, lay off teachers, or hike taxes because the math stopped working.
When I look at towns, school quality is obviously a starting point…everyone wants good schools. But the part I focus on the most is the tax base behind those schools. The towns that hold up in rougher cycles usually have a solid mix of commercial revenue, especially from businesses that aren’t the first to disappear in a downturn. Healthcare, medical campuses, logistics, universities, government, long established professional firms, those anchors keep money coming in even when the economy softens. And that stability is what protects school budgets, local services, and long term property values.
So if you’re trying to set up your future, think the way you would about any investment…look past the surface and look at the fundamentals. The next few years will tell you a lot about which towns have their act together. And that’s the environment you want to build a life in.
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Want Good Schools? Look at the Town’s Budget, Not Just the Ranking
If you’re planning to buy a home in the next few years, this is one of those moments where you really need to pay attention to the town, not just the house. We’re heading into a period where budgets are tightening, federal support is fading, and costs are rising for schools, infrastructure, and municipal services. That’s when you find out which communities are actually well run and which ones have been papering over problems during the good years. The last thing you want is to move somewhere that suddenly has to cut school programs, lay off teachers, or hike taxes because the math stopped working.
When I look at towns, school quality is obviously a starting point…everyone wants good schools. But the part I focus on the most is the tax base behind those schools. The towns that hold up in rougher cycles usually have a solid mix of commercial revenue, especially from businesses that aren’t the first to disappear in a downturn. Healthcare, medical campuses, logistics, universities, government, long established professional firms, those anchors keep money coming in even when the economy softens. And that stability is what protects school budgets, local services, and long term property values.
So if you’re trying to set up your future, think the way you would about any investment…look past the surface and look at the fundamentals. The next few years will tell you a lot about which towns have their act together. And that’s the environment you want to build a life in.
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Dimitry Nakhla | Babylon Capital®
Oracle is now down ~40% from its September peak, with the multiple contracting from 46x to a more reasonable 28x
At long last, The Intelligent Investor has re-entered the chat 😂
$ORCL https://t.co/i9aXglG17p
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Oracle is now down ~40% from its September peak, with the multiple contracting from 46x to a more reasonable 28x
At long last, The Intelligent Investor has re-entered the chat 😂
$ORCL https://t.co/i9aXglG17p
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EndGame Macro
The GDPNow Spike Looks Great Until You Ask What It’s Actually Measuring
This chart is basically a race between two ways of estimating the same quarter. The green line is the Atlanta Fed’s GDPNow model, a fully mechanical tracker that updates whenever new economic data drops. The blue line is the Blue Chip economist consensus, what human forecasters think GDP will look like once the quarter is over.
Early in the summer, both sides were sitting around 1–2% growth. But as the data came in like retail sales, manufacturing reports, income and outlays, housing…the GDPNow model kept nudging higher, climbing toward a little over 4% by mid November. The consensus moved too, but more slowly and never caught up. So at face value, the chart is saying the data flow for Q3 has looked surprisingly strong, at least as GDP is officially measured. The model just reacts faster than human forecasters.
But Here’s the Important Part And What GDPNow Can’t See
GDPNow only tells you how the BEA’s GDP formula will likely shake out and not how healthy the economy actually feels on the ground. And when you read the underlying methodology, the limitations jump out.
It’s A Mod Of The BEA Spreadsheet , Not A Model Of Real Life
GDPNow’s own slides are explicit…”no judgmental adjustments,” “solely the mathematical results of the model.”
That means it treats every monthly number literally. If inventories rise because goods aren’t selling, GDPNow shows an increase…even though, economically, that’s not strength. If imports collapse because consumers are tightening up, GDPNow shows a positive contribution from net exports…even though that’s a sign of softer domestic demand. The model only knows the arithmetic. It has no intuition.
It Can’t Distinguish Quality Of Growth
Look at the decomposition table in the GDPNow slides…by the time the estimate hits 4.2%, a big chunk of the lift is coming from things like net exports and inventories. Those categories can move GDP without telling you anything good about the underlying economy.
A strong GDP number driven by trade timing and stockpiling is very different from a strong GDP number driven by wage funded consumption. GDPNow doesn’t care, it all counts the same.
It Assumes Old Relationships Still Hold In A New Economy
GDPNow uses “bridge equations” basically historical correlations to map monthly data into quarterly GDP components. That’s fine when the structure of the economy is stable. But right now?
•Pandemic distortions
•Credit card reliance
•Rising delinquencies
•Housing affordability stress
•Fiscal cliffs
•Higher interest rate sensitivity
Those are regime changes, not noise. A model trained on the 2010–2019 world may not capture 2025 accurately. It’s blind to distribution, fragility, and financial stress
GDPNow doesn’t see…
•who is doing the spending,
•how much of it is funded by debt,
•whether households are underwater,
•or whether businesses are quietly pulling back.
You can have 4% real GDP growth with rising bankruptcies, falling real wages for most households, and stress building in CRE, autos, and credit cards. None of that touches the GDPNow estimate until it finally shows up as weaker PCE months later.
And by then, the story has already changed.
The Bottom Line
GDPNow is a fast, transparent way of guessing what the BEA will publish. And on that front, it’s often pretty good. But the model is not a reliable read on the real underlying health of the economy. It’s a mechanical mirror of the official accounting framework and that framework often flatters the headline while hiding the fractures underneath.
So when you see the green line sprinting ahead of the consensus, don’t jump straight into thinking the economy is booming. The model is telling you how the math looks, not how people are living. And right now, that gap between the math and the lived reality is wider than the lines on this chart let on. tweet
The GDPNow Spike Looks Great Until You Ask What It’s Actually Measuring
This chart is basically a race between two ways of estimating the same quarter. The green line is the Atlanta Fed’s GDPNow model, a fully mechanical tracker that updates whenever new economic data drops. The blue line is the Blue Chip economist consensus, what human forecasters think GDP will look like once the quarter is over.
Early in the summer, both sides were sitting around 1–2% growth. But as the data came in like retail sales, manufacturing reports, income and outlays, housing…the GDPNow model kept nudging higher, climbing toward a little over 4% by mid November. The consensus moved too, but more slowly and never caught up. So at face value, the chart is saying the data flow for Q3 has looked surprisingly strong, at least as GDP is officially measured. The model just reacts faster than human forecasters.
But Here’s the Important Part And What GDPNow Can’t See
GDPNow only tells you how the BEA’s GDP formula will likely shake out and not how healthy the economy actually feels on the ground. And when you read the underlying methodology, the limitations jump out.
It’s A Mod Of The BEA Spreadsheet , Not A Model Of Real Life
GDPNow’s own slides are explicit…”no judgmental adjustments,” “solely the mathematical results of the model.”
That means it treats every monthly number literally. If inventories rise because goods aren’t selling, GDPNow shows an increase…even though, economically, that’s not strength. If imports collapse because consumers are tightening up, GDPNow shows a positive contribution from net exports…even though that’s a sign of softer domestic demand. The model only knows the arithmetic. It has no intuition.
It Can’t Distinguish Quality Of Growth
Look at the decomposition table in the GDPNow slides…by the time the estimate hits 4.2%, a big chunk of the lift is coming from things like net exports and inventories. Those categories can move GDP without telling you anything good about the underlying economy.
A strong GDP number driven by trade timing and stockpiling is very different from a strong GDP number driven by wage funded consumption. GDPNow doesn’t care, it all counts the same.
It Assumes Old Relationships Still Hold In A New Economy
GDPNow uses “bridge equations” basically historical correlations to map monthly data into quarterly GDP components. That’s fine when the structure of the economy is stable. But right now?
•Pandemic distortions
•Credit card reliance
•Rising delinquencies
•Housing affordability stress
•Fiscal cliffs
•Higher interest rate sensitivity
Those are regime changes, not noise. A model trained on the 2010–2019 world may not capture 2025 accurately. It’s blind to distribution, fragility, and financial stress
GDPNow doesn’t see…
•who is doing the spending,
•how much of it is funded by debt,
•whether households are underwater,
•or whether businesses are quietly pulling back.
You can have 4% real GDP growth with rising bankruptcies, falling real wages for most households, and stress building in CRE, autos, and credit cards. None of that touches the GDPNow estimate until it finally shows up as weaker PCE months later.
And by then, the story has already changed.
The Bottom Line
GDPNow is a fast, transparent way of guessing what the BEA will publish. And on that front, it’s often pretty good. But the model is not a reliable read on the real underlying health of the economy. It’s a mechanical mirror of the official accounting framework and that framework often flatters the headline while hiding the fractures underneath.
So when you see the green line sprinting ahead of the consensus, don’t jump straight into thinking the economy is booming. The model is telling you how the math looks, not how people are living. And right now, that gap between the math and the lived reality is wider than the lines on this chart let on. tweet
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EndGame Macro
Peak Hedging, Peak Fear And The Setup For A Reflexive Rally
This chart is basically showing that the options market just hit one of those moments where fear stops being a vibe and becomes something you can literally measure. SPY put volume didn’t just pick up, it exploded. It’s the second highest reading ever, right alongside the handful of days where traders collectively hit the panic button and loaded up on protection. If you look back at those dates…September 2022, March 2023, the cluster in early April 2025 they all happened during sharp pullbacks where sentiment was washed out and people were hedging aggressively.
The table at the bottom is the punchline…every time put volume crossed 8 million contracts, SPY was higher a month later. Not immediately, not always cleanly, but the one month window has been remarkably consistent. And that’s why these spikes show up near bottoms. It’s positioning. When everyone crowds into puts at the same time, the market often runs out of sellers. Dealers start buying back into strength, hedges decay, shorts get pinned, and that fear flips into a reflexive move the other way.
Why It’s Not A Perfect Bottom Signal But Still Matters
You can’t take any of this as gospel. The sample size is tiny, and the options market today looks nothing like it did a decade ago. Zero day options, systematic hedging flows, dealer gamma dynamics, all of that means an 8M+ put spike today is built on an entirely different ecosystem than the original data points. And huge put volume isn’t always raw fear; sometimes it’s a hedge roll, sometimes it’s a big player setting up for an event, and sometimes it’s just structured product desks doing their thing. The chart treats it all the same.
But the bigger message still holds that traders are scared, hedged, and leaning in one direction. When positioning gets this lopsided, you don’t need some miraculous macro catalyst to spark a bounce, you just need the bleeding to slow. In markets, extreme fear tends to create its own reversal.
So What’s the Highest Probability Outcome Now?
This is where everything comes together. A spike in put volume like this almost always marks a point where the market is emotionally exhausted. That doesn’t mean the exact bottom is in but in the short term, the odds tilt toward a reflexive bounce, not a continuation of the slide. When everyone is looking down, markets usually move up simply because the risk has already been priced in.
And that’s my highest probability view here…the next meaningful move is more likely to be upward. Maybe sharp, maybe fast, maybe messy but upward. After that, the market probably runs into the reality of a late cycle economy, stretched consumers, and a Fed that still doesn’t have a clean exit. So the bounce may not become a new trend, but the setup for relief is better than the setup for a fresh collapse.
This isn’t call the bottom energy. It’s recognizing the difference between a market that’s still panicking and one that’s already burned through most of its fear. Right now, we’re firmly in the second camp.
tweet
Peak Hedging, Peak Fear And The Setup For A Reflexive Rally
This chart is basically showing that the options market just hit one of those moments where fear stops being a vibe and becomes something you can literally measure. SPY put volume didn’t just pick up, it exploded. It’s the second highest reading ever, right alongside the handful of days where traders collectively hit the panic button and loaded up on protection. If you look back at those dates…September 2022, March 2023, the cluster in early April 2025 they all happened during sharp pullbacks where sentiment was washed out and people were hedging aggressively.
The table at the bottom is the punchline…every time put volume crossed 8 million contracts, SPY was higher a month later. Not immediately, not always cleanly, but the one month window has been remarkably consistent. And that’s why these spikes show up near bottoms. It’s positioning. When everyone crowds into puts at the same time, the market often runs out of sellers. Dealers start buying back into strength, hedges decay, shorts get pinned, and that fear flips into a reflexive move the other way.
Why It’s Not A Perfect Bottom Signal But Still Matters
You can’t take any of this as gospel. The sample size is tiny, and the options market today looks nothing like it did a decade ago. Zero day options, systematic hedging flows, dealer gamma dynamics, all of that means an 8M+ put spike today is built on an entirely different ecosystem than the original data points. And huge put volume isn’t always raw fear; sometimes it’s a hedge roll, sometimes it’s a big player setting up for an event, and sometimes it’s just structured product desks doing their thing. The chart treats it all the same.
But the bigger message still holds that traders are scared, hedged, and leaning in one direction. When positioning gets this lopsided, you don’t need some miraculous macro catalyst to spark a bounce, you just need the bleeding to slow. In markets, extreme fear tends to create its own reversal.
So What’s the Highest Probability Outcome Now?
This is where everything comes together. A spike in put volume like this almost always marks a point where the market is emotionally exhausted. That doesn’t mean the exact bottom is in but in the short term, the odds tilt toward a reflexive bounce, not a continuation of the slide. When everyone is looking down, markets usually move up simply because the risk has already been priced in.
And that’s my highest probability view here…the next meaningful move is more likely to be upward. Maybe sharp, maybe fast, maybe messy but upward. After that, the market probably runs into the reality of a late cycle economy, stretched consumers, and a Fed that still doesn’t have a clean exit. So the bounce may not become a new trend, but the setup for relief is better than the setup for a fresh collapse.
This isn’t call the bottom energy. It’s recognizing the difference between a market that’s still panicking and one that’s already burned through most of its fear. Right now, we’re firmly in the second camp.
S&P 500 $SPY Put Volume on Thursday was the 2nd largest ever 🚨 Historically this has usually occurred near bottoms 🥳🤑🫂 https://t.co/3543mXn5ii tweet
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EndGame Macro
Riding the Last Wave: Bitcoin’s Momentum in a Cooling Economy
This chart is basically trying to map Bitcoin onto the broader business cycle, the idea that BTC rips when liquidity is improving and stalls or breaks when the macro turns. The white line is Bitcoin in log scale, and the blue line is a kind of macro pulse indicator. Every time that macro line bottoms, the chart labels a transition from bear to pre parabolic. When it rises, Bitcoin tends to follow, and when it peaks, you get the blow off phases we saw in 2017 and 2021.
There’s truth in that. Bitcoin has always been a high beta expression of global liquidity, so it tends to move early when financial conditions ease. But the chart also makes it look far cleaner than reality. We’re working with two full cycles, maybe two and a half. That’s not enough to draw perfect rules around. And it’s drawn with hindsight, the color coded boxes aren’t how anyone experiences this in real time.
Still, the broader point stands that Bitcoin tends to front run shifts in the macro cycle, and right now the chart is signaling we’re somewhere in the stronger half of that cycle.
Why This Is Still a Late Cycle Moment
The problem and what the chart doesn’t tell you is that the underlying economy is deteriorating. Not collapsing, just quietly weakening in all the ways late cycle slowdowns usually look.
Household balance sheets are getting squeezed…credit card delinquencies are climbing, auto loan stress is the highest since the early 2010s, student loan payments are biting again, and personal finance sentiment has dropped to multi year lows. Consumers are running out of cushion.
Businesses are feeling it too. Hours worked have softened, job openings are drifting down, small business optimism is sliding, and hiring freezes are showing up across sectors. All of it is consistent with an economy that’s inching toward the part of the cycle where layoffs start to pick up.
Then you have the Fed. They’re cutting not because growth is roaring but because the data is softening in ways they can’t ignore and QT is ending for the same reason. In every past cycle, when the Fed is cutting into weakness rather than cutting into strength, you’re closer to the end than the beginning. Markets sometimes rally on the first cuts, but they usually discover why the Fed is cutting a bit later.
Bitcoin is holding strong and could still push higher, that part of the chart is real. But the environment underneath looks very much like late cycle behavior…stretched consumers, slowing demand, rising delinquencies, quieter job markets, and a central bank trying to buy time.
That’s why you can’t treat this moment as if it’s the early pre parabolic phase all over again. It’s more complicated. There’s still room for upside especially with easier policy coming but there’s also an expiration date attached. The macro is already shifting underneath the surface, and Bitcoin has never been immune to that.
tweet
Riding the Last Wave: Bitcoin’s Momentum in a Cooling Economy
This chart is basically trying to map Bitcoin onto the broader business cycle, the idea that BTC rips when liquidity is improving and stalls or breaks when the macro turns. The white line is Bitcoin in log scale, and the blue line is a kind of macro pulse indicator. Every time that macro line bottoms, the chart labels a transition from bear to pre parabolic. When it rises, Bitcoin tends to follow, and when it peaks, you get the blow off phases we saw in 2017 and 2021.
There’s truth in that. Bitcoin has always been a high beta expression of global liquidity, so it tends to move early when financial conditions ease. But the chart also makes it look far cleaner than reality. We’re working with two full cycles, maybe two and a half. That’s not enough to draw perfect rules around. And it’s drawn with hindsight, the color coded boxes aren’t how anyone experiences this in real time.
Still, the broader point stands that Bitcoin tends to front run shifts in the macro cycle, and right now the chart is signaling we’re somewhere in the stronger half of that cycle.
Why This Is Still a Late Cycle Moment
The problem and what the chart doesn’t tell you is that the underlying economy is deteriorating. Not collapsing, just quietly weakening in all the ways late cycle slowdowns usually look.
Household balance sheets are getting squeezed…credit card delinquencies are climbing, auto loan stress is the highest since the early 2010s, student loan payments are biting again, and personal finance sentiment has dropped to multi year lows. Consumers are running out of cushion.
Businesses are feeling it too. Hours worked have softened, job openings are drifting down, small business optimism is sliding, and hiring freezes are showing up across sectors. All of it is consistent with an economy that’s inching toward the part of the cycle where layoffs start to pick up.
Then you have the Fed. They’re cutting not because growth is roaring but because the data is softening in ways they can’t ignore and QT is ending for the same reason. In every past cycle, when the Fed is cutting into weakness rather than cutting into strength, you’re closer to the end than the beginning. Markets sometimes rally on the first cuts, but they usually discover why the Fed is cutting a bit later.
Bitcoin is holding strong and could still push higher, that part of the chart is real. But the environment underneath looks very much like late cycle behavior…stretched consumers, slowing demand, rising delinquencies, quieter job markets, and a central bank trying to buy time.
That’s why you can’t treat this moment as if it’s the early pre parabolic phase all over again. It’s more complicated. There’s still room for upside especially with easier policy coming but there’s also an expiration date attached. The macro is already shifting underneath the surface, and Bitcoin has never been immune to that.
Top line is where the liquidity fuel has cyclically exhausted. It ends the red zone. All multi-year tops have printed here.
Bottom line is where the liquidity fuel has cyclically ignited. It begins the red zone. All multi-year parabolic moves have started here.
Bitcoin doesn’t care about the calendar. It cares about liquidity.
Where are we? tweet
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EndGame Macro
IQ Doesn’t Change by State. Conditions Do.
The differences here are tiny, most states sit right around 100, which is exactly what IQ tests are designed to produce. A two or three point swing at the state level isn’t about innate intelligence; it’s about the conditions people grow up in: schooling quality, early childhood development, income levels, access to healthcare, even things like environmental exposure and population mobility.
So when you see the Northeast and parts of the Upper Midwest shaded toward the higher end, and the Deep South and some Western states shaded lower, it’s not telling you something about the brains of entire regions. It’s showing you where the long term investments in education, nutrition, and public health have been stronger,
and where they’ve been weaker. IQ at this scale is almost always a proxy for infrastructure, opportunity, and economic complexity, not raw cognitive horsepower.
Why You Should Read It as a Socioeconomic Map, Not an Intelligence Map
What matters more is why certain states cluster the way they do. High scoring states tend to have better funded schools, more urban density, more college grads, and higher household incomes. Low scoring states often struggle with persistent poverty, underfunded education systems, and worse health outcomes. Those structural gaps show up in every metric we track like test scores, earnings, mobility, longevity and IQ maps are no exception.
So the real point is that the environment children grow up in shapes their educational and developmental trajectory in ways that echo for decades. If anything, maps like this are a reminder that intelligence isn’t some fixed trait assigned by geography; it’s an outcome of the conditions people live under.
This map isn’t measuring people’s ceilings, it’s measuring the systems that either help them reach it or hold them back.
tweet
IQ Doesn’t Change by State. Conditions Do.
The differences here are tiny, most states sit right around 100, which is exactly what IQ tests are designed to produce. A two or three point swing at the state level isn’t about innate intelligence; it’s about the conditions people grow up in: schooling quality, early childhood development, income levels, access to healthcare, even things like environmental exposure and population mobility.
So when you see the Northeast and parts of the Upper Midwest shaded toward the higher end, and the Deep South and some Western states shaded lower, it’s not telling you something about the brains of entire regions. It’s showing you where the long term investments in education, nutrition, and public health have been stronger,
and where they’ve been weaker. IQ at this scale is almost always a proxy for infrastructure, opportunity, and economic complexity, not raw cognitive horsepower.
Why You Should Read It as a Socioeconomic Map, Not an Intelligence Map
What matters more is why certain states cluster the way they do. High scoring states tend to have better funded schools, more urban density, more college grads, and higher household incomes. Low scoring states often struggle with persistent poverty, underfunded education systems, and worse health outcomes. Those structural gaps show up in every metric we track like test scores, earnings, mobility, longevity and IQ maps are no exception.
So the real point is that the environment children grow up in shapes their educational and developmental trajectory in ways that echo for decades. If anything, maps like this are a reminder that intelligence isn’t some fixed trait assigned by geography; it’s an outcome of the conditions people live under.
This map isn’t measuring people’s ceilings, it’s measuring the systems that either help them reach it or hold them back.
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EndGame Macro
When Growth, Surprises, and Inflation Roll Over Together, the Cycle Is Talking
You’ve basically got three ways of tracking the momentum of U.S. growth, all plotted as 4 month changes, so this is about whether things are getting better or worse, not the absolute level…
•Blue – “Underlying Growth Nowcast”: a composite model of real economy data (output, jobs, spending, etc.). When it’s above zero, growth is accelerating vs the prior few months; below zero, it’s decelerating.
•Green – CESI: the Citi Economic Surprise Index. This doesn’t ask “is the data good?”, it asks “is it better or worse than economists expected?” Positive means a string of upside surprises; negative means the data keeps disappointing.
•Yellow – 1 year inflation swap: market pricing of inflation over the next year, again shown as a 4 month change. If it’s falling hard, it usually means traders think demand is cooling and pricing power is fading.
From early 2023 through mid 2025, these three lines swing around but broadly move in waves: bursts of improvement where growth and surprises pick up and inflation expectations rise, followed by air pockets where they all sag.
The important part is the right edge of the chart. Since mid 2025, all three have rolled over together and pushed negative: the growth nowcast is slowing, the surprise index has slipped from strong positive to the downside, and the move in 1 year inflation swaps has turned sharply lower. That’s the market and the data jointly saying that “The U.S. is losing momentum.”
Why they’re rolling over now
This is what late cycle looks like…
For two years the economy’s been digesting higher rates, tighter credit, and the tail end of post COVID stimulus. It held up longer than most people expected, but the bill always comes due with a lag.
•Households are getting squeezed. Excess savings are mostly gone, credit card balances have climbed, and delinquencies on cards, autos and student loans have moved up. People are still spending, but more of it is funded with expensive debt and less with real income growth. That’s a classic recipe for slower consumption ahead.
•Business confidence is cooling. Hiring plans have softened, hours worked have edged down, and capex intentions aren’t what they were in 2021–22. Companies are still profitable, but they’re more cautious, especially in interest sensitive areas like housing, CRE, and small business.
•Policy is shifting from brake to “we might have gone too far.” The Fed has already cut twice and is about to end QT. They’re doing that because the incoming data, especially on activity and the labor market is getting softer and the risk of overtightening is rising. The CESI rolling over is the market realizing the stream of “better than expected” reports is drying up.
•Markets are repricing the next year. When 1 year inflation swaps fall this hard, it’s usually not because everyone suddenly discovered they love low inflation; it’s because they think demand and pricing power are going to be weaker, and that the Fed will be easing into a slowdown.
Put simply the long and variable lags of tight policy are finally showing up in the growth metrics. The chart is just the visual of that process.
How to read this
This is saying the second derivative of growth has flipped and things are no longer getting better; they’re gradually getting worse.
Historically, when you see the growth nowcast, the surprise index, and short term inflation expectations all roll over together, you’re in the zone where…
•the Fed starts to pivot or cut (already happening),
•markets oscillate between “soft landing” and “something is breaking,” and
•risk assets become more sensitive to every incremental piece of data.
So the message here isn’t doom, it’s timing…the U.S. didn’t dodge the cycle; it just delayed it. These lines are telling you the delay is over and the slowdown is finally working its way through the system.
A “growth scare” appears to be brewing.
[...]
When Growth, Surprises, and Inflation Roll Over Together, the Cycle Is Talking
You’ve basically got three ways of tracking the momentum of U.S. growth, all plotted as 4 month changes, so this is about whether things are getting better or worse, not the absolute level…
•Blue – “Underlying Growth Nowcast”: a composite model of real economy data (output, jobs, spending, etc.). When it’s above zero, growth is accelerating vs the prior few months; below zero, it’s decelerating.
•Green – CESI: the Citi Economic Surprise Index. This doesn’t ask “is the data good?”, it asks “is it better or worse than economists expected?” Positive means a string of upside surprises; negative means the data keeps disappointing.
•Yellow – 1 year inflation swap: market pricing of inflation over the next year, again shown as a 4 month change. If it’s falling hard, it usually means traders think demand is cooling and pricing power is fading.
From early 2023 through mid 2025, these three lines swing around but broadly move in waves: bursts of improvement where growth and surprises pick up and inflation expectations rise, followed by air pockets where they all sag.
The important part is the right edge of the chart. Since mid 2025, all three have rolled over together and pushed negative: the growth nowcast is slowing, the surprise index has slipped from strong positive to the downside, and the move in 1 year inflation swaps has turned sharply lower. That’s the market and the data jointly saying that “The U.S. is losing momentum.”
Why they’re rolling over now
This is what late cycle looks like…
For two years the economy’s been digesting higher rates, tighter credit, and the tail end of post COVID stimulus. It held up longer than most people expected, but the bill always comes due with a lag.
•Households are getting squeezed. Excess savings are mostly gone, credit card balances have climbed, and delinquencies on cards, autos and student loans have moved up. People are still spending, but more of it is funded with expensive debt and less with real income growth. That’s a classic recipe for slower consumption ahead.
•Business confidence is cooling. Hiring plans have softened, hours worked have edged down, and capex intentions aren’t what they were in 2021–22. Companies are still profitable, but they’re more cautious, especially in interest sensitive areas like housing, CRE, and small business.
•Policy is shifting from brake to “we might have gone too far.” The Fed has already cut twice and is about to end QT. They’re doing that because the incoming data, especially on activity and the labor market is getting softer and the risk of overtightening is rising. The CESI rolling over is the market realizing the stream of “better than expected” reports is drying up.
•Markets are repricing the next year. When 1 year inflation swaps fall this hard, it’s usually not because everyone suddenly discovered they love low inflation; it’s because they think demand and pricing power are going to be weaker, and that the Fed will be easing into a slowdown.
Put simply the long and variable lags of tight policy are finally showing up in the growth metrics. The chart is just the visual of that process.
How to read this
This is saying the second derivative of growth has flipped and things are no longer getting better; they’re gradually getting worse.
Historically, when you see the growth nowcast, the surprise index, and short term inflation expectations all roll over together, you’re in the zone where…
•the Fed starts to pivot or cut (already happening),
•markets oscillate between “soft landing” and “something is breaking,” and
•risk assets become more sensitive to every incremental piece of data.
So the message here isn’t doom, it’s timing…the U.S. didn’t dodge the cycle; it just delayed it. These lines are telling you the delay is over and the slowdown is finally working its way through the system.
A “growth scare” appears to be brewing.
[...]