Summary
- The thing to be bearish on is positioning, not the cycle. Our cyclical macro regime is still risk-on, US growth leading indicators are resilient, recession probabilities are low, and equity breadth is broadening. None of that looks like a major top.
- What IS stretched is speculation itself: record leveraged ETF exposure, record retail option volumes, and a market that has stopped paying for protection. We called for a vol event in our 2H26 outlook and that call is very much live. But a positioning-driven flush in a healthy economy is a dip to buy, not the start of a bear market.
- If you want a tactical short, Japan and the UK are the better expressions (that’s where the fiscal anchor is actually cracking).
The macro regime is still risk-on
Our cyclical macro regime remains in risk-on territory. The regime framework exists precisely so we don’t confuse uncomfortable price action with a genuine turn in the cycle, and right now it isn’t close to flipping.
Our global growth leading input diffusion is rolling over, but it’s hovering around 50. This is a new model built on ~180 empirically selected leading data across 30+ countries, and shows what % of these inputs are rising or falling QoQ. The signal comes from large divergences from 50, not from drift around the midpoint. For now, this signals stable/moderating growth rather than a cyclical downturn.
US growth is resilient
US growth leading indicators and high-frequency data continue to point up and to the right. These lead PMIs and earnings, and they’re telling you the real economy is re-accelerating, not rolling into recession.
Our US growth leading indicator ticked higher again in July and continues to project a steady outlook for US growth.
Headline GDPNow estimates have fallen materially over the past few weeks, but we think this is noise. The core components of GD
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