The Theory of (Mostly) Everything: Part 2

Summary

• The Delphi Macro Regime (v2) now incorporates leading indicators of global growth and inflation alongside liquidity. We also redesigned the policy overlay to capture when central banks are supportive and when they are committing a policy error.
• The upgrade pays everywhere we look. Regime labels separate good days from bad days more cleanly across the full sample and every time slice tested, and Risk-Off regimes now carry outright negative annualized returns and Sortino ratios, something the liquidity-only model never delivered.
• Today the model reads neutral, having flipped from risk-on in November 2025, and v2 paints a more cautious picture than the liquidity-only read. Deteriorating liquidity leading indicators and a hawkish policy repricing that is outrunning fading inflation pressure are removing the macro margin of safety. 
• Overall this supports trimming risk at the margin, owning gold (the historical post-hike pattern favors it, and it remains the structural beneficiary of a weakening-dollar world), and favoring uncrowded expressions, parts of crypto and the cyclical laggards (like transports & financials) that de-rated into the hike.

In part one of this series we introduced you to Delphi’s Macro Regime indicator, which has thus far been solely composed of leading indicators for liquidity.

Liquidity is the most important cyclical driver of asset prices, but not the only one. As we wrote in May:

“The hardest problem in making top-down macro actionable for asset allocation isn’t forecasting growth, inflation, or liquidity in isolation. It’s that macro doesn’t matter — until it does, and what matters keeps changing. The hierarchy of which factor drives returns rotates through time. 2023-24 was a growth story. 2022 was an inflation story. 2020 was a quantity-of-money story. 2018 was a price-of-money story. Most frameworks either oversimplify this into one signal or over-engineer it into something abstruse and impracticable.”

The Delphi Macro Regime now incorporates leading indicators of global growth and inflation. We have also enhanced the “policy” overlays to better model how central bank action (or inaction) influences the macro landscape and correspondingly asset markets.

Today, the Delphi