MacroScope Weekly — March 29, 2026

Current Regime: Reflation / Contracting Liquidity

TL;DR: Growth continues to soften while inflation firms — the Reflation regime holds. Gold's momentum score turned negative this week, and the VAMS filter cut it — sending the freed capital to SGOV. The portfolio now sits at 20% PDBC / 10% XLE / 70% SGOV. Heavily defensive, but that's the momentum filter doing its job.

The Regime: Reflation Holds

The regime classifier continues to read Reflation with Contracting Liquidity — unchanged for the fourth consecutive week. The composites have drifted modestly: growth down to +0.41, inflation up to +0.11, liquidity at -0.15. No regime change, but the gradual divergence between softening growth and firming inflation is the trend to watch.

Growth: +0.41 | Inflation: +0.11 | Liquidity: -0.15

Regime Classifier — Growth, Inflation, and Liquidity composites with risk shading

Growth: Holding But Narrowing

The growth composite slipped marginally to +0.41. The overall signal remains in expansion territory, but the breadth of support is narrowing.

Production (P4) at -0.08 is the concern. Industrial production declined 0.2% in the March flash estimate, and the ISM manufacturing PMI printed 48.4 — back in contraction after two months above 50. The manufacturing recession that the February jobs data hinted at is now visible in the hard data.

Input Acquisition (P3) at +0.68 is softening gradually. Trade uncertainty from the Section 301 investigations is weighing on forward orders. The preliminary findings released this week confirmed that tariff escalation is coming — the administration signaled new duties on EU steel and aluminum, effective April 15.

Financial Conditions (P1) at +0.36 are tighter. High-yield spreads widened another 10bps, and the 10-year yield remains elevated at 4.42%. The yield curve is still positively sloped, which keeps this pillar positive, but the margin is shrinking.

Corporate Capex (P2) at +0.62 and Distribution (P5) at +0.55 remain supportive. The AI capex cycle and robust freight volumes are providing a floor under the composite even as the cyclical pillars deteriorate.

Growth Composite — pillar growth signal since 2020

Inflation: Building Across Multiple Channels

The inflation composite climbed to +0.11 — the highest reading since early January. The direction is now clearly up, and it's broadening beyond just import prices.

Import Prices (C5) at +0.62 remain elevated. Oil has stabilized around $99 after a modest pullback from last week's $101, but the DXY at 99.2 keeps import prices firm. The new EU tariff announcement adds another inflationary impulse that will show up in the data over coming weeks.

Pipeline Costs (C2) at +0.36 hit their highest level since November 2025. The upstream-to-downstream transmission is accelerating — what started as an oil shock is now visible in intermediate goods and producer prices more broadly.

Demand Pressure (C1) at -0.06 is still negative but improving. Core PCE came in at +0.35% MoM on Friday, above the +0.3% consensus. The year-over-year rate ticked up to 2.9%. This isn't demand-pull inflation, but the excess supply-side pressure is starting to bleed into broader price measures.

Services Inflation (C6) at -0.45 continues to moderate, but the pace of improvement has slowed significantly. Shelter inflation in particular has stopped falling — a development worth watching.

Inflation Composite — inflation channel signal since 2020

Liquidity: Still Contracting

The liquidity composite deteriorated to -0.15. All four pillars are either negative or barely neutral.

Private credit (-0.32) is the weakest reading in six months. Bank lending to small and mid-size businesses has essentially frozen. The combination of elevated rates and rising credit risk is suppressing new issuance.

Shadow banking (-0.26) continues to contract as dealer balance sheets shrink and non-bank lending tightens.

Central bank (-0.04) is near neutral. The Fed is on hold and balance sheet runoff is minimal, but there's no active easing.

Cross-border flows (+0.04) are barely positive. The weak dollar helps, but not enough to move the composite.

The contracting liquidity signal is what keeps the portfolio defensive. Even in Reflation, the model distinguishes between expanding and contracting liquidity — and contracting liquidity means no broad equity exposure.

Liquidity Composite — global liquidity signal since 2020

Market Implications & Portfolio

The model holds 20% Commodities (PDBC) / 10% Energy (XLE) / 70% SGOV. The regime and liquidity state haven't changed — this is purely momentum-driven. Gold's VAMS score turned negative this week after a brief recovery, and the filter cut it immediately. The freed 40% went straight to SGOV.

This is the most defensive the portfolio has been since mid-2024. Three of the regime's base allocations — equities, bitcoin, and now gold — are failing their momentum tests. Only commodities and energy retain positive momentum, kept afloat by the supply-side inflation dynamics.

Gold at $5,240 was cut despite the structural thesis. This is important to understand: the thesis says gold is a permanent anchor, but the VAMS filter overrides the thesis when momentum is negative. Gold's short-term momentum turned after a volatile week of profit-taking. The system doesn't ask "is gold fundamentally important?" — it asks "is gold in a drawdown that could deepen?" When the answer is yes, it steps aside.

Commodities (PDBC) at 20% and Energy (XLE) at 10% are the sole risk positions. Their momentum scores remain positive — supply-side inflation from oil and tariffs continues to support the trend.

SGOV at 70% is the result of the momentum filter cutting three positions. With rates at 3.50-3.75%, the portfolio is earning meaningful carry while waiting for momentum to recover. This isn't a macro call — it's the safety layer doing exactly what it's designed to do.

The key question is when gold re-enters. If gold's momentum score turns positive again, the portfolio immediately shifts from 70% SGOV back to a much more aggressive posture. The thesis hasn't changed — the timing has.

Asset Holdings — Dynamic portfolio weights over time

Week Ahead: Jobs and Tariffs

April 1 — ISM Manufacturing PMI: After printing 48.4, another sub-50 reading would confirm the manufacturing contraction is deepening. Watch the prices-paid component for pipeline inflation pressure.
April 4 — March Nonfarm Payrolls: After February's -92K shock, consensus expects a modest rebound to +45K. Another negative print would significantly accelerate the growth composite's decline and raise Stagflation risk.
April 15 — EU tariff effective date: The new duties on EU steel and aluminum are now priced into expectations, but any last-minute escalation (or de-escalation) could move markets.
Oil trajectory: Brent's pullback to $99 from $101 is encouraging, but the geopolitical premium remains embedded. Any progress on the Red Sea security corridor would be the most impactful catalyst for the inflation composite.

All model scores are normalized to a [-1, +1] scale through our proprietary normalization methodology. Positive readings indicate above-trend expansion; negative readings indicate below-trend contraction. Data updated through March 27, 2026.

MacroScope models are systematic tools, not investment advice. Past performance does not guarantee future results.