All Letters
May 17, 2026

MacroScope Weekly — May 17, 2026

Current Regime: Reflation / Contracting Liquidity

TL;DR: Reflation / Contracting for a third straight week, with growth nudging up to +0.71 — the strongest reading of the year — and inflation holding near +0.25. The big news was institutional, not statistical: Kevin Warsh was confirmed as Fed chair in a 54–45 vote, the closest in modern history, and Jerome Powell's term expired this week. April CPI confirmed inflation is still accelerating. The book is unchanged.

Composites: Growth at a Year-High

Growth pushed to +0.71, its best level of 2026. The production and decision/capex pillars remain the engine — the build-out cycle simply hasn't blinked, and the distribution pillar (now including hyperscaler cloud revenue) is confirming that the digital economy is moving goods and services, not just ordering chips. Inflation is steady near +0.25; April CPI accelerating toward 4% lines up with what the composite has been signalling for a month.

Liquidity is still the lone holdout below zero, keeping the overlay Contracting. With a brand-new chair about to run his first meeting, the liquidity path is the single most uncertain input in the framework right now.

Regime Classifier — Growth, Inflation, and Liquidity composites

The Portfolio: Unchanged, By Design

Third week, same book. The tournament rebalanced at month-start and the regime hasn't moved, so there's no turnover to report:

  • Real assets: PDBC + XLE, 15% each.
  • Defensive: GLD + XLP, 12.5% each.
  • Cash: SGOV, 20%.
  • Growth / Liquidity: SMH + QQQ, IEMG + HYG.

A reminder on cadence: the model rebalances monthly, so within a stable regime the holdings are deliberately sticky. The value of a systematic book isn't constant motion — it's holding the right exposures while the regime persists and rotating cleanly when it turns.

Asset Holdings — portfolio weights over time

News: A New Fed Chair, By the Narrowest Margin

Kevin Warsh was confirmed as the next Federal Reserve chair in a 54–45 Senate vote — the narrowest confirmation for the role in the modern era, almost entirely on party lines. Powell's term as chair expires this week, and Warsh is expected to be sworn in shortly.

This matters for the thesis. Warsh has historically leaned hawkish on inflation and skeptical of balance-sheet expansion — but he arrives into an energy-driven inflation shock layered on top of a debt load that needs the front end contained. The tension between a hawkish instinct and a fiscal reality that demands suppressed real rates is exactly the bind the framework is built to track. April CPI, meanwhile, confirmed prices are still accelerating, leaving the new chair little room to ease even if he wanted to.

Week Ahead

  • Warsh sworn in (~May 22): The handover completes. First signals on tone and balance-sheet intentions will move the liquidity composite.
  • Inflation follow-through: With CPI near 4%, watch PCE and any Fed commentary for whether the energy pass-through is broadening into core.
  • Liquidity overlay: A flip back to Expanding would be the single most bullish development available — it's the only thing standing between this regime and full risk-on.

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 May 15, 2026.

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