Goldilocks Macro: Calm Rates, Rising Stocks, and a Volatility Setup

1) RATES – Get the RoC (rate of change) of headline U.S. Inflation right, and you get most of the big things in Macro right.  Precious Metals obviously love an economic condition that contains growth accelerating and inflation decelerating, especially when the Long-End of the Curve (US Treasury 10yr Yields) declines.  They’ve been doing that after putting in another lower high Monday.  They might still be bullish TREND, but the RoC is muted and that is what markets like…a reasonably quiet bond market.  We still have a Street Low forecast for CPI through Q2 of 2026.  Trump is probably going to keep going after Powell on that and his government spending.  Meanwhile, gold and silver continue liking the rates condition, up another 1% and 5.7% respectively.

2) GLOBAL EQUITIES – ‘If Japanese Bond Yields keep breaking out, stocks will collapse’ – I guess that’s the media-driven Narrative of The Day.  Instead, Japanese Stocks seem to love rising Bond Yields, a collapsing Yen, and Takaichi/Ueda leadership.  Takaichi is the 1st female Prime Minister in Japan’s history.  What does that have to do with markets?  Nothing.  As a reminder, Japan is also exhibiting growth accelerating and inflation decelerating here in Q1.  Some of the better emerging market countries lately?  Would you believe Turkey and Israel?  Both currently overbought.

3) VIX – The uninformed volume was buying “panic-puts” again yesterday.  Given that the conditional economic scenario continuing to unfold is “Goldilocks,” I suppose the put buying (protection) was/is for emotional/political decision-making.  I guess they think Trump is just too much “risk.”  I have no idea, and I really don’t care.  Markets really don’t care all that much about political infighting.  All I see is a +110% implied volatility PREMIUM on the S&P 500 proxy (SPY) vs. 30-day realized.  That is accelerating and VERY high and registers a 2.2x Z-score on a 3-year look-back.  What does that mean?  It’s 2.2 standard deviations ABOVE the historical mean.  What does THAT mean?  People are buying a lot of protection…which sounds scary, right?!  Well, remember, dealers take the other side of that trade, and when the puts unwind, it creates a buying condition in futures.  It’s just a matter of time.  The immediate-term downside on VIX is towards 14.93 while its top end is near 18.  VIX is currently trading at 17.24…pretty close to that 18 level, so more downside in volatility than upside.  That’s good.  Big investors tend to invest at the top end of VIX when implied volatility is sky-high.  Could we “spike” VIX towards 20 and scare the pants off traders/investors?  Yep.  Is that currently probable?  No.  Possible, yes; probable, no.