Global macro roadmaps look bearish

In my trade alert I sent out last week, I highlighted that we may return to a stagflation regime where USD and yields recover from their March selloff. There are two roadmaps I’m using to navigate between the three regimes we’ve seen over the last tightening cycle - stagflation, recession (risk lower, yields lower), and disinflation (risk higher, yields lower).

Roadmap #1 - US 10 real yields

Above is a chart of US 10 yr real yields, which is calculated by subtracting US 10 yr breakeven yields from the 10 yr nominal Treasury yield. It’s a measure of how tight policy is relative to market-based inflation expectations. The more positive it is, the more restrictive current interest rates are.