2026-09-18 · Macro
Macro 2026: The Four Variables I Watch Before Risk Assets
I don't make price calls — that's coin-flipping dressed up as research. What I watch is the transmission chain: how a handful of variables feeds into the pricing of risk assets. Four variables. More than that and you can't track them; fewer and you miss signals.
1. Rates: the discount anchor for everything
The risk-free rate is gravity. When it rises, long-duration assets feel it first — growth equities, long bonds, the financial properties of gold. When it falls, risk appetite repairs itself. What I watch isn't "what the Fed said" but the direction of real rates: nominal minus inflation expectations. That's what sets the opportunity cost of capital.
2. Credit: whether the system suddenly runs short of money
Rates decide how expensive things are; credit decides whether the game continues. High-yield spreads, commercial paper spreads, offshore dollar liquidity — any of them widening quickly is the pre-symptom of somebody getting a margin call. Late in a bull market, rates can still look fine while credit is already cracking.
3. Earnings expectations: whether the story can be cashed in
Eventually someone has to pay for multiple expansion: earnings. I track the breadth of revisions — how many companies are being revised up versus down — because it leads EPS growth rates. When expectations start being cut across the board and price hasn't reacted yet, that divergence is the most dangerous configuration there is.
4. Liquidity: whether the water is still there
The first three decide what multiple to pay; liquidity decides whether there's a buyer on the other side. Central bank balance sheets, reverse repos, broad money growth — they tell me whether the pool is filling or draining. When liquidity goes out with the tide, even a good story finds no bid.
How they set my position size
These four aren't a scorecard, they're an attack/defend switch. Friendly rates, calm credit, rising earnings revisions, ample liquidity: full attack. Any one deteriorating and I step down a notch; credit and liquidity both tripping means defend outright. That matches the discipline of sizing from the worst case rather than from the size of the opportunity — work out how much you can lose before you think about how much you might make.
I've turned this monitoring into the macro-dashboard skill: refresh the four
variables weekly, output an attack-or-defend conclusion, and never a forecast.