Flying Blind in Shutdown Chaos [Week #28]
Despite the systematic vol sellers being back in control, this won't be the last volatility spike of the year.
As the US government shutdown drags into its third week, blinding us to key economic data, market participants are slowly realizing we’re flying blind. We’ve been told so many times that the shutdown is a non-event that nobody even dares to second-guess it. It’s been 20 days without any hard data from the government. The few scraps we do get are prone to high noise and likely to be revised later. These metrics are crucial inputs for quant firms and macro investors alike. Even staples like the CFTC Commitment of Traders are MIA, and we all know how vital that is for traders like us. This data blackout alone justifies expecting a sustained volatility regime over the next month. Throw in the highly anticipated Trump-Xi meeting, MAG-7 earnings, and China’s Fourth Plenum, and volatility is here to stay. Yet so far, nothing much is priced in. Sure, we saw some jitters last week, but the systematic vol sellers are already back in control. Meanwhile, soft data are tanking again. Is this just another false alarm?
In this week’s macro update, I’ll share my insights on:
Growth: What earnings are signaling and how to interpret those GDP forecasts.
Inflation: The inflation swaps market is finally making a decisive move, and it’s not what you’d expect.
Monetary Policy: We’re holding our breath ahead of the FOMC in 8 days.
Fiscal Policy: A deep dive into the shutdown’s real impact.
Liquidity: Monetary plumbing 101, plus why the repo market tensions aren’t alarming yet.
Stick with me through to the conclusion, where I’ll dissect positioning and reveal my trades for the upcoming earnings season.
If you’re not familiar with the macro dashboard, make sure to read the explainer first:
Let’s dive in!
