Keeping track of the macro zeitgeist in the post-pandemic world can be difficult. To the uninitiated, it’s well-nigh impossible.

More art than science, the task comes down not just to determining how to characterize good and bad news, but also to anticipating shifts in how other market participants will be inclined to trade the incoming data vis-à-vis monetary policy.

It’s really about tipping points. So, for example, how much good news is too much, where “too much” means enough to turn monetary policy incrementally more hawkish? Which data points matter most in that regard, and how much of an overshoot on those data points is enough to override conflicting signals from less important prints?

On the other side, how bad does bad news have to be to undercut risk sentiment in an environment where monetary policy is biased hawkish? Put differently: What’s the threshold beyond which the recessionary signal from bad data overwhelms the bullish read-through from the dovish policy bent such data is likely to engender?

Currently, US equities are trading in a bad news is good news regime. Stocks were pleased this week with a downside JOLTS print, a meaningful drop in consumer confidence and a downshift in private sector hiring. Taken together, those prints were plainly dovish for policy, bullish for bonds and thereby a catalyst for stocks which spent most of this month struggling to digest rising real yields.

With all of that in mind, I think it’s useful to recap the ebb and flow of the macro narrative and the policy nexus in 2023, both as a reminder of “how we got here,” so to speak, and also as a way of illustrating how nimble one has to be to keep apprised of, and in step with, fickle markets.

What transpired over the first three days of this week was “another example of consensus shifts and narratives being consistently caught wrong-way over the course of 2023,” Nomura’s Charlie McElligott wrote, in a Wednesday note. Here’s Charlie’s bullet point recap of this year’s narrative seesaw:

• The initial January “anti-USD” / end of Fed tightening cycle / recession trade” got stopped-out by the “animal spirits” blowout across February’s releases of January’s “hot data” shocking to the upside;
• But thereafter, a market then positioned for “higher Fed terminals” proceeded to get promptly stopped-out by the regional banks shock and a perceived “re-striking” of the Fed put / resumption of “short vol” regime, as the “Fed tightening cycles tend to end after they break something” truism then seemingly realized;
• Thereafter, we then saw the world tilt back into “credit crunch” footing, where the perception was that the bank stress would indeed pull-forward the recession timing yet again;
• But that was then painfully stopped-out by months of upside surprise growth data, versus cooling inflation in “Goldilocks” fashion;
• And now, we are seeing the past month’s worth of capitulation back into “high for longer” Fed = bond / rates “shorts  / payers” now being squeezed-out and unwound, as buyers of duration smell the slowdown further metastasizing in global data

I wish you the best of luck in anticipating the next narrative stop-out.