MacroVoices #508 Laskhman Achuthan: Inflation Cycles Amid Regime Change

This is Macro Voices, the free weekly financial podcast targeting professional finance, high net worth individuals, family offices, and other sophisticated investors. Macro Voices is all about the brightest minds in the world of finance and macroeconomics telling it like it is, bullish or bearish, no holds barred. Now, here are your hosts, Eric Townsend and Patrick Ceresna.

Macro Voices episode 508 was produced a day early this week on Wednesday, November 26th, 2025, in observance of tomorrow's American Thanksgiving holiday. I'm Eric Townsend. Mr. Business Cycles himself, ECRI co-founder Lakshmana Chuthan returns as this week's feature interview guest. Lak and I will discuss all things business cycles, from the current outlook on growth and inflation to how cycles in general perform in times like these.

when big political and geopolitical headlines are the primary factors driving markets. and i'm patrick ceresna with the macro scoreboard week over week as of the close of tuesday november 26 2025 the s&p 500 index up 187 basis points trading at 67.66 the market materially rebounding from its first meaningful correction since Liberation Day. We'll take a closer look at that chart and the key technical levels to watch in the postgame segment.

down 33 basis points trading at 99.78 the january wti crude oil contract down 219 basis points trading at 57.95 Oil breaking down now within a stone throw of year lows. The January Arbob gasoline down 323 basis points to 180. The February gold contract up 138 basis points trading.

at 4177 gold continuing to strengthen off of recent lows that march copper contract down 20 basis points trading at 509 the december uranium contract down 39 basis points trading to 75 85 and the u.s 10-year treasury yield down 13 basis points trading at 401 now trading again at that key level of 4%. The key news to watch next week is the ISM manufacturing and services PMIs, the ADP non-farm employment change, and the core PCE price index.

This week's feature interview guest is ECRI co-founder Lakshman Achuthan. Eric and Lack discuss impact of regime changes on cycle analysis, K-shaped consumption, AI investment, and more. Eric's interview with Lakshman Achuthan is coming up as Macro Voices continues right here at macrovoices.com.

And now with this week's special guest, here's your host, Eric Townsend. Joining me now is ECRI co-founder Lakshman Achuthan. Locke, it's great to get you back on the show. For most of our listeners are familiar with your work. Those who are not should just put Locke's name into the search box at macrovoices.com. We go fully into the long-term business cycle.

and cycles analysis work that Locke's firm, Economic Cycles Research Institute, focuses on in some of those past interviews. I want to dive into the current situation, though, Locke, because you are Mr. Cycles. You think about the world. in cycles. I love your work, but hang on. You told me something off the air about how you guys have this idea of an economic regime change. It seems to me.

Although the cycles work is very, very important. And I get it. I respect it. But I think President Trump and Secretary Besant are intending policy changes. that are literally on the scale of re-architecting the global financial system. Now, I'm not saying that they're going to achieve all of those goals, but...

That's what they seem to be out to do. And it seems to me that that potentially puts a real speed bump in reading cycles that are normally based on just, you know, the normal ebb and flow of economics. think about cycles analysis in a world where President Trump and Secretary Besant really are intending changes that are pretty much unprecedented? That escalated quickly. That was a big question, but it's great to be back with you.

I think that's really at the heart. Your question just cuts right to the chase. It's at the heart of decision-making in a world where the rules are changing. And so you have to do a lot. You have to have an interesting framework, I would say. And I'm very, very grateful for the cycle framework because it has a tried and true history of navigating.

what I would call regime change. You're talking about re-architecting the global economy. I agree. It seems like there's some version of that. It's hard to say literally what, but something's going on.

And cycle work does extend back farther than people may realize to the early part of the last century. There have been a lot of regime changes of kind of the economic lay of the land over that time frame. I'll rattle off a few, a little trip down memory lane. You have the panic of 1907, which... gave us the creation of the Fed. So that's kind of a, you know, it's changing some of the rules of the game, right? You have, as World War I ends, you have the end of globalization and income tax.

reduces the reliance on tariffs. That's a huge shift in the way global trade was going on. In the first half of the 30s, you have Smoot-Hawley. tariff act the depression the end of the gold standards the new deal there's a lot of huge things going on more recently and you could tell i'm a cycle guy when i say this is recent

But you have the Nixon shock in the 70s. There you have some tariffs. You have the end of the gold dollar link, the Bretton Woods set up, and stagflation shows up. That's a new thing, relatively new. In this century, you've got the housing bubble, the financial crisis, the huge bailouts with QE. And then post-COVID, you've got that unprecedented is a word that gets used a lot.

unprecedented massive fiscal stimulus, extreme QE, and all the supply chain stuff that happened. So these regime changes have occurred. The cycles continue. to happen, right? And this is important to remind everyone, what we're doing with cycle work is watching for the inflection point. Is the cycle going to turn and go the other way? So if we have one job,

at ECRI. That's our job. Is it going to turn and go the other way? The rules can change. The magnitude of the swings can get larger and smaller as the structure of the economy changes over all these decades. This inflection point monitoring and kind of risk of question actually is pretty darn stable. And all those times I just listed, the cycle indicators.

didn't break down. They kept getting the direction correct. And more importantly, the timing of the direction. And now I'm talking about growth. I'm not talking about markets.

but the timing of the direction, they were able to get very well. So in the current environment, the reason this is a problem, and this is embedded in your original question, the reason this is a problem is because when the rules change, models break down. And nine out of 10 people listening, whether they're explicitly doing it or implicitly kind of taking it in when they take in information, are relying on models.

where there's an estimation of some sort of relationship that has occurred in the recent past, the last five or 10 years, and it's optimized for the next whatever year or something. And you say, oh, because those are the rules of last. several years. It's going to happen that way in the immediate future. During regime change, that's absolutely untrue. However, these cycle indicators continue to get the direction right. So it's in that context.

that we come into 2025 and you have um as you said this re-architecting perhaps going on of the global the global economy and how do the indicators work you know quite frankly they work the way they always do They got the direction right.

Let's go ahead and talk about how the cycles interpret the last six months or so. The amount of time that we've seen these significant policy actions from Secretary Besant and President Trump starting to affect markets. interpret that period of time when those events occurred? And what do they tell us about what comes next? I'm going to refer to a couple of charts that are available, that I'll make available. Back in...

Basically, Liberation Days, right? It's in April or so. And we had ended 2024 all set up for there's a slowdown. We're having a slowdown in growth. There's no hard landing. And inflation, while it's still sticky, is going to stay in check. In April, our indicators were still signaling a slowdown ahead, but there was no recession. And before Liberation Day, that was our view. There's nothing in our world, nothing too radical.

Then you have Liberation Day. You have all of the headlines and quite a bit of angst about a hard landing or a recession. That was the mood. People may or may not remember this, but that's what it was. So in July, you have a little bit of time after all that news came out. Our forward-looking indicators on growth had turned back up, pointing to growth firming, not stalling. And that was even as our forward-looking, separate forward-looking indicators on inflation

were showing inflation pressures still fading. And at the time, we called it a setup for a Goldilocks phase. And everybody else was still talking about a hard landing. But we just... It didn't show up in the cyclical, forward-looking, directional data. And that's just what we have. We are very agnostic, actually.

uh on on most things except what our indicators say when the indicators are pointing one way or another we we trust them because of the real-time performance and then we try to figure out why afterwards now august By August of this year, very interesting because the resilience was giving way to even firmer growth. Our cyclical signals and broader... investment data started to really line up and we got into a more, what we would call a balanced brightening. And it's an unusual situation.

I think the last time was a quarter of a century ago where you have a cycle, a set of cycle data, which we're tracking, moving to the upside directionally. At the same time that you've got... some sort of structural thing happening. As you say, there was all this re-architecting happening, but the separate issue is all the tangible and intangible.

investment drivers that surround the AI activity. And so with those pushing to the upside at the same time that the cycle's pushing to the upside, doesn't happen like that all the time. And so that's notable. That's happening. We saw that in the summer. In September, again, our update is the expansion is totally intact. Inflation is contained. pretty darn unusual. And that brings us to now where it continues to be constructive. There's...

I think it's kind of now a little bit more in the headlines, this K-shaped stuff. We've been talking about it until I'm blue in the face, but basically you have the... a smaller group of consumers at the upper end of the K that are responsible for the bulk of consumption. The top 10% are just spending freely and they're helped by rising wealth.

strong balance sheets. And at the same time, the median household is under a lot of strain. They have slower earnings growth, a lot of credit stress, and with the job market not... adding jobs right it's it's not losing jobs so it's not adding jobs there's more stress and so you get this what we've called the kind of plutonomy pattern a narrow consumption base

that props up the overall numbers but there's definitely some fragility underneath and that is why things i think are very confusing for people at the moment and it also explains in a way where One aspect of why inflation is having trouble like getting a grip or getting some traction here, I'm talking broad inflation, not goods inflation. And that's because the bottom end of the K just can't stand it.

They can't handle higher prices. And so it's very difficult for it to start to run. And our forward-looking inflation indicators are saying that continues to be the case for now. So right now we're in a Goldilocks phase. I know that's getting a little tired to say. Growth firming, inflation contained, no hard landing, no stagflation. Now eventually... That's going to, the balance will tip. And that's what the leading indicators are designed to do is to give us a heads up on that.

That's fantastic luck because there's so much to unpack there. I really want to dive into it. I tend to think in macro narratives in my head, and I really respect the data-driven work that you and others do. That's what I... Respect technically, but my brain thinks in in narration and what I think you just said. Tell me if I got it wrong is.

Right now, we've got an economy that's dependent on rich people being in the mood to spend money like it's going out of style because some of them are new at being rich and they're still celebrating that. But all it takes is one big catalyst like some of the people. that are in the majority who can't afford to go out to dinner, watching that conspicuous consumption, getting pissed off and throwing a Molotov cocktail at just the wrong moment that hits a big news story. And all of a sudden.

There's a mood shift and rich people don't want to show off and go spend money like it's going out of style. And everything collapses very quickly because of that one little butterfly flapping its wings at the wrong moment kind of. trickle-down effect am i reading way too much into that because it sounds like there's some real risk there here's where our cycle stuff would line up with that story

As I kind of intimated, the K-shaped consumption, it's not a new feature. This feature, you know, I feel like I've been saying it for decades, and maybe it's been there forever. Uh, you know, you know, I'm not that old, right? But, but, you know, I know that we're not the first ones to struggle with what's going on with the economy. And what I do know is like relative change, right?

And it feels like that gap between the upper end of the K and the lower end of the K has just taken a good step bigger. And that... would feed into the narrative you just said, right? It's like, what's the straw that's going to break the camel's back kind of thing. What do your long-term cycles tell us about past times in history when wealth inequality was growing exponentially, which is what seems to be happening here? Here's what happens, right? It's quite interesting. Imbalances build.

And they're always different, right? You know, if you're a student of these cycles and histories, there's some debt crisis, there's some other boom, like the dot-com boom, or there's the... housing stuff. There's weird little like imbalances that build. And that in and of itself doesn't tell you when things are going to end, right? We're looking for the inflection point in my world.

right we're looking for the inflection point so we track the leading indicators not the coincident ones we're trying to look a little further ahead and when they begin to turn and go down i don't know exactly what the match is going to be that lights the fire, but that's when the conditions are ripe for something to move the other way and that's where you generate the cycle. It's the combination of the extreme.

In this case, we're identifying tension between the two legs of the K or the two arms of the K. And at some point, something is going to give. I don't know what it is, but I watch the long, what I'm doing every day.

as much as i can is watch these long leading indicators and i'm trying to see if there's any sign of a growth rate cycle downturn and the reason this is on my mind and I can't help but remember the dot-com boom. And roughly speaking, NASDAQ went to 5,000, then it peaked, and then it crashed and fell 50% and took.

you know, all the related things around it with it. There was a whole narrative around tech that it was going to do all these things. And it's not that it was untrue, but it was just overdone, right? It got overdone. And perhaps that's happening here. I don't know. But what I do know is that in 2000, the year 2000, the long leading indicator. index had started to turn down and it was starting to point to growth slowing, which then takes the shine off of the priced for perfection stories.

But you're saying you're not seeing that now. You're not seeing the topping. Today when I'm talking with you right now, I don't see it. It doesn't mean I'm not aware that it could happen. I'm aware it can happen, but I'm just reporting as I'm trying to get rid of my feelings and say, I know that booms end in busts because I've read books.

And I know that the long leading index is just one thing. I don't know. There may be other things that could crack the situation. But the one thing that I know something about is accelerating and decelerating growth. And I know that decelerating growth would take the shine off of the price for perfection stories that underpin a lot of what is being said.

about you know you know how people have stories around why this time is different and right and you see everybody i think everybody who's been around for a little while looks at the market and says whoa that's pretty high and wonders you know what might topple the apple cart. Today, I'm saying in the snapshot of what the long leading indicator is saying is it's not growth yet. It seems like if you look at the market in terms of where all of the upside has been, it would be.

the risk of an unwind of the AI trade specifically. And I think there are extreme parallels to the dot-com bust in the sense that they got the call right that the internet was going to be a really big deal. They got that exactly right. It's just that they went and... bought a whole bunch of stuff they didn't understand what it was because it sounded like it was internet related and that got us into

a bust situation that was quickly contagious even to the cool stuff that really was relevant. Is there a setup for that to happen again here with AI where, yeah, AI is a really big deal, but it doesn't mean we can't have a bust because it's a big deal. I would say it's virtually certain, right? Because the nature of it is, as we said earlier, you're priced for perfection, but the misallocation.

of resources, right? Because you don't know which one is the right one. So everybody's throwing money at everything and some of them are no good. Or maybe, what is it? I'm not going to get this right, but I'm sure your listeners know this.

In the dot-com boom, they were building certain infrastructure, including lines and capacity for data moving around that just was way beyond anything that could be used. And, you know, it has to be repurposed at some point. It's almost like... building there there's a whole thing where people build all the malls and stuff like that and then you don't go to the mall anymore you buy stuff online so you got to repurpose them all here

We're building a great deal of data center capacity and other things. And, you know, I don't know exactly how this works, but if there's some technology change, that may not be needed. Right. So that's misallocated capital. You've got to be careful what you wish for. Many of us know or understand that these free market economies that we like to think we're in, we're mostly in for the most part, every once in a while they get it.

kind of crony capitalism, but in these free market oriented economies, if you don't allocate your capital properly, you end up paying for it at some point. And so the boom can turn into a bust. And that's... probably going to happen here but there's a huge fear of missing out if it happens in a month and you pulled out you're a genius if it if you pull out now and it happens in a year

You're an idiot. And so that fear of missing out keeps everybody here. I want to swing back because you're making me think back to the regime change stuff also, if you'll bear with me. In the early 70s, Nixon... the so-called Nixon shock, right? This is a bit of a regime change. He has an America first policy and unilateral action in the international trade stage, get 10% PAC tariffs.

You have the inability to exchange dollars for gold, taking off the gold standard. The upshot of that for everybody looking at it in the moment was, whoa, this is a really big deal. which it is. And maybe this is going to bring us a lot of inflation. What's going to go on now, right? There was a whole concern around that. And ultimately they were right. I think in retrospect,

People look and they say, oh yeah, 70s had a lot of inflation. It must have been related to that Nixon shock. And it probably was, right? Smarter people than I have made that argument. But what's interesting from a decision-making point of view... either for your business or for your portfolio, is that after he did this and made the announcement, the economy did great and inflation was not a problem. It was more than a year later.

that the wheel started to come off. I don't think people really appreciate that. The indicators got the direction right on both counts. We had been coming out of the 69-70 recession. So the indicators were pointing towards growth and we didn't have an inflation problem at the moment, even though these things were happening. And it's not that it didn't show up, right? Because these were big rule changes. And you have the oil embargo begin also.

But the timing of when it shows up is really critical. And, you know, there might be some rhyming of that now. I really want to go deeper on this one, Locke, because and I'm going to ask you to hold me to account here because you are a historian and a cycles analyst. I am not. And if I've got the history wrong, please set me straight. But I think about the Nixon shock and.

the secular inflation of the 1970s with a different narrative, which is, I think that all the signs of a secular inflation were there in the mid to late 1960s. I think that the. First, from what I've read about secular inflations, and please correct this part if I have it wrong.

It's very common that the market is misled because for the first few years of a secular inflation, the feedback loops that make inflation bad for the stock market haven't kicked in yet. So what happens is in the early years of the inflation, it feels like just... really explosive economic growth and everything is wonderful. Everybody's happy. But it turns out that it's really just the beginning of an inflation. I think that's what happened. It started in the late 60s.

By the time the Nixon shock occurred, as you said, you can get to essentially what we think of in markets is a... buy the rumor, sell the news event where the Nixon shock happened. A lot of people knew that it was going to be inevitable. They were fading it. That got unwound. It wasn't another year, just like after the bust in the dot-com market. It wasn't until another year before. the trade really started to kick in that.

you know, the Internet is an important thing and that the inflation was very real. And then you had the stock market bust of the 1970s. It feels to me like we're still in the late 1960s. The Nixon shock hasn't even happened yet. Have I got that all wrong?

What do you think about that view? So on the secular side, I'm like you in the sense of I hear the stories. I try to put them together. And it's very, very difficult because the secular. or structural stuff, very hard to forecast the inflection point. Extremely hard. You can see it, if you're lucky, and you're really good, in the rearview mirror five years after it happened.

It's hard to do, to know that stuff. So that's why it's tricky. I think you need to be astute. In one man's opinion is that history is important, right? And I like to read it. They're great stories. And you learn that people did interesting things and thought interesting things.

You're also reading someone's account of something. You don't literally know what was happening in the mood in the moment. Like I think you and I and everybody listening know the mood today outside our window. But then you start to re-remember it very quickly. as a decision maker you're taking in all of this you have this huge amount of data flow and nowadays we have more than ever right of this data flow coming over our washing over our screens and our ears or whatever and

We're trying to figure out, is there a structural change? What is the structural change? What's it doing? And quite frankly, it's very, it's almost impossible. But I think. The cyclical stuff, you can start to hang your hat on that. That is reliable information. Even now with the government data on hold for a bit, we have... reliable, cyclical inputs. And they're saying that regardless of our understanding of history and of the...

game changes or the rule changes that we think are going on at the moment, growth is not collapsing here. And inflation writ large is not running away. The caveat there, how I can reconcile that with the stories that we've been telling about Nixon or the secular changes that started in the 60s, is that the forward look on the cycle indicators is...

a couple of quarters, two or three quarters. So it's not saying any of those views are wrong. It's saying not yet. Locke, I love that setup because I'll tell you the narrative that's, I think.

driving this is energy and if you use that analogy to the internet you know they were building a whole bunch of infrastructure they weren't thinking about things like social media and you know so forth would be the big trends that would be where the money would I think what people are missing now about the AI trade is, yes, it is every bit as important to the future of history as everybody thinks it might be, but it's not going to happen.

the way everybody thinks or imagines it's going to happen because there won't be enough energy in order to fuel it. The exponential growth of AI will require a increase in the amount of energy that we consume that simply It isn't immediately serviceable. It could be long term with the right nuclear energy strategy, but that takes 10 or 15 years to build out.

There's a really big energy crunch, I think, that will drive an inflation. So again, I'm thinking in narratives. How does that view align with your cycles work? What do you see in the cycles that... And by all means, if your cycles contradict, tell me so. No, no, no. So right now, the future inflation gauge is not running away, okay? And most of the future inflation gauges around the world are pretty benign. We cover...

you know, all the major economies, including the major emerging economies. Actually, in China, you want a little inflation, right? Because they've been flirting with deflation. I'm talking very broadly, not in a commodity or energy inflation.

There are a couple spots where there's a little like UK and Japan had a little inflation stuff, but not, but basically not an issue right here. Does that mean anything that you said was wrong? No, I agree with you. My, you know, I. We work with large industrial companies and those who are in the energy production area, like the traditional, hey, I need to have a generator kind of thing.

they've sold things for the next five, 10 years already because of what you're saying with the demand. What's quite interesting, and I don't know how to fully figure this out, is just market prices. I was listening to a pitch. Like this is your basic straight up Wall Street bank pitch on, you know, how to reallocate your assets. Right. And so everything's all the assets are up year to date.

across the board, bonds, equities, whatever, gold, stocks, except oil, right? Oil's down 10% when I had this report, which was in September, end of September. So that's interesting, right? Now, how do I intersect all of that with inflation and cycles? And it comes into our work. Now I'm going from structural to cyclical. looking out the next couple of quarters. It comes into our work in two ways. Industrial materials prices, sensitive ones, including oil. Let's start there at the bottom of this.

very closely linked to global industrial growth cycles. Global industrial growth has been in fits and starts. It was kind of like slowing a little bit and bottomed out. Yeah, now it's moving up. OK, so there's a there may be a disconnect there on the demand side between relatively weak oil prices and. where the global industrial cycle is headed over the next couple of quarters. That says nothing about supply. I don't have an insight on the supply side. So that's the other side of this equation.

Then you switch to the inflation side. What's going on with inflation cycles? So I'm switching from global industrial growth cycles to a completely different cycle, inflation cycles in the United States in particular. sensitive industrial materials prices, which is much broader than oil. Okay, there's energy, there's metals, there's textiles, there's other...

kind of miscellaneous materials, building materials, these other things. And they actually are starting to move up as a group. Some of your longtime listeners may remember the...

JOC index, the Journal of Commerce Industrial Materials Price Index. It's actually an ECRI index that we started in the 80s to track sensitive industrial materials prices. It's very different than like the Bloomberg one or... goldman sachs one or whatever because those tend to be kind of energy heavy and ours are or tradable our index is specifically designed for inflection points and growth and

I have to tell you that the breadth of that is starting to move to the upside. So it would be unusual, very unusual for oil prices to not eventually participate in that. One, that means that one driver of many of the inflation cycle could start to get a little traction in the coming quarters.

Well, Locke, everything that you're saying very much stands as confirmation of one of my core views, which is I think we are at the beginning of a secular inflation. And I think the bad for the stock market part of that secular inflation. is not happening yet and it sounds like your data confirms is not likely imminent it's probably a good year or two off before we get into

kind of inflation cycle that really starts to affect markets. And there's a lot of good reason to think that this equity market, what everybody thinks of as a very bubblicious, maybe it's about to stall out and roll over stock market. probably actually has legs to run quite a bit higher before eventually. I think there will be some serious headwinds, but it sounds like it's not time yet. Does that jibe with what you're saying? Yeah, I'd say not yet. I agree with you.

Not yet. This is kind of an off-color joke, but I'm an older guy. It's the guy who jumps off the Empire State Building, and as he's passing each floor on the way down, he says, so far, so good. You know, it can be fine for a while. And booms and busts are like that. I mean, they're fascinating times if you have some awareness as to what's going on.

And probably some humility on knowing that you're not going to get it exactly right. Locke, I want to turn this conversation upside down now because I think that... this secular inflation discussion we're having is going to be really important. You see this from two sides. One is your cycle work, but you also advise a lot of people to the extent that you can talk generally without.

breaching any confidentiality agreements. What are your clients asking you about inflation? How are they seeing it? Are other people worried about this? What is your interaction with your client network telling you about this? I think that our clients have spent some time thinking about cycles. And once you kind of get into it, you're a little more familiar moving between cycles and growth and cycles and inflation.

And it's the latter cycle, the cycle and inflation, I think that is most interesting to the clients and to me, quite frankly, because I think it's confusing to. to the general public and therefore has all kinds of risks and opportunities around it the inflation cycle right now as we've been to is not a problem the u.s uh cyclical outlook on inflation overall

It's not running away. And that's hard to believe because of the things that you see and hear around you. And when you get into it, and we talked about this a little bit at the beginning of the call, there are... pieces that are moving up and it's related to the headlines the the tariffs and such are pushing core goods inflation out of deflation where they were in 24 and into inflation where they are now and they're running around they're approaching two percent

And so that's a big change, right? They went from minus 2% to plus 2% on core goods. At the same time, shelter and services less shelter are all trending down. And so that's why the overall inflation... while sticky is not running up yet and part of that relates to the bulk of people who the median households and who are in the lower end of the K who can't afford higher prices. And so discretionary spending items.

They can't get a lot of price inflation there for that large cohort of people. All of this matters because this combination of inflation and growth give you interest rates.

Interest rates then price the rest of your portfolio. I'm oversimplifying, but, you know, it's a critical component. And where does this then relate to the interest rate, to the yield curve? Well, regardless of whatever the headlines are. There's not going to be a strong inflation reason for a hawkish Fed. So that's one piece of information. On the other side, the continued stickiness.

And all of the structural and secular concerns, you know, may have the long end kind of hanging out also kind of sticky. And so that's the setup for the yield curve. going forward. There's probably some room on the short end, certainly not for raising rates, but for being more dovish. And then the other end's sticky for now. And you've got... as I described earlier, on a cyclical basis, a Goldilocks kind of outlook, firming growth with overall inflation, you know, not running away.

So you see how the inflation cycle informs so much. And I think the inflation cycle is the most confusing part for most people to figure out. Locke, I can't thank you enough for a terrific interview, but before we close, I want to ask the question on a lot of our listeners' mind. particularly our institutional audience, which is what if they want to sign up for your service in order not to be left out in the cold and to know when there is a change in what you're.

cycles are telling us is coming next or when one of those inflection points is upon us? Well, look, if you want to work with us, it's pretty simple. Just call, just give us a call. We're old school. Just call Melinda at our office and you can find us at businesscycle.com. We're here in New York. We do have some people who are extremely good on social media and stuff. So we have a YouTube channel, and that's Economic Cycle Research Institute. And we have a LinkedIn where there's...

There's a newsletter and things like that, and that's Economic Cycle Research Institute again. So if you just type in the whole name on one of those social channels, you'll get right up-to-date stuff on what we're doing publicly if you want to work with us. Give us a call or send us an email and we'll take care of you. We're nice people and we enjoy talking. Patrick Ceresna and I will be back as Macro Voices continues right here at macrovoices.com.

Now, back to your hosts, Eric Townsend and Patrick Ceresna.

Eric, it was great to have Lack back on the show. Now listeners, you're going to find the download link for the post game trade of the week in your research roundup email. If you don't have a research roundup email, that means you have not yet registered at macrovoices.com. Just go to our homepage, macrovoices.com, and click on the red button over Lax Picture saying looking for the downloads. Patrick, Locke's view is that cycles and liquidity still support macro resilience.

But at the same time, we're dealing with AI bubble dynamics. And that means being delta one long the market carries a lot of left tail risk. So the question in my mind is how do you design a trade? that expresses Locke's constructive macro outlook view, but do that in a way that's risk managed and doesn't expose you to the full downside if the bubble finally cracks.

eric lax view is that the macro backdrop remains the resilient goldilocks economy where growth is steady liquidity is supportive and there's no immediate catalyst for a downturn But that doesn't mean equity markets have explosive upside from here. Instead, it may suggest a slow grind higher with meaningful left tail risk because of the AI driven froth. So being outright delta one long doesn't offer great risk reward. You want to stay invested, but you also.

don't want to hedge the downside. That's why a traditional S&P 500 collar makes sense here. Now if your view is that the upside here is limited, selling a bit of it to finance the downside protection is a good trade-off the call premium subsidizes the put giving you a more defensive posture while still participating in a stable or modestly rising market. It keeps you aligned with lax resilience view but with defined risk if you get a volatility shock or the bubble unwinds.

With the S&P 500 trading near 6750, the structure I'm looking at is a 5% out of the money collar using the January 15th, 2026 expiration or about 50 days at the time of recording. On the downside, I'd buy the $6,400 put for about $54. And to help finance that protection, I'd sell the $7,100 call, which brings in roughly $36. That leaves you with...

a net debit of around $18 for the entire structure. This gives you a very clean risk managed profile. You stay along the market in line with LAX macro resilience framework, the opportunity cost of the call cap is likely low but if you were to get a volatility shock or an unwind of the ai froth the long put kicks in and materially limits the damage It's a simple, elegant way to stay invested without carrying the Delta One downside risk.

Patrick, every Monday at Big Picture Trading, your webinar explains how retail investors can put on our most recent trade of the week. For those listeners that want to explore how to put on these trades in greater detail, Don't miss out on a 14-day free trial at BigPictureTrading.com. Now let's dive into the post-game chart, Dick. Eric, let's take a look at those equity markets. What's your thoughts here?

Patrick, I've noticed a lot of people scratching their head the last couple of weeks saying, OK, what the heck caused this downside correction in the markets? What was the catalyst? It's not really clear what the problem is here. It's actually crystal clear to me. Now, that doesn't mean I'm right, but I'll tell you what I.

I think I think this is entirely about hot money fund managers protecting their tear sheets into year end. This is something I didn't really understand until I ran a small macro hedge fund myself. The way the market works is. Real money basically stays in their positions, doesn't trade in and out of them. So they're not who's affecting the market. It's the hot money that affects the day-to-day moves in the market.

And the way these guys think is when everybody has had a fantastic year, which is where we stand right now, if you already up 60% on the year, fantastic numbers. There's really not a lot of incentive to try to get to up 65% or up 70%. You've already had a fantastic year. When people look at that tear sheet three years from now and they say, he had a 60% year, that's going to. to sound great no matter what. On the other hand, if you

Go, as happened to a lot of people in 2018, and you turn that plus 60% into plus 12% by the time you get to year end because the last few weeks were the beginning of some kind of market crash. Well. That's when you're really in trouble and you really regret the risk management decision you should have made. I think that memory of 2018 has got a lot of fund managers saying, look, if I just cash out, risk off.

de-risk my portfolio right now, I'm still up 60% on the year. I don't want to take the chance of losing half of that. And it's not worth it to stay fully invested into year end when I'm not sure what's going to happen.

And that means that Holiday Thin Liquidity could take the market on a big move in either direction. Now, at the moment of recording, it looks like that direction is up. It seems like we've reversed the downtrend and we're bouncing really vigorously here. We're back above the 50-day moving average. Things are looking great.

But remember, thin liquidity is when market manipulation tactics are most effective and easiest to perpetrate. So it's easy to see how someone could engineer a big stop-clearing run to the downside, and that in turn could... poison the market and spook everyone into year-end just into bailing out in order to protect their tear sheet.

Conversely, a sustained rally above the 50-day moving average, and it looks like we've got one in play, at least as of recording time, before the market open on Wednesday. That could bring on a bigger than expected Santa Claus rally as everybody says, OK, the market's sounding the all clear. We're back above the 50 day. This rally looks great.

RSI has improved. Stochastics have improved. Let's get back in. Let's not wait till year end. That could give us a really pronounced move to the upside. So I think the name of the game into year end. when everybody's P&L resets, is try to figure out which way the trend is running and stay with it into year end. For the moment, I think it's reversing to the upside.

You know, knock on wood, anything could happen in thin liquidity over the holiday. So let's wait till we get through this thin liquidity holiday weekend before we reach any final conclusions. Well, Eric, for me. This price action is very reminiscent of January at the start of the year. We started the year below the 50-day moving average, a quick sell-off that got us about 5% off of the highs. Then a rip that had the market go and retest its highs.

by the end of January, and we're creating what was essentially a double top. At this moment, with the fact that we've recovered above the 50 DA, got away from all the trigger points for CTA selling with the short... holiday period low volumes it's entirely possible that this market could have a short-term rally up to the highs and allow the upcoming fed meeting to be the catalyst for the next major move in the markets and so At this stage, market is out of the danger zone. Now, Eric, I want to.

step back and really size up this correction because we've been talking for months about that this has been one of the longest and one of the largest in magnitude rallies that we've had this decade actually the hundredth percentile without a five percent correction but

this market correction from peak to trough has now been a six percent correction and therefore qualifies as a correction so this idea of waiting for a correction well correction has happened and so now the question is is this enough to resume a new bull phase of a market.

Or is this market in a bigger distribution cycle that much more mimic a topping formation in the market? A lot of that is going to be decided with how semiconductors behave here. We're actually at a very key level. NVIDIA broken.

to a lower low. A lot of the semiconductors like AMD have retraced more than 50% of their previous rallies. This is actually a tactical buy on dip window where if the AI bubble was to continue and the semiconductors are going to be bought on dip this is actually a level where that should happen and so whether these semiconductors get bought on dip here and resume rallying I think will play an incredibly important part in determining whether

there's another full bull leg ahead or whether this is just going to be a seasonal period where the markets rally up to their highs and get sloshed around in a trade range going into the holiday period. So a lot to be discovered.

on the short term it would take a breakdown below 6600 at this moment to reopen a floodgate so the market's got a little bit of wiggle room here to stay in this trade range definitely throughout the thanksgiving holiday and certainly potentially towards the fed meeting all right eric let's uh touch on the dollar

Patrick, we're still flirting with upside breakout territory. As of recording time, before the market opened on Wednesday, we were well off the highs and flirting with channel support, actually. So maybe we're about to see the next move up.

On the other hand, a sustained move below 99.5, that's just about where we are right now on the Dixie chart, would suggest at least a swing reversal to the downside is in play. But it's too early to call that yet. Let's see what it looks like after the holiday weekend.

well eric for me the dollar chart is very simple we've been two months above its 50-day moving average uh higher highs higher low sequences occurring and uh every potential for the dollar to squeeze a little bit higher here but to me that really now upon the euro breaking down in order to play out the the u.s dollar yen has already had a rip is a stone throw away from its year highs and so at this stage it's going to take the big kahuna currency pair of the year

to actually break down in order to see that upside on the dollar really accelerate the euro has bounced back toward its 50-day moving average but has been over a month trading below that 50-day will we see the euro remain below the 50-day moving average, I think is a key technical thing to watch in determining whether this dollar is going to have another leg up. All right, Eric, let's touch on oil here.

Front of curve time spreads on the WTI market are starting to soften again, even as flat price mostly holds its ground. Now, I'm still very, very bullish crude oil and commodities in general. after the 2026 election season. But until the election season is over, until we get to midterm elections, I think invisible hands could push this market considerably lower. President Trump definitely.

desperately needs lower oil prices. He's got a lot of political capital with Saudi Arabia right now. He's got plenty of room to negotiate some kind of secret deal behind the scenes in order to keep energy prices lower. On the other hand, I think the fundamentals are in the opposite direction, very bullish. Which one's going to win out?

Boy, tough call for now. I would say that the seasonal low is in February. I definitely don't want to be long before then. At some point between February, which is seasonal low, and November, which is end of election season, Depending on how things are playing out, I'm going to want to get back long and long in size. The question is how things are going to play out. How much political power does President Trump have? What is the outlook for the midterm elections?

Those are the things that I think are going to determine the direction of the market between February and November of 26. Well, Eric, we have crude oil deteriorating below a fib zone. It's been trading consistently below the 50-day moving average and has weakened now to being a stone throw away from all of its major lows of the year, which lie in the 55 to 56.

dollar range At this moment, we're weakening into this key support line at a time when news catalysts such as potential peace deal between Russia and Ukraine and a potential start of a military operation against... Venezuela could be disruptors in oil trends. And so at this juncture, we have to respect that the prevailing downtrend is intact, but it'll be interesting to see whether one of these catalysts shifts or pivots this prevailing downtrend.

All right, Eric, let's talk about gold. Well, Patrick, in Tuesday evening after-hours futures trading, a formative upside breakout from the pennant or symmetrical triangle pattern that began on October 21st appears maybe, hopefully, cross your fingers knock on wood to have begun to the upside. But it's still early to call an upside breakout until we've seen a daily close above 4,200. So let's wait for that closing print above 4,200. Right now, though, the chart's looking really bullish.

And remember, thin liquidity holiday periods are when fake breakouts are most likely. So let's not read too much into this potential formative upside breakout until we see confirmation in liquid market hours. Eric, I'm also watching that same 4200 levels. So now that we've seen a correction in gold and it now making a higher low, if gold can get above that 4200 level, then a retest of its previous high.

could be in play and certainly would ask the question as to whether we're going to have a resumption in the bull trend now i want to highlight one important observation of the last four gold market corrections that were relatively sideways in that pennant formation. they've all lasted anywhere from two months to four months in length this current market correction in gold is just over 30 days old and so the question here is is this going to be the shortest correction of all these sequences

And will the bulls just be able to resume the upside immediately? Or is this going to still stall out on overhead resistance and come back to retest some key levels as it kind of continues to base for another month in line with pre- Previous lengths of corrections before it technically breaks out. Our main overall bullish gold. The bigger question is, is this going to be the start of the next leg or not? And overall, I don't see any reason why this can't wait till January.

to start but i do think that the next key break in gold will be to the upside all right eric let's get your update on uranium Patrick, I added considerably to my longs on both URA 50 and 55 strike calls on this dip. Our friend Justin Hewn over at Uranium Insider nailed this bottom, at least so far, if that was the bottom. UI's newsletter and member's webinar. Justin, just...

perfectly to the day, nailed that bottom if it was the bottom. And of course, he qualified that to say he wasn't calling a bottom, but he thought it could be the bottom. Looks like it may have been. We still need to see the spot price move, though. Now, we are seeing action. in the uranium physical market. It's just not visible to most people. There was $2 of upside in this month's monthly term price report, which comes from UXC. That's a special subscription uranium market data.

that most traders don't have access to. What most people are watching is the spot price. That's what's gonna move the market. We haven't seen spot move yet, but we do have a new floor on spot price because spot is so far below term price now. that the carry trade is in place. So if spot trades much lower, carry traders are going to step in.

This is, however, a famously volatile market, and we're coming into thin liquidity holiday trading. So all it would take is some broad market weakness. Somebody... getting spooked out of their S&P position to slam the uranium miners back down to new lows. But once liquidity stabilizes after the thin liquidity holiday weekend, my outlook is decidedly bullish.

That's with the big caveat that that's barring a broad market risk event and particularly an unwind of the AI trade. Now, frankly, an unwind of the AI trade is pretty darned unlikely considering the U.S. government the White House just made. One of the biggest Manhattan Project-sized announcements in history saying they're completely, totally committed as a matter of national security to standing up AI in a battle with China.

it seems very unlikely that we're going to see an unwind of the AI trade. And for that reason, I think that risk... has come out of the nuclear market or should have come out of the nuclear market, but we haven't seen it in the tape yet and we definitely haven't seen it in the spot price of uranium. Hopefully that's what's coming next. uranium stocks have gone through a one-month correction now and have certainly mean reverted a very good chunk of that september october advance

Overall, we're clearly seeing some profit taking. But the bigger question I have on my mind is that how much are these uranium stocks correlated with the AI story? Have they been basketed with that? sustained selling in the AI story, will that put further pressure on these stocks as they may have been basketed into the same trade idea thesis?

Nonetheless, the one thing to watch is whether or not the uranium stocks can get back above their 50-day. Now that this correction is getting underway, that level is around the $47 level on the URA and a technical breakout back. above there would certainly gain some traction on a potential new breakout. And so will the bulls be able to put that together is the thing to watch. Patrick, before we wrap up this week's show, let's hit that 10-year Treasury note chart.

We certainly have now seen us roll back down and trade towards the lows again. We're now toying with this 4% level. And overall, we've now seen the odds of a December rate cut. actually come right back in to like 80 plus percent. And so if we see that generally we're talking about a dovish Fed and an economy that may be not as resilient, then the question is, is a will we. see these yields.

break to a lower low which is going to be a breakdown towards the 390 basis point level overall this has been a general downtrend of lower highs and lower lows and so no reason to see that there's some sort of imminent new phase where yields are going to materially rise. And so continuing to see whether or not they break down is the path of least resistance and the trend that will likely stay in place here.

going into the end of the year. Folks, if you enjoy Patrick's chart decks, you can get them every single day of the week with a free trial of Big Picture Trading. The details are on the last pages of the slide deck or just go to bigpicturetrading.com. Patrick, tell them what they can expect to find in this week's Research Roundup.

Well in this week's research roundup you're going to find the transcript for today's interview as well as the trade of the week chart book we just discussed here in the post game and a number of links to articles that we found interesting. You're going to find this link and so much more.

in this week's research roundup that does it for this week's episode we appreciate all the feedback and support we get from our listeners and we're always looking for suggestions on how we can make the program even better now for those of our listeners that write or blog about the markets like to share that content with our listeners, send us an email at researchroundupatmacrovoices.com and we will consider it for our weekly distributions.

If you have not already, follow our main account on X at Macro Voices for all the most recent updates and releases. You can also follow Eric on X. at Eric S. Townsend. That's Eric spelt with a K. You can also follow me at Patrick Ceresna. On behalf of Eric Townsend and myself, thank you for listening and we'll see you all next week.

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