How to Read the Four Macro Scenarios

What the four macro scenarios are

The Macro Model uses a four-scenario structure to make a complex macro backdrop easier to read. Instead of showing every macro input separately, the page groups the current 12-month context into P(-2), P(-1), P(+1), and P(+2). Those labels represent feature-driven macro states, not direct textbook terms. They are simplified names for a deeper mix of policy, inflation, yield-curve, credit, and sentiment conditions.

This matters because a macro scenario is not the same thing as an asset forecast. The scenario tells users what kind of macro environment the model sees. The payoff table then asks how the selected asset historically behaved after similar model-labeled environments.

The macro features behind the scenarios

The model is connected to macro-condition features such as policy rates, inflation, yield-curve shape, consumer sentiment, and credit spreads. The exact proprietary weighting is not disclosed, but the interpretation is straightforward: pressure usually rises when policy is restrictive, inflation is uncomfortable, credit spreads widen, sentiment weakens, or the curve backdrop looks stressed.

Supportive conditions usually appear when inflation pressure cools, policy pressure eases, spreads remain contained, sentiment improves, and the broader macro feature mix becomes more constructive. Users should treat the scenario label as a readable summary of those inputs, not as a literal economic diagnosis.

Plain-English interpretation of each scenario

P(-2) Severe Macro Pressure is the most defensive scenario. It can reflect wider credit spreads, weaker sentiment, yield-curve stress, restrictive policy, inflation pressure, or a sharply negative macro score. A plain-English interpretation is: funding conditions tighten, risk appetite weakens, and multiple pressure signals appear at the same time.

P(-1) Weak Macro Backdrop is a lower-quality but not necessarily crisis-like setup. It can reflect elevated inflation or policy pressure, soft sentiment, moderately wider spreads, weaker liquidity, or a less supportive growth backdrop. A stagflation-like grind may push weight here if inflation and policy pressure remain high while sentiment and liquidity are weak.

P(+1) Constructive Macro Backdrop is a supportive but not extreme scenario. It can reflect easing inflation pressure, contained spreads, improving sentiment, less restrictive policy conditions, or a constructive macro score. This is often the scenario users can think of as a soft-landing or improving-backdrop state.

P(+2) Strong Macro / Liquidity Backdrop is the strongest supportive scenario. It can reflect favorable liquidity, tight credit spreads, strong sentiment, easier policy pressure, or a broader macro score that is clearly positive. This does not guarantee upside, but it means the macro feature mix is strongly supportive.

Why these are not textbook economic labels

Users often expect labels like recession, stagflation, soft landing, or expansion. Those terms are useful examples, but they are not the official output of the Macro Model. The model instead produces a scenario distribution across the four P states. A stagflation-like environment may be reflected by P(-1), but only if the feature mix resembles that kind of pressure. A risk-off shock may be reflected by P(-2), but only if the pressure appears broadly across the macro inputs.

This approach avoids overclaiming. The page is designed to show educational macro context, not to make an official economic call or reveal proprietary feature weights.

How to read scenarios with scenario payoffs

The scenario probabilities explain the macro backdrop. The scenario payoffs explain how the asset historically behaved after similar macro states. This is why a negative macro scenario can still have a positive payoff for some assets. If the asset historically rebounded after similar pressure windows, the payoff can be positive even when the macro label sounds defensive.

For high-volatility assets, the payoff table deserves extra attention. A large Macro EV can be driven by broad support across several scenarios, or it can be driven by one unusually large historical payoff in a single path.

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