Morning Market Checklist for Economic Metrics

Comprehensive checklist for your morning economic metrics routine and an interpretation guide for each metric’s movement and their interactions.

Morning Market Checklist for Economic Metrics (Risk Assets Trading)

1. Crude Oil Price (WTI or Brent)

• Current Price: _____

• Trend: ⬆ Up / ⬇ Down

• Volatility: High / Low

2. U.S. 2-Year Treasury Yield

• Current Yield: _____%

• Trend: ⬆ Up / ⬇ Down

3. U.S. 10-Year Treasury Yield

• Current Yield: _____%

• Trend: ⬆ Up / ⬇ Down

4. U.S. Dollar Index (DXY)

• Current Value: _____

• Trend: ⬆ Up / ⬇ Down

5. 10Y-2Y Yield Spread (Recession Indicator)

• Current Spread: _____ (10Y - 2Y)

• Trend: ⬆ Steepening / ⬇ Flattening

Interpretation of Individual Metric Movements

1. Crude Oil Price

• ⬆ Rising Oil Prices:

• Sign of strong demand, often due to economic expansion.

• Inflationary pressures (higher energy costs).

• Positive for energy stocks and commodities.

• Could lead to tighter monetary policy if inflation spikes.

• ⬇ Falling Oil Prices:

• Weak demand or oversupply (economic slowdown concerns).

• Could reduce inflation pressures (positive for consumers).

• Negative for energy stocks, but positive for transportation and manufacturing.

2. U.S. 2-Year Treasury Yield

• ⬆ Rising 2Y Yield:

• The market expects tighter Fed policy (rate hikes).

• Typically bearish for risk assets (stocks, crypto) due to higher discount rates.

• Signals short-term economic optimism if rising due to growth expectations.

• ⬇ Falling 2Y Yield:

• The market anticipates Fed rate cuts or economic slowdown.

• Positive for risk assets if rate cuts are expected to boost growth.

• Can indicate flight to safety (investors moving into bonds).

3. U.S. 10-Year Treasury Yield

• ⬆ Rising 10Y Yield:

• Market expects economic growth, rising inflation, or higher Fed rates.

• Higher borrowing costs can slow business investment and housing markets.

• Positive for financial stocks (banks) but negative for tech/growth stocks.

• ⬇ Falling 10Y Yield:

• Signals slowing growth, lower inflation expectations, or Fed rate cuts.

• Bullish for tech and growth stocks due to lower discount rates.

• If dropping sharply, may indicate recession fears.

4. U.S. Dollar Index (DXY)

• ⬆ Rising DXY:

• Strengthening dollar means capital is flowing into USD assets.

• Bearish for commodities (oil, gold, crypto) and emerging markets.

• Can signal risk-off sentiment if rising due to safe-haven demand.

• ⬇ Falling DXY:

• Weaker dollar makes U.S. exports more competitive.

• Bullish for commodities, stocks, and risk assets.

• May indicate monetary easing or capital outflows from USD.

5. 10Y-2Y Yield Spread (Recession Indicator)

• ⬆ Steepening (10Y > 2Y and widening):

• Positive signal for economic growth.

• Market expects long-term expansion and rising inflation.

• ⬇ Flattening or Inverting (10Y < 2Y):

• Classic recession warning signal.

• Investors see higher short-term risks and lower long-term growth.

• Could indicate the Fed is overtightening monetary policy.

Combinations and Market Implications

Bullish for Risk Assets (Stocks, Crypto, Growth)

1. Oil ⬆ + 10Y Yield ⬆ + DXY ⬇ → Economic expansion with controlled inflation.

2. 10Y Yield ⬇ + 2Y Yield ⬇ + DXY ⬇ → Fed rate cuts, liquidity boost.

3. 10Y Yield ⬆ + 10Y-2Y Spread ⬆ → Economic growth optimism.

4. Oil ⬆ + DXY ⬇ → Strong global demand, risk-on sentiment.

Bearish for Risk Assets (Recession Risks)

1. 2Y Yield ⬆ + 10Y Yield ⬇ (Yield Curve Inversion) → Recession warning.

2. Oil ⬇ + 10Y Yield ⬇ + DXY ⬆ → Global slowdown, safe-haven demand.

3. DXY ⬆ + 2Y Yield ⬆ + 10Y-2Y Spread ⬇ → Hawkish Fed, liquidity tightening.

4. Oil ⬇ + 10Y Yield ⬇ → Weak demand concerns, potential deflation risks.

Inflationary Environment (Fed Policy Impact)

1. Oil ⬆ + 10Y Yield ⬆ + 2Y Yield ⬆ → Rising inflation, Fed may hike rates.

2. Oil ⬆ + DXY ⬇ → Imported inflation (higher costs in USD terms).

3. 2Y Yield ⬆ + DXY ⬆ → Market pricing in Fed hawkishness.

Deflationary or Stagflation Risks

1. Oil ⬆ + DXY ⬆ + 10Y Yield ⬇ → Stagflation warning (high energy prices, weak growth).

2. Oil ⬇ + DXY ⬆ + 10Y Yield ⬇ → Deflation fears, global recession risk.

3. 2Y Yield ⬇ + 10Y Yield ⬇ + DXY ⬆ → Flight to safety, bond demand rising.

Key Takeaways for Trading

• Rising oil + falling DXY = Good for commodities, inflationary.

• Rising 2Y yield + rising DXY = Risk-off, liquidity tightening.

• Falling 10Y yield + falling DXY = Risk-on, Fed easing expected.

• Yield curve inversion = Be cautious of recession risk.

• Watch for oil price trends as a key inflation driver.

This checklist and interpretation guide should help you align trades with macroeconomic shifts and adjust strategies accordingly. Let me know if you’d like to refine any part!