Macro Terms Glossary

Your complete reference for macroeconomic, financial, and market terminology used in macro analysis. Each term includes a clear definition, real-world examples, and links to related articles.

Last Updated: January 20, 2026

A

Asset Allocation

The process of dividing investments among different asset classes (stocks, bonds, commodities, cash) to balance risk and reward based on market conditions and investment goals.

Example: During reflationary regimes, investors typically increase allocation to equities and reduce cash holdings.

Related: Market Regimes, Business Cycles

B

Bear Market

A market condition where prices decline 20% or more from recent highs, typically accompanied by widespread pessimism and negative investor sentiment.

Characteristics:

Price decline of 20%+ from peak
Negative sentiment and fear dominate
Often coincides with economic recession
Typically lasts 9-18 months

Example: The S&P 500 fell 34% from February to March 2020 in the fastest bear market in history.

Related: Market Regimes, VIX

Beta

A measure of an asset's volatility relative to the overall market. Beta of 1.0 means the asset moves in line with the market.

Interpretation:

Beta > 1: More volatile than market (tech stocks often 1.2-1.5)
Beta = 1: Moves with market
Beta < 1: Less volatile than market (utilities often 0.5-0.8)
Beta < 0: Moves opposite to market (gold, some hedges)

Related: Market Regimes

Bull Market

A market condition characterized by rising prices (typically 20%+ from recent lows), optimism, and investor confidence.

Characteristics:

Sustained price increases
Positive economic indicators
High investor confidence
Often lasts years (average 5+ years)

Example: The 2009-2020 bull market was the longest in history, with S&P 500 rising over 400%.

B (continued)

Business Cycle

The recurring pattern of expansion and contraction in economic activity over time. Typically measured by GDP growth, employment, and industrial production.

Four Phases:

Expansion: Rising growth, falling unemployment
Peak: Maximum growth before slowdown
Contraction: Declining growth, rising unemployment
Trough: Minimum growth before recovery

Example: The 2020 COVID recession was the shortest business cycle on record (33 days from peak to trough).

C

Carry Trade

An investment strategy where investors borrow in a low-interest-rate currency and invest in higher-yielding assets or currencies.

Example: Borrowing Japanese Yen at 0.1% to buy US Treasuries yielding 4.5%, profiting from the rate differential.

Risks:

Currency fluctuations can wipe out gains
Sudden unwinding can cause market volatility
Popular trades become crowded

Related: Global Liquidity

Central Bank

A national institution responsible for managing a country's money supply, interest rates, and banking system stability.

Major Central Banks:

Federal Reserve (Fed): United States
European Central Bank (ECB): Eurozone
Bank of Japan (BOJ): Japan
People's Bank of China (PBOC): China
Bank of England (BOE): United Kingdom

Related: Monetary Policy, Quantitative Easing

CFNAI (Chicago Fed National Activity Index)

A weighted average of 85 monthly economic indicators designed to gauge overall economic activity and inflation pressure.

Interpretation:

Above 0: Above-trend growth
Below 0: Below-trend growth
Below -0.7: Recession likely

Example: CFNAI fell to -16.74 in April 2020 during COVID lockdowns, the lowest reading in the index's history.

Related: CFNAI vs PMI, Business Cycles

Credit Spreads

The difference in yield between corporate bonds and risk-free government bonds (typically US Treasuries). Wider spreads indicate higher perceived risk.

Measurement: High-Yield (HY) spread = HY bond yield - 10-year Treasury yield

Example: HY spreads widened from 357 bps in February 2020 to 1,087 bps in March 2020 during the COVID crisis.

Related: Market Regimes, 2008 Crisis Analysis

Commodities

Raw materials or primary agricultural products that can be bought and sold, including energy, metals, and agricultural goods.

Major Categories:

Energy: Oil, natural gas, coal
Precious Metals: Gold, silver, platinum
Industrial Metals: Copper, aluminum, iron ore
Agricultural: Wheat, corn, soybeans, coffee

Related: Global Liquidity, DXY

Correlation

A statistical measure of how two assets move in relation to each other, ranging from -1 (perfect inverse) to +1 (perfect positive).

Interpretation:

+1.0: Assets move perfectly together
0: No relationship
-1.0: Assets move in opposite directions

Example: Net liquidity and NASDAQ have shown ~0.82 correlation since 2003.

Related: Net Liquidity, Regime Detection

CPI (Consumer Price Index)

A measure of the average change in prices paid by consumers for a basket of goods and services over time. The primary inflation gauge.

FRED Series: CPIAUCSL

Interpretation:

YoY > 3%: Above target, potential tightening
YoY 2-3%: Target range
YoY < 2%: Below target, potential easing

Example: US CPI peaked at 9.1% YoY in June 2022, the highest since 1981.

Related: Inflation, Disinflation

D

Deflation

A sustained decrease in the general price level of goods and services (negative inflation). Distinct from disinflation.

Characteristics:

Falling prices across the economy
Often accompanies severe recessions
Can lead to deflationary spiral (delayed spending → less demand → more deflation)
Central banks typically try to avoid at all costs

Example: Japan experienced deflation for much of 1999-2012, with prices falling or stagnant.

Related: Disinflation, CPI

Disinflation

A decrease in the rate of inflation (prices still rising, but at a slower pace). Not to be confused with deflation (falling prices).

Example: US CPI inflation peaked at 9.1% in June 2022 and fell to 3.0% by June 2023—a disinflationary period.

Related: Market Regimes, Regime Detection

DXY (US Dollar Index)

A measure of the US dollar's value relative to a basket of six major foreign currencies (EUR, JPY, GBP, CAD, SEK, CHF).

Interpretation:

Rising DXY: Stronger dollar, headwind for commodities
Falling DXY: Weaker dollar, tailwind for commodities

Related: Global Liquidity

E

Emerging Markets

Countries with developing economies that are transitioning toward more advanced financial systems and higher income levels.

Major Emerging Markets:

BRICS: Brazil, Russia, India, China, South Africa
Others: Mexico, Indonesia, Turkey, Poland, Thailand

Characteristics:

Higher growth potential
Higher volatility and risk
Sensitive to US dollar strength and Fed policy
Often commodity-dependent

Related: DXY, Global Liquidity

Equity Risk Premium (ERP)

The excess return that investing in stocks provides over a risk-free rate (typically Treasury bonds). Compensation for taking equity risk.

Formula:

ERP = Expected Stock Return - Risk-Free Rate

Historical Average: ~4-6% over long periods

Example: If S&P 500 expected return is 10% and 10-year Treasury yields 4%, ERP = 6%.

Related: Treasury Securities, Risk Premium

F

Fed Balance Sheet (WALCL)

The total assets held by the Federal Reserve, primarily US Treasury securities and mortgage-backed securities purchased through quantitative easing.

FRED Series: WALCL

Example: The Fed's balance sheet expanded from $4.2 trillion in February 2020 to $8.9 trillion by April 2022.

Related: Net Liquidity, Global Liquidity

Fear and Greed Index

A composite indicator measuring investor sentiment on a scale from 0 (Extreme Fear) to 100 (Extreme Greed).

Components:

Stock price momentum
Stock price strength
Stock price breadth
Put/call ratios
Market volatility (VIX)
Safe haven demand
Junk bond demand

Related: Fear & Greed Index Guide

Federal Funds Rate

The interest rate at which banks lend reserve balances to other banks overnight. The Fed's primary monetary policy tool.

Current Target: Set by the Federal Open Market Committee (FOMC)

Impact:

Influences all other interest rates
Higher rates = tighter financial conditions
Lower rates = easier financial conditions

Example: The Fed raised the federal funds rate from 0% to 5.25% between March 2022 and July 2023.

Related: Monetary Policy, Hawkish/Dovish

Fiscal Policy

Government decisions about spending and taxation that influence the economy. Distinct from monetary policy (controlled by central banks).

Types:

Expansionary: Increased spending, tax cuts (stimulates economy)
Contractionary: Reduced spending, tax increases (slows economy)

Example: The $2.2 trillion CARES Act in 2020 was massive fiscal stimulus.

Related: Monetary Policy, TGA

Flight to Quality

Investor behavior of moving capital from risky assets to safer ones during periods of market stress or uncertainty.

Typical Flows:

From stocks → Treasury bonds
From high-yield bonds → investment-grade bonds
From emerging markets → developed markets
From risk assets → gold, cash

Example: During March 2020, investors fled to Treasuries, pushing 10-year yields below 0.5%.

Related: Safe Haven, Credit Spreads

G

Global Liquidity

The total amount of money and credit available in the global financial system, primarily driven by central bank policies and money supply.

VantMacro Formula:

Net Liquidity = Fed Balance Sheet (WALCL)
                - Treasury General Account (TGA)
                - Reverse Repo (RRP)

Why It Matters: Net liquidity explained 68% of NASDAQ variance from 2003-2026.

H

Hard Landing

An economic scenario where aggressive monetary tightening to combat inflation causes a recession.

Characteristics:

Sharp GDP decline
Rising unemployment
Financial stress
Central bank may need to reverse course

Contrast with Soft Landing: Economy slows enough to reduce inflation without recession.

Example: Paul Volcker's 1980-82 rate hikes caused a hard landing (recession) but broke inflation.

Related: Soft Landing, Federal Funds Rate

Hawkish/Dovish

Terms describing central bank policy stance toward inflation and interest rates.

Hawkish:

Prioritizes fighting inflation
Favors higher interest rates
Willing to accept slower growth

Dovish:

Prioritizes growth and employment
Favors lower interest rates
More tolerant of inflation

Example: Fed Chair Powell turned hawkish in late 2021 as inflation surged, signaling aggressive rate hikes.

Related: Federal Funds Rate, Monetary Policy

I

Inflation

A sustained increase in the general price level of goods and services over time, reducing purchasing power.

Measurement:

CPI: Consumer prices (headline inflation)
Core CPI: Excludes food and energy (less volatile)
PCE: Fed's preferred measure

Fed Target: 2% annual inflation

Example: US inflation averaged 2.1% from 2010-2020, then surged to 9.1% in June 2022.

Related: CPI, Disinflation, Stagflation

ISM PMI (Purchasing Managers' Index)

A monthly survey of purchasing managers in the manufacturing sector, measuring new orders, production, employment, supplier deliveries, and inventories.

Interpretation:

Above 50: Expansion
Below 50: Contraction

Example: ISM PMI fell to 41.5 in April 2020, indicating sharp manufacturing contraction.

Related: CFNAI vs PMI

L

Leverage

The use of borrowed money to amplify investment returns (and losses). Can apply to individuals, companies, or the financial system.

Types:

Financial Leverage: Debt-to-equity ratio
Operating Leverage: Fixed vs variable costs
Market Leverage: Margin trading, derivatives

Example: Hedge funds using 10:1 leverage can turn a 5% gain into 50%, or a 5% loss into 50%.

Related: Credit Spreads, Market Regimes

Liquidity Trap

A situation where interest rates are near zero, but monetary policy fails to stimulate the economy because people hoard cash.

Characteristics:

Interest rates at or near zero
Conventional monetary policy ineffective
Banks reluctant to lend
Consumers/businesses reluctant to borrow

Example: Japan's "lost decades" (1990s-2010s) exemplified a liquidity trap.

Related: Quantitative Easing, Monetary Policy

M

M2 Money Supply

A broad measure of money supply including cash, checking deposits, savings accounts, money market funds, and other near-money assets.

FRED Series: M2SL

Example: M2 surged 25% year-over-year in early 2021 due to COVID stimulus, the fastest growth in modern history.

Related: Real M2, Global Liquidity

Market Regime

A distinct market environment characterized by specific combinations of growth, inflation, and liquidity conditions that persist over time.

VantMacro's 7 Composite Regimes:

Reflationary Expansion
Post-Shock Recovery
Late-Cycle Inflationary Boom
Disinflationary Slowdown
Stagflationary Squeeze
Crisis/Liquidation
Transitional

Momentum

The tendency for assets that have performed well to continue performing well (and vice versa) over certain time periods.

Types:

Price Momentum: Recent winners continue winning
Earnings Momentum: Companies beating estimates continue beating
Economic Momentum: Acceleration in growth indicators

Example: The "momentum factor" has been one of the most persistent market anomalies since the 1990s.

Related: Market Regimes, Regime Detection

Monetary Policy

Central bank actions to influence money supply and interest rates to achieve economic objectives (price stability, full employment).

Tools:

Interest Rates: Federal funds rate
Open Market Operations: Buying/selling securities
Reserve Requirements: Bank reserve ratios
Quantitative Easing/Tightening: Balance sheet expansion/contraction

N

Net Liquidity

A refined measure of global liquidity that accounts for Treasury operations that drain liquidity from markets.

Formula:

Net Liquidity = Fed Assets (WALCL) - TGA - RRP

Why Subtract TGA & RRP?

TGA (Treasury General Account): Cash sitting at the Fed, not in circulation
RRP (Reverse Repo): Cash parked at the Fed by money market funds, removed from markets

NBER (National Bureau of Economic Research)

The private, non-profit research organization that officially determines US business cycle dates (recession start and end dates).

Recession Definition: A significant decline in economic activity spread across the economy, lasting more than a few months.

NBER Indicators:

Real personal income
Nonfarm payroll employment
Real personal consumption
Wholesale-retail sales
Industrial production

Example: NBER declared the COVID recession lasted only 2 months (February-April 2020).

Related: Business Cycle, CFNAI

O

Output Gap

The difference between actual economic output and potential output (what the economy could produce at full capacity).

Interpretation:

Positive Gap: Economy overheating, inflationary pressure
Negative Gap: Economy below potential, slack in labor market
Zero Gap: Economy at full employment

Related: Business Cycle, Inflation

P

PCE (Personal Consumption Expenditures)

The Federal Reserve's preferred inflation measure, tracking prices of goods and services consumed by households.

FRED Series: PCEPI (headline), PCEPILFE (core, excluding food/energy)

Why Fed Prefers PCE:

Broader coverage than CPI
Accounts for substitution effects
More accurately reflects actual spending

Example: Core PCE peaked at 5.6% in February 2022.

Related: CPI, Inflation

PMI (Purchasing Managers' Index)

Generic term for surveys of purchasing managers. See ISM PMI for US manufacturing.

Related: CFNAI vs PMI

Q

Quantitative Easing (QE)

Central bank policy of purchasing government bonds and other securities to inject money into the economy and lower interest rates.

Example: The Fed launched QE in 2008 and again in 2020, expanding the balance sheet by trillions.

Opposite: Quantitative Tightening (QT) - selling securities to reduce money supply.

Related: Global Liquidity, 2008 Crisis

Quantitative Tightening (QT)

Central bank policy of reducing the balance sheet by selling securities or letting them mature without replacement.

Example: The Fed began QT in 2022, reducing the balance sheet from $8.9T to $7.5T by 2024.

Related: Net Liquidity

R

Real M2

M2 money supply adjusted for inflation (deflated by CPI). Measures actual purchasing power of money supply.

Formula:

Real M2 = M2 / CPI

Related: Real M2 Guide

Reflationary Expansion

A market regime characterized by rising growth AND rising inflation, typically following a recession or crisis.

Characteristics:

GDP growth accelerating
Inflation rising from low levels
Central bank still accommodative
Risk assets perform well

Historical Example: 2009-2010 post-financial crisis recovery.

Related: Market Regimes, Post-Shock Recovery

Regime Detection

The process of identifying and classifying market environments based on macroeconomic data.

VantMacro Approach:

3 dimensions: Growth (CFNAI), Volatility (VIX), Credit Risk (HY spreads)
7 composite regimes
427 historical transitions analyzed (2003-2026)
92% directional accuracy

Reverse Repo (RRP)

A Federal Reserve facility where money market funds and banks can park cash overnight in exchange for Treasury securities.

FRED Series: RRPONTSYD

Why It Matters: Cash in RRP is removed from financial markets, reducing liquidity available for risk assets.

Example: RRP balances peaked at $2.5 trillion in late 2022.

Related: Net Liquidity, Global Liquidity

Risk-Off

A market environment where investors reduce exposure to risky assets and seek safety. Opposite of risk-on.

Characteristics:

Falling stock prices
Rising Treasury prices (falling yields)
Widening credit spreads
Strengthening US dollar
Rising VIX

Example: March 2020 was an extreme risk-off event with VIX hitting 82.

Related: Risk-On, Flight to Quality, VIX

Risk-On

A market environment where investors embrace risky assets, seeking higher returns. Opposite of risk-off.

Characteristics:

Rising stock prices
Falling Treasury prices (rising yields)
Tightening credit spreads
Weakening US dollar
Low VIX

Example: The 2020-2021 recovery was a prolonged risk-on environment fueled by stimulus.

Related: Risk-Off, Bull Market

Risk Premium

The additional return investors require to hold a risky asset compared to a risk-free asset.

Types:

Equity Risk Premium: Stocks vs Treasury bonds
Credit Risk Premium: Corporate bonds vs Treasuries
Term Premium: Long-term vs short-term bonds

Related: Equity Risk Premium, Credit Spreads

S

Safe Haven

An asset expected to retain or increase in value during market turmoil, providing protection during risk-off environments.

Traditional Safe Havens:

US Treasury bonds
Gold
Swiss Franc
Japanese Yen
US Dollar

Example: Gold rose from $1,500 to $2,000+ during the 2020 crisis.

Related: Flight to Quality, Risk-Off

Sentiment

The overall attitude of investors toward a market or asset, often measured through surveys and market-based indicators.

Sentiment Indicators:

AAII Survey: Individual investor sentiment
Fear & Greed Index: Market-based composite
Put/Call Ratio: Options market sentiment
VIX: Implied volatility (fear gauge)

Contrarian View: Extreme sentiment often signals turning points.

Related: Fear and Greed Index, VIX

Soft Landing

An economic scenario where central bank tightening slows the economy enough to reduce inflation without causing a recession.

Characteristics:

Inflation declines toward target
GDP growth slows but stays positive
Unemployment rises modestly
No financial crisis

Example: The 1994-95 Fed tightening cycle is often cited as a successful soft landing.

Related: Hard Landing, Federal Funds Rate

Spread

The difference between two prices, rates, or yields. Context determines the specific meaning.

Common Spreads:

Bid-Ask Spread: Difference between buy and sell prices
Credit Spread: Corporate bond yield minus Treasury yield
Term Spread: Long-term minus short-term yields
Yield Spread: One bond yield minus another

Related: Credit Spreads, Yield Curve

Stagflation

An economic environment with both stagnant growth AND high inflation—the worst of both worlds.

Characteristics:

Low or negative GDP growth
High inflation (CPI > 4%)
Rising unemployment
Difficult for central banks (can't ease without worsening inflation)

Historical Example: 1970s stagflation (oil shocks)

Related: Market Regimes

T

TGA (Treasury General Account)

The US Treasury's checking account at the Federal Reserve where tax revenues and bond proceeds are deposited.

FRED Series: WTREGEN

Why It Matters: When TGA balance rises, it drains liquidity from markets. When it falls, liquidity is injected.

Example: TGA surged from $400B to $1.8T in April 2020 as the Treasury issued debt to fund COVID stimulus.

Related: Net Liquidity, Global Liquidity

Term Premium

The additional yield investors demand to hold longer-term bonds instead of rolling over short-term bonds.

Interpretation:

Positive Premium: Normal—investors want compensation for duration risk
Negative Premium: Unusual—strong demand for long-term safety
Rising Premium: Concerns about inflation, fiscal sustainability

Example: Term premium turned negative in 2019-2020 due to flight to safety.

Related: Yield Curve, Risk Premium

Treasury Securities

Debt instruments issued by the US government, considered the safest assets in global markets.

Types:

T-Bills: 4 weeks to 1 year (zero-coupon)
T-Notes: 2 to 10 years (semi-annual coupon)
T-Bonds: 20 to 30 years (semi-annual coupon)
TIPS: Inflation-protected securities

Why They Matter: Risk-free rate benchmark for all other assets.

Related: Yield Curve, Federal Funds Rate

U

Unemployment Rate

The percentage of the labor force that is jobless and actively seeking employment.

FRED Series: UNRATE

Interpretation:

Below 4%: Full employment, tight labor market
4-6%: Normal range
Above 6%: Elevated, economic weakness
Above 10%: Severe recession

Example: Unemployment spiked to 14.7% in April 2020, the highest since the Great Depression.

Related: Business Cycle, NBER

V

Volatility

A statistical measure of the dispersion of returns for an asset, index, or market. Higher volatility = greater price swings.

Measurement:

Historical Volatility: Based on past price changes
Implied Volatility: Derived from options prices (forward-looking)
Realized Volatility: Actual volatility over a period

Example: Bitcoin has annualized volatility of ~60-80%, vs ~15-20% for S&P 500.

Related: VIX, Beta

VIX (Volatility Index)

A measure of expected 30-day stock market volatility based on S&P 500 options prices. Often called the "fear gauge."

FRED Series: VIXCLS

Interpretation:

Below 15: Low volatility, complacency
15-20: Normal volatility
20-30: Elevated volatility, uncertainty
Above 30: High volatility, fear
Above 40: Extreme fear, crisis

Example: VIX spiked to 82.69 in March 2020 during the COVID crash.

Related: Market Regimes, Fear & Greed

Y

Yield Curve

A graph showing bond yields across different maturities (e.g., 2-year, 10-year, 30-year Treasury yields).

Shapes:

Normal (Steep): Long-term yields > short-term yields (healthy economy)
Flat: Similar yields across maturities (uncertainty)
Inverted: Short-term yields > long-term yields (recession warning)

Example: The 2s10s yield curve inverted in 2022, preceding the 2023 banking crisis concerns.

Related: Yield Curve Guide, Business Cycles

Additional Resources

Data Sources

VantMacro Tools

Want to track these indicators in real-time? Try VantMacro's free dashboard with empirically-grounded regime detection.

Questions about any terms? Contact us or read our comprehensive methodology.