Guide to the Markets

Dashboard Overview

WEEKLY

Weekly Snapshot

● Net Liquidity at $5.80T — Inside the Transition Zone ($5.5-6.0T). April tax season TGA build is the key near-term drain with RRP buffer fully depleted.
● Labour market weakening: Feb NFP printed -92K, 3-month average near zero. UMich sentiment at 56.4, well below the ~77 long-run average.
● Rates stable but curve flat: 10Y-3M at 52bps (avg ~153). Credit spreads tight (IG 90bps, HY 327bps) — limited cushion if conditions deteriorate.

S&P 500

6,592

Mar 25, 2026

VIX

25.3

Elevated

Fed Funds

3.6%

Eff. Daily Rate

10Y UST

4.3%

Real 1.9% | BE 2.4%

Unemployment

4.4%

NFP -92K

CPI YoY

2.4%

Core 2.5%

Net Liquidity

$5.78T

Transition Zone

IG / HY Spread

87 / 317

bps OAS (tight)

Treasury Yield Curve

10Y-3M: 52bps (avg ~153bps)

As of Mar 26, 2026

Real GDP Growth (QoQ SAAR)

Latest: 0.7% (4Q25)

BEA advance estimate, Jan 30 2026

CPI Inflation (YoY)

Headline 2.4% | Core 2.5% | Feb 2026

BLS release Mar 12, 2026

Nonfarm Payrolls (MoM, K)

3mo avg: 6K

BLS release Mar 7, 2026

Net Liquidity Framework

WEEKLY

Net Liquidity = Federal Reserve Balance Sheet (WALCL) − Treasury General Account (TGA) − Overnight Reverse Repo (RRP)

Net Liquidity

$5.78T

Transition Zone

WALCL

$6.66T

Fed Balance Sheet

TGA

$0.87T

Treasury Account

ON RRP

$777M

Near zero!

Net Liquidity vs S&P 500

FRED API data, weekly since January 2015

—— Net Liquidity (left, $T) —— S&P 500 (right) - - $6T supportive - - $5.5T stress

As of Mar 26, 2026 (FRED Wednesday close)

Zone Assessment

Thresholds relative to Estimated Lowest Comfortable Level of Reserves (LCLoR)

Above $6.0T (Ample Reserves)

Broadly supportive of risk assets and smooth market functioning.

$5.5T - $6.0T (Transition Zone)

Liquidity cushion declining; heightened market sensitivity to Fed QT and TGA shifts.

NOW

Below $5.5T (Reserve Scarcity)

High risk of market stress, elevated funding costs, and asset drawdowns.

$5.80T. April tax season TGA build is key near-term drain. RRP buffer depleted ($698M).

Components (FRED API, Mar 25)

FRED series: WALCL, WTREGEN, RRPONTSYD

Component	Millions	Trillions
WALCL (Fed BS)	6,657,161	$6.657T
TGA Balance	874,077	$0.874T
ON RRP	777	$0.000777T
Net Liquidity	5,782,307	$5.782T

Near-zero RRP = structural shift. TGA increases now drain NL dollar-for-dollar with no buffer.

Early Warning Indicators

WEEKLY

Money Market Stress: SOFR − IORB Spread

Banking panic gauge: when reserves dry up, interbank borrowing costs surge above the Fed's IORB floor rate

SOFR

3.64%

Mar 20

IORB

3.65%

Fed floor rate

Spread

-3 bps

Safe

Below 0 bps: Ample Reserves (Healthy)

Banks are flush with cash. Market liquidity is robust and highly supportive of risk assets.

0 to +2 bps: Buffer Depleted (Caution)

Excess liquidity is drained. Markets become highly sensitive to Fed QT and Treasury issuance.

+3 to +5 bps: Funding Stress (Tight)

Interbank competition for cash increases. Upward momentum for equities is heavily constrained.

Above +5 bps: Reserve Scarcity (Critical)

Systemic funding stress. High risk of violent equity drawdowns and forced deleveraging.

FRED: SOFR, IORB | As of Mar 26, 2026

Liquidity Support Ratio: NL / S&P 500

Market foundation scanner: how many dollars of net liquidity underpin each index point

Current Ratio

0.88

Below -1σ!

5yr Mean

1.35

Historical avg

-1σ Level

0.98

Warning threshold

Above 1.60: Abundant Liquidity (Euphoria)

Excess cash easily justifies premium valuations. Broadly supportive of sustained rallies.

1.20 – 1.60: Healthy Range (Balanced)

Liquidity and valuations are well-aligned. Market direction is primarily driven by earnings.

1.00 – 1.20: Support Thinning (Caution)

Equities are outpacing liquidity creation. Further upside requires strong fundamental catalysts.

0.90 – 1.00: Overstretched (Fragile)

Below -1σ threshold. Minimal cash buffers leave markets highly vulnerable to macro shocks.

Below 0.90: Extreme Divergence (Critical)

Severe valuation imbalance. Acute risk of mean reversion and aggressive drawdowns.

At 0.88, the ratio is below -1σ (0.98). The S&P 500 has outrun its liquidity support — a further NL drawdown carries amplified downside risk.

Calculated: NL ($B) / S&P 500 index | As of Mar 26, 2026

Rates & Credit

WEEKLY

Fed Funds

3.6%

3.8%

10Y

4.3%

TIPS 1.9%

30Y

4.9%

IG OAS

87bps

Avg 145

HY OAS

317bps

Avg 502

Yield Curve

Slope: 52bps (avg ~153)

As of Mar 26, 2026

Rate Decomposition

Rate	Value	FRED
Fed Funds	3.64%	DFF
2-Year	3.84%	DGS2
5-Year	3.96%	DGS5
10-Year	4.33%	DGS10
30-Year	4.89%	DGS30
TIPS 10Y	2.02%	DFII10
Breakeven	2.34%	T10YIE
10Y-3M	69bps	T10Y3M
30Y Mortgage	6.38%	MORTGAGE30US

Fixed Income Detail

QUARTERLY

FI Sector Yields & Returns (p.32)

Sector	Yield	2026 Ret	Maturity
2Y UST	3.79%	0.12%	2yr
5Y UST	3.88%	-0.04%	5yr
10Y UST	4.25%	0.06%	10yr
30Y UST	4.83%	0.79%	30yr
U.S. Agg	4.53%	0.12%	8.2yr
IG Corps	5.10%	-0.36%	10.5yr
U.S. HY	7.31%	-0.43%	4.8yr
Munis	3.58%	0.76%	13.4yr
MBS	4.78%	0.51%	7yr
Lev. Loans	8.77%	-0.50%	4.7yr

FOMC March 2026 Projections (p.30)

FOMC YE: 3.55% | Market: 3.40% | Long-run: 3.10%

Metric	2026	2027	2028	L.Run
Real GDP 4Q/4Q	2.4	2.3	2.1	2.0
Unemployment 4Q	4.4	4.3	4.2	4.2
Headline PCE	2.7	2.2	2.0	2.0
Core PCE	2.7	2.2	2.0

Economy — FRED Data

WEEKLY

GDP 4Q25

0.7%

SAAR

CPI

2.4%

Core 2.5%

PCE

2.8%

Core 3.1%

Unemp

4.4%

NFP

-92K

Claims

210K

Sentiment

56.4

UMich avg ~77

GDP Growth

Labor & Consumer

Indicator	Value	FRED
Unemployment	4.4%	UNRATE
NFP MoM	-92K	PAYEMS
Avg Hourly Earnings	$37.32	CES05
JOLTS Openings	6,946K	JTSJOL
JOLTS Hires	5,294K	JTSHIL
JOLTS Layoffs	1,631K	JTSLDL
Init. Claims	205K	ICSA
UMich Sentiment	56.4	UMCSENT
Debt Service %	11.3%	TDSP
CC Delinquency	2.9%	DRCCLACBS

Economy — PDF Data

QUARTERLY

Hyperscaler CapEx ($bn) — p.23

GOOGL, AMZN, META, MSFT, ORCL

Tariffs on U.S. Imports (2025) — p.25

Eff. rate Mar 2026: 12.0% | Peak Apr 2025: 30%

AI Adoption by Sector — p.24

% firms using AI, Feb 2026

Federal Budget — p.28

2026: $7.4T spending | Deficit $1,853bn (25%)

Spending

Social Security$1,666bn (22%)

Medicare$1,287bn (17%)

Net Interest$1,039bn (14%)

Non-def. Disc.$996bn (13%)

Defense$885bn (12%)

Medicaid$708bn (10%)

Revenue

Income Tax$2,751bn (37%)

Payroll Tax$1,826bn (25%)

Customs Duties$418bn (6%)

Corporate Tax$404bn (5%)

Net Debt/GDP: 99.4% | CBO projects 120.2% by 2036

Equities

QUARTERLY

S&P 500

6,592

Fwd P/E

20.3x

30yr: 17.2x

CAPE

38.1x

Avg: 28.6x

EY Spread

-0.3%

Negative!

EPS '26F

$316

25:$274 27:$368

Margin

14.1%

4Q25

EPS Growth — p.7

Mag 7 vs S&P 493 — p.9

Index Concentration — p.8

	Top 10	Rest 490	S&P 500
Fwd P/E	23.7x	18.5x	20.3x
Avg P/E	20.7x	15.9x	17.2x
Mkt Cap %	38.5%	61.5%	100%
Earnings %	33.1%	66.9%	100%

Valuations — p.5

Measure	Current	30yr Avg	Signal
Forward P/E	20.3x	17.2x	Near +1sd
CAPE	38.1x	28.6x	Elevated
Div Yield	1.5%	2.0%	Below avg
EY Spread	-0.3%	0.7%	Negative!
Margin 4Q25	14.1%	~10%	Record

Annual Returns vs Drawdowns — p.16

Avg 14.2% intra-year drop, positive 35 of 46 years

Small / Mid / Large — p.13

Metric	Large	Mid	Small
Fwd P/E	20x	23x	17x
Int. Coverage	8.4x	4.0x	1.5x
% Unprofitable	5%	14%	39%
Down. Revisions	1%	3%	20%
Analysts/Co	26	18	7

39% small caps unprofitable vs 5% large. Interest coverage 1.5x vs 8.4x.

Sector Returns & Valuations — p.15

Sector	Wt	YTD	P/E	Avg	Grth	DY	Beta	Fgn%
Energy	3.8%	32.8%	20.5x	13.8x	5.9%	2.8%	1.1	37%
Materials	2.0%	4.6%	18.5x	15.7x	24.4%	1.7%	1.0	53%
Financials	12.4%	-10.5%	14.2x	12.9x	9.4%	2.1%	1.1	29%
Industrials	8.9%	5.8%	24.6x	16.9x	12.6%	1.4%	1.1	36%
Cons.Disc.	9.8%	-8.7%	25.9x	20.6x	10.8%	2.0%	1.2	35%
Tech	33.5%	-6.3%	22.5x	18.7x	31.5%	0.7%	1.2	52%
Comm.Svcs	10.6%	-2.9%	20.9x	18.7x	11.5%	0.8%	1.1	49%
Real Estate	2.0%	7.0%	17.6x	17.3x	4.3%	3.6%	0.9	19%
Health Care	9.4%	-5.3%	17.3x	15.1x	8.0%	2.1%	0.7	33%
Staples	5.2%	6.5%	22.0x	17.9x	6.7%	2.6%	0.6	40%
Utilities	2.5%	9.0%	19.0x	16.0x	10.2%	2.8%	0.5	2%

International & Global

QUARTERLY

DXY

120.6

Trade-Weighted

US % ACWI

62%

vs 40% in 2010

Global Equity Returns (USD) — p.42

Region	'26 YTD	2025	15yr Ann
ACWI ex-US	1.6%	33.1%	6.3%
EAFE	-0.2%	31.9%	6.9%
Eurozone	-4.0%	41.3%	6.9%
EM	5.4%	34.4%	4.4%
Japan	4.8%	25.1%	7.6%
China	-5.3%	31.4%	3.5%
Taiwan	15.4%	39.8%	14.4%
India	-13.4%	4.3%	5.2%
Brazil	14.1%	50.4%	0.4%

Global Valuations — p.46

Forward P/E by region vs 20yr avg

ACWI ex-US at -28% discount to US (20yr avg: -19%)

Global PMI (Feb 2026) — p.48

Composite (Mfg + Services)

DM Policy Rates — p.49

Fed

4.25-4.50%

BoE

4.50%

BoJ

0.50%

ECB

2.50%

Bull avg 70 months (+221%), Bear avg 14 months (-39%). Expansions avg 49 months.