1.  USDJPY

Ina period of almost unprecedented macro volatility, Qi's model of USDJPY has been striking for its stability. Model confidence is 77% and has been north of 70% for 6 months now.

Mode lvalue has started to roll over but the gunshot reaction to last night's tariff announcement has seen spot fall further.

USDJPY now sits 0.7 sigma (2.5%) cheap to aggregate macro conditions. That's towardsthe cheap end of recent Valuation Gap ranges. There's also decent correlationbetween spot and Qi FVG.

The current trading environment is probably not conducive to mean reversion strategies, but the chart below suggest FVG extremes have done at decent job atmarking recent turning points. Risk off dominates price action for now but,even with VIX north of 20, the risk-reward could be shifting at these levels.

2.       NASDAQ back in a macro regime

Qi model confidence for the NASDAQ has risen 44% over the last month and is now above our 65% threshold for a macro regime. After months when idiosyncratic stories (DeepSeek) or political headlines dominated, macro fundamentals have reasserted themselves.

The bad news ismacro momentum is in a clear downtrend. Qi model value has fallen 7.5% YtD, 6.9%over March, and is down 1.9% in April.

Thenew macro regime shows an interesting mix:

·      positivesensitivity to the Dollar and real rates speaks to a desire for this current USexceptionalism to abate

·      negativesensitivity to VIX speaks to an intuitive desire for healthy risk appetite

·      negativesensitivity to NowCasting tracking GDP suggests there is an element of a"bad news is good news" mindset, presumably on the hope of Fed ratecuts.

·      notepositive sensitivity to Fed Rate Expectations speaks to that with a desire fora bullish steepening of money markets, i.e. near term rate cuts.

Theconsolation is NASDAQ screens as 0.5 std dev or 2.6% cheap to aggregate macroconditions.

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 3.       Bonds vs. Commodities - recession vs. inflation

What are thepossible trades for asset allocators believing the tariff announcementsincrease the chances of recession?

Qi's model for USTreasuries versus Commodities (using the ratio of the ETFs GOVT versus EXXY) shows an interesting bullish divergence pattern - model value is improving (up~7% since mid-March) but the market has seen commodity outperformance speed up.

The biggest weighting in EXXY currently is gold (15.6%). There are very good reasons to believe gold specifically and commodities in general are in the middle of a super cycle that has a lot further to run. This is not to disputethe idea that the current macro environment dictates a need to be holding atleast some real assets.

But Qi's Fair Value Gap is now -1.7 std dev (10.9%) which is very much the cheapend of historical ranges.

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It is also worth noting that the recent correlation between spot and Qi FVG is decent. Again, these are not obvious mean reversion markets, but it's interesting to note a near term shift towards a desire for recession hedges could benefit USTs, & - going forward - could present better entry levels to set inflation hedges in commodities.

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