Macro Risk Memo February 2026
The macro environment in early 2026 reflects restrictive digestion rather than early-cycle expansion. Quantitative tightening concluded in December 2025, yet liquidity conditions remain constrained by elevated real yields, a policy rate that remains above market-implied neutral, and the potential for renewed dollar strength. Markets can rally on the belief that tightening is over, but sustained risk expansion typically requires a meaningful easing impulse. At present, the slope of liquidity has flattened, yet the conditions that historically support broad speculative leadership are not clearly in place
The labor market remains stable in aggregate terms, though breadth measures indicate diffusion of weakness across states. Layoffs remain subdued, preventing nonlinear unemployment acceleration. That is the key point: unemployment can drift higher for extended periods without recession, but the regime changes when layoffs rise persistently and hiring behavior turns defensive. Whether that occurs is highly sensitive to equity durability and financing conditions.
Yield structure and financial conditions remain consistent with late-cycle dynamics. Curve normalization or re-steepening has historically coincided with rising recession probability more often than renewed growth acceleration. Real yields remain elevated relative to prior expansionary regimes, constraining valuation multiples and speculative risk appetite. Financial conditions have eased modestly but remain restrictive.
Housing reflects late-cycle cooling rather than systemic stress. Construction activity has moderated, price growth has decelerated, and affordability remains constrained. Credit quality and balance sheets appear stronger than in prior systemic downturns, which supports the view that housing is slowing rather than breaking, absent a sharp labor deterioration.
Sector leadership favors tangible demand exposure over speculative duration. Energy and capital- intensive industrial exposures are supported by structural investment themes, including electrification and AI-related infrastructure buildout.
Metals remain structurally supported, though cyclical consolidation risk persists. Bitcoin peaked in Q4 2025 consistent with post-halving timing. The current structure aligns with prior midterm-year contraction phases. Liquidity sequencing remains central. Durable expansion likely requires either a stronger monetary impulse or equity stress sufficient to force policy recalibration.
The regime favors capital discipline, selective deployment, and caution toward broad high-beta exposure until liquidity becomes more decisively supportive.