26 November 2025
Financial markets often move before the macroeconomic data catches up – and for active investors, that leads to a crucial question: how do we spot when the cycle is about to turn? In “Mind the Cycle: From Macro Shifts to Portfolio Plays,” author Jesin Koyipurathu, CFA argues that advantage lies not in reacting to lagging indicators like GDP or inflation prints, but in detecting changes in momentum and financial conditions early — and turning those signals into portfolio action.
Why “Where We Were” Does Not Enough Predict “Where We’re Going”
Traditional macroeconomic statistics – GDP growth, CPI inflation, employment – tell us about where the economy has been. By the time data are released and revised, markets often have already priced in new expectations.
Instead of focusing on absolute levels, the article recommends watching rates of change (first derivatives), and even changes in the rate of change (second derivatives). That means tracking whether growth or inflation are accelerating or decelerating – and if that acceleration itself is gaining strength or fading.
These early shifts often precede major market moves. For instance, falling real rates, easing credit spreads, a softer dollar or lower volatility can act as a “stealth easing” – signaling improving financial conditions even before macro data turns positive.
Looking at the Right Signals – And the Right Combinations
No single data point is enough. According to Koyipurathu, a meaningful inflection tends to occur when multiple series move together: growth momentum, inflation dynamics, and financial conditions alike. When these elements shift in concert, the probability of a sustained market move rises significantly.
Examples of useful indicators: PMI data (manufacturing and services), new orders, export trends for growth; trimmed‑mean inflation and input‑cost surveys for inflation; real yields, credit spreads, currency strength/weakness, volatility indexes for financial conditions.
When financial conditions improve persistently, asset rotations often follow – from duration (bonds) to beta (equities), from safe/defensive to cyclical asset classes, and possibly toward emerging‑market currencies or risk assets.
Global Cycle Matters More Than Local Data
While local economic indicators have value, the global business cycle often sets the tone. Portfolio managers may gain an edge by estimating the probability that the global cycle will shift in the coming 3-6 months – for example, by monitoring how many major economies are showing improving leading indicators, or how broad the upturn is across PMIs, industrial production and trade data.
In other words: breadth of improvement often precedes a durable risk rotation; narrowing breadth may warn of a broader de-risking.
Markets as Reflexive Systems: Liquidity, Sentiment and Self‑Reinforcing Loops
Markets don’t just respond – they influence. Price moves change narratives; narratives drive flows; flows impact liquidity; liquidity feeds back into prices. This reflexivity means a small improvement in financial conditions can trigger a self‑reinforcing loop of multiple expansion, lower volatility, and additional inflows – until the loop exhausts or reverses.
For investors, the task isn’t to precisely predict the future – but to identify probabilistically when the feedback loop is strengthening or losing stamina.
Implications for Portfolio Strategy
According to the article, investors and allocators who embrace this “cycle‑first” mindset can improve timing and reduce reliance on backward‑looking confirmation. By focusing on momentum, breadth and financial conditions, they can position portfolios more proactively – aiming to be early in on opportunity, rather than late to follow.
That might mean increasing exposure to risk assets when conditions suggest improving liquidity and sentiment; or rotating toward defensive assets if credit spreads widen, yields rise and volatility jumps. In some cases, it may also mean tilting toward duration or diversifying across geographies, currencies and asset classes.
What This Means for CFA Society Italy Members
For CFA charterholders and investment professionals in Italy, the article offers a timely framework to refine macro‑driven portfolio decisions. In a world of rapid macro shifts, policy uncertainty and global interconnectedness:
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A cycle‑based lens helps avoid being anchored to lagging economic statistics and allows for more nimble allocation decisions.
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Monitoring a balanced dashboard – growth, inflation, yields, credit, FX, volatility – supports better risk‑reward judgments.
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Recognizing the reflexive nature of markets helps manage behavioral biases and avoid chasing late rallies or prematurely abandoning positions.
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For multi‑asset or global portfolios, paying attention to global cycle breadth can help detect regime shifts relevant for European, emerging‑market, or FX‑sensitive exposures.
In other words: members of CFA Society Italy can use this insight to strengthen their macro‑analysis toolbox, improve timing, and manage risk more proactively – especially in an environment where headline data may lag real developments by weeks or months.