Macro Strategy Memo

Discussing similarities between today and July/August 2024 with respect to the lows in implied correlation and the weakness in the JPY

I. The Core Thesis

Implied correlation (COR1M) is at multi-month lows (~4–6), suppressed by a crowded short-vol/dispersion trade. The structural setup — record yen short positioning, a hawkish Fed transition, a stagflationary oil shock, and a calendar loaded with binary catalysts — is consistent with a rapid, self-reinforcing spike in COR1M analogous to July–August 2024 and, at a higher order of magnitude, October 1987. The thesis is not consensus in Western markets but is live in Japanese sell-side research and implicit in US bank stress test scenarios.