MacroHeat (Global Macro Growth Proxy)

Overview:
MacroHeat by CWRP is a proprietary macroeconomic sentiment indicator that tracks the temperature of global industrial and risk-linked activity using market-based signals. It distills asset movements from metals, foreign exchange, and energy markets into a single, smoothed composite value. This tool is designed to help portfolio managers, traders, and strategists gauge the direction and momentum of real economy growth expectations.

MacroHeat does not predict policy or price action directly—it measures macro risk appetite and industrial growth expectations across three crucial asset pairs:

Copper/Gold Ratio – Industrial Metals vs. Defensive Metal

AUD/JPY Cross – Commodity-sensitive FX vs. Safe-haven FX

Brent/NatGas Ratio – Oil Demand vs. Gas Oversupply

These inputs are transformed into standardized z-scores to generate an intuitive composite signal of expansion, contraction, or neutrality in the global growth regime

Interpretation:
Copper / Gold Ratio
Copper is widely used in construction, manufacturing, and infrastructure. It responds to real-world industrial activity.

Gold is a traditional safe-haven asset, bid up in times of uncertainty or deflationary pressure. A rising Copper/Gold ratio implies higher industrial activity relative to defensive hedging, consistent with expansionary conditions.

AUD / JPY
AUD (Australian Dollar) is closely tied to the commodity cycle and heavily exposed to Chinese demand, especially for raw materials like iron ore and coal. JPY (Japanese Yen) is a low yielding, defensive currency that tends to strengthen during global stress due to Japan’s net external creditor position. A rising AUD/JPY indicates risk on sentiment and strength in Chinese or regional industrial demand. Falling values may signal risk aversion or cooling commodity linked activity.

📌 *Note: AUD is a proxy for China linked global demand. JPY reflects broader global risk sentiment, not the Japanese economy per se.

Brent / NatGas Ratio
Brent crude prices reflect global oil demand, typically linked to transportation, logistics, and industrial usage. Natural Gas, though also industrial, is often supply heavy and regionally priced. A high Brent/NatGas ratio can indicate tight oil supply or strong demand, relative to gas, suggesting higher economic activity.

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Each of the above components is converted into a Z-score using log returns over a 252-day rolling window. This standardizes movement and allows for cross-market comparison. The indicator then:
Averages the Z-scores of the three components (>1 is expansive, <-1 is contractive)
Smooths the result using a 5-day simple moving average
Classifies the result into macroeconomic regimes
And outputs to the table which has live component Z-scores with visual cues (yellow = expansionary; blue = contractionary).

Thank you for using the Global Macro Growth Proxy by CWRP!
I'm open to all critiques and discussion around macroeconomics and hope you find use in this model!