In a nutshell
- 📈 PMI New Orders–Inventories Spread: A sustained spread of >3 points for 2 months signals early demand recovery, favouring FTSE 250 cyclicals and SMEs; corroborate with supplier delivery times and export orders.
- 🧭 2s10s Yield Curve Re‑Steepening: A gradual +25–50 bps over 90 days with anchored breakevens supports banks and capex; avoid inflation‑driven, violent steepenings that compress equity multiples.
- 👷 V/U Ratio + Wage Momentum: V/U → ~1.0 alongside 3‑month annualised wage growth <4% implies disinflation without deep job losses, aiding rate‑sensitives, housing‑adjacent names, and steady hiring plans.
- 💳 High‑Yield OAS Compression: OAS <400 bps and >75 bps four‑week tightening flags refinancing windows reopening, broadening risk appetite into mid‑caps and turnarounds.
- 🚢 Trade & Transport Pulse: BDI +20% m/m, Brent $70–85, and a falling inventory‑to‑sales ratio signal a Goldilocks setup for exporters/logistics; apply an Opportunity Momentum Score and act only when ≥3 of 5 signals align.
On 8 January 2026, the first full trading week of the year, investors across the UK and beyond are scanning the dashboards for green shoots. In markets, the most durable opportunities typically arrive not with headlines, but with numbers that quietly shift—a basis point here, a diffusion point there. Below, I unpack five numerical indicators that, taken together, can sharpen your entry timing and sizing. Rather than reading tea leaves, we set clear thresholds and risk checks you can operationalise today. When signals align across cycles—real economy, credit, and trade—the odds tilt towards timely, higher‑conviction moves, whether you’re building positions in mid‑caps, expanding capex, or allocating to private credit.
| Indicator | Numeric Trigger To Watch | Opportunity Lens |
|---|---|---|
| PMI New Orders–Inventories Spread | > 3 points for 2 consecutive months | Early demand upturn; SMEs and cyclicals |
| 2s10s Yield Curve Re‑Steepening | +25–50 bps over 90 days | Risk appetite, banks, industrials |
| Vacancy/Unemployment (V/U) + Wage Momentum | V/U → ~1.0 with 3‑mth wage growth < 4% annualised | Rate‑sensitives, hiring plans |
| High‑Yield OAS Compression | OAS < 400 bps; 4‑week compression > 75 bps | Capital markets reopening, refinancing |
| Trade & Transport Pulse | BDI +20% m/m; Brent $70–85; falling I/S ratio | Global cyclicals, logistics, exporters |
PMI New Orders–Inventories Spread: Quiet Catalyst For A Demand Turn
Purchasing Managers’ Indexes are diffusion indicators, but the real edge often sits beneath the headline. Track the spread between “new orders” and “inventories”. When new orders run at least 3 points above inventories for two consecutive prints, firms are signalling that demand is outrunning what’s on the shelves. That spread typically precedes hard‑data upturns in output and shipments by one to two quarters. In the UK, this has historically favoured FTSE 250 cyclicals, industrial suppliers, and domestically focused SMEs that feel turning points first.
Why it matters now: as rates plateau and supply chains normalise, marginal improvements in orders can translate quickly into restocking. Watch for corroboration from supplier delivery times and export orders—two checks that temper false positives.
- Pros: Early, quantifiable signal; aligns with earnings revisions breadth.
- Cons: Vulnerable to seasonal noise and one‑off survey quirks; sector‑mix effects can distort.
Mini‑case: after the 2020 shock, UK services’ new‑orders‑over‑inventories advantage presaged a surge in SME hiring and margin expansion as pricing power briefly returned. The same playbook—buy quality cyclicals on a sustained spread break‑out—has worked across prior mid‑cycle re‑accelerations.
2s10s Yield Curve Re‑Steepening Pace: The Difference Between Good And Bad Steepening
A steepening curve can mean two very different things: improving growth expectations or sticky inflation risk. The trick is to measure pace and context. A +25–50 bps move in the 2s10s over 90 days, alongside anchored breakevens and cooling wage momentum, tends to mark a constructive pivot. It’s the pace—gradual, policy‑led steepening—that historically supports bank net interest margins and unlocks capex plans.
Why X isn’t always better: a violent, inflation‑driven steepening can compress equity multiples and keep central banks hawkish. Pair curve signals with real yields and term premium estimates; if real 10‑year yields ease while the curve steepens, risk assets usually breathe easier.
- Pros: Clear, market‑priced indicator; ties directly to financials’ earnings sensitivity.
- Cons: Can whipsaw around policy meetings; global spillovers (e.g., UST moves) can swamp UK dynamics.
Execution notes: for UK investors, a benign re‑steepening has historically favoured domestic banks, building materials, and transport. Use a simple rule—add on the third weekly higher low in 2s10s after a trough—to avoid first‑bounce traps.
Vacancy-To-Unemployment Ratio And Wage Momentum: A Telltale About Disinflation Without Pain
The V/U ratio compresses labour‑market tightness into a single number: job vacancies divided by unemployed workers. Opportunity knocks when V/U trends back towards ~1.0 while 3‑month annualised wage growth falls below 4%. That combination implies cooling inflation pressure without a deep jobs recession—fertile ground for rate‑sensitive equities, housing‑adjacent names, and leveraged buyouts that depend on predictable cash flows.
Negation framing matters: a falling V/U is not always bad. If vacancies normalise from overheated levels while layoffs remain low, demand is rebalancing rather than collapsing. Cross‑check with participation rates and hours worked to ensure the signal reflects genuine slack, not discouraged workers exiting the labour force.
- Pros: Direct link to central‑bank reaction functions; improves visibility on real incomes.
- Cons: Reporting lags; structural shifts (remote work, sector mismatches) can blur comparability.
Field note: UK recruiters I’ve spoken with since 2023 flagged a steady narrowing of bid‑ask spreads on pay for mid‑skill roles. When wage growth cools without hiring freezes, margin repair in services accelerates, often surprising consensus EPS upward.
High‑Yield Option‑Adjusted Spreads: Compression As A Reopening Signal For Risk Capital
Credit markets often move first. Watch sterling and euro high‑yield OAS dipping below 400 bps, plus a four‑week compression greater than 75 bps. Those thresholds frequently precede a reopening in primary issuance and a broadening of equity risk appetite into mid‑caps and turnarounds. Spread compression is the bond market’s way of saying refinancing risk is receding.
Pros vs. cons in plain numbers:
- Pros: Measurable, forward‑looking; improves default‑adjusted carry; tightens loan covenants’ bite.
- Cons: Too‑tight spreads can signal late‑cycle complacency; sharp oil moves can contaminate high‑yield indices.
Risk checks: pair OAS moves with issuer‑weighted interest coverage and maturity walls. If 12‑month trailing defaults stabilise while coverage improves, equity beta can expand with less left‑tail risk. Tactically, UK-listed special situation names benefit as refinancing windows reopen, reducing dilution risk from emergency equity raises.
Trade And Transport Pulse: Freight, Energy, And Inventory Cycles In Sync
Global trade’s heartbeat is visible in shipping and energy. A 20% month‑on‑month rise in the Baltic Dry Index, Brent crude between $70–85, and a declining inventory‑to‑sales ratio create a “Goldilocks” channel: freight tight enough to imply demand, energy affordable enough to preserve margins. When these three align, exporters, logistics platforms, and capital‑goods makers typically lead.
Why it isn’t always better: freight spikes driven by disruptions (storms, chokepoints) can be misleading, and low oil from growth scares won’t help cyclicals. Confirm with container spot rates and export order books in PMIs. UK‑adjacent case: in 2016–2017, stabilising energy and firmer freight coincided with a synchronised global upswing, lifting machinery orders and engineering consultancies.
- Pros: Tangible, near‑real‑time; ties to inventory rebuilds that feed earnings.
- Cons: Highly volatile; subject to geopolitical shocks; data can be noisy week to week.
Tactics: stagger entries over three confirmations (freight, energy, inventories), and fade when energy breaks out of the band or inventories jump faster than sales.
For investors and operators setting 2026 roadmaps, the common thread is disciplined numeracy: define triggers, verify with two corroborating indicators, and act with measured sizing. You can even roll them into a simple Opportunity Momentum Score (0–100) by equally weighting the five signals, only upgrading exposure when at least three are “on.” The goal isn’t clairvoyance; it’s stacking probabilities. As these thresholds line up through January, where will you find the most asymmetric opportunities—and which corroborating numbers will you require before you pull the trigger?
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