Macroeconomic Context

Macroeconomic Context: HWM

Economic Environment Analysis (Data Only)

HWM • 2026-02-01

Overview: Economic & Company Trends

Economic Environment

Interest Rates
Inflation (Year-over-Year Change)
Real GDP Growth (Annualized Quarterly Rate)
Unemployment Rate
Economic Indicators Summary
Indicator Current Historical Avg Percentile Trend
Fed Funds Rate 3.72% 2.00% 71th ↓ Falling
10-Year Treasury 4.26% 2.65% 91th ↑ Rising
2-Year Treasury 3.56% 2.17% 71th ↑ Rising
CPI (All Items) YoY 3.0% 3.1% 67th → Stable
Core CPI YoY 2.9% 3.1% 55th → Stable
Real GDP Growth 4.40% 2.71% 79th ↑ Rising
Unemployment Rate 4.40% 4.65% 60th → Stable

Company Fundamentals

Revenue & FCF Growth (YoY)
Operating & Net Margin
ROE & ROA
EPS Trend

Stock Performance

Rolling 12-Month Returns

Data period: 2015-01 to 2026-01

Macro Sensitivity & Exposure Analysis

Methodology

Regression Model

Revenue_Growth_t = α + β₁(Macro_Level_t) + β₂(Macro_Change_t) + ε

Model specification: - Y = Company revenue growth (quarterly) - Macro_Level = Absolute value of macro variable (e.g., Fed Funds at 5%) - Macro_Change = Quarter-over-quarter change in macro variable - Separate regressions for each macro variable to isolate effects - Ridge regularization (α=1.0) to handle multicollinearity Sign stability is computed by running the regression on rolling 20-quarter windows and counting the fraction of windows with the same coefficient sign.

Strength Classification
  • High: |β| > 0.3
  • Moderate: |β| > 0.1
  • Low: |β| ≤ 0.1
Confidence Classification
  • Stable: Sign stability > 75%
  • Moderate: Sign stability > 50%
  • Unstable: Sign stability ≤ 50%

HWM - Howmet Aerospace Inc.

Step 1: Aligned Data (43 quarters, 2015Q1 to 2025Q3)

Sample of the data used for regression analysis. Company fundamentals aligned with macro indicators by quarter.

Fiscal Quarter Gross Margin (%) Revenue Growth (QoQ %)
2015Q1 N/A N/A
2015Q2 N/A N/A
2015Q3 N/A N/A
... ... ...
2025Q1 N/A 6.5%
2025Q2 N/A 9.2%
2025Q3 N/A 13.8%
Step 2: Regression Results

Ridge regression coefficients (β) showing sensitivity to each macro variable. Separate columns for Level (absolute value) and Change (direction).

Variable β (Level) β (Change) Sign Stability (L) Sign Stability (C)
CPI 0.537 0.297 67% 67%
RATES 0.462 0.471 83% 100%
GDP 0.006 -0.131 50% 100%
UNEMPLOYMENT -0.288 -0.108 83% 83%

* p<0.10, ** p<0.05, *** p<0.01 | Sign Stability = fraction of rolling windows with same coefficient sign

Step 3: Classification Logic

How we applied thresholds to convert regression coefficients into classifications.

Variable Type β → Direction → Strength → Confidence
CPI Level 0.537 Positive High Moderate
CPI Change 0.297 Positive High Moderate
RATES Level 0.462 Positive High Stable
RATES Change 0.471 Positive High Stable
GDP Level 0.006 Neutral Low Unstable
GDP Change -0.131 Negative Moderate Stable
UNEMPLOYMENT Level -0.288 Negative High Stable
UNEMPLOYMENT Change -0.108 Negative Low Stable
Step 4: Final Macro Sensitivity Profile

Company characteristics that inform macro sensitivity expectations:

Trait Classification Key Metric Implication
Pricing Power Medium GM: 21.4% Moderate pricing flexibility
Leverage Medium D/E: 0.62 Moderate rate exposure
Macro Variable Direction Strength Confidence Interpretation
CPI ↑ Positive High Moderate High positive cpi exposure
GDP ↔ Mixed Moderate Unstable Moderate mixed gdp exposure
RATES ↑ Positive High Moderate High positive rates exposure
UNEMPLOYMENT ↓ Negative High Moderate High negative unemployment exposure
Level vs Change Sensitivity (Fundamentals)

Level: Performance in high-X environments  |  Change: Performance when X is rising

Variable Level Sensitivity Change Sensitivity
CPI Positive (high)
Performs better in high-inflation environments (high)
 Positive (high)
Benefits when inflation rises (high)
RATES Positive (high)
Performs better in high-interest rate environments (high)
 Positive (high)
Benefits when interest rates rise (high)
GDP Neutral
No significant sensitivity to GDP levels
 Negative (moderate)
Hurt when GDP rises (moderate)
UNEMPLOYMENT Negative (high)
Performs worse in high-unemployment environments (high)
 Negative (low)
Hurt when unemployment rises (low)
Macro Risks
  • Cpi falling
  • Rates falling
  • Unemployment rising
Macro Tailwinds
  • Cpi rising
  • Rates rising
  • Unemployment falling

Summary: HWM is positively exposed to inflation and positively exposed to interest rates. Key risks: cpi decreases, rates decreases.

Method: Mixed | Data: 43 quarters (2015Q1-2025Q3)