Macro Research
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Abstract: The price of silver has seen significant growth since 2025, meaningfully outperforming gold and copper and reaching an all-time high of $121.65 per ounce on January 29, 2026. The rally began more as an investment story rather than an industrial demand story. Industrial demand provided a tailwind, but the…
Abstract: The theme of this year’s Jackson Hole symposium, “Financial Innovation: Implications for Payments and Policy”, points to topics like payment rails, tokenization, and digital settlement, rather than an economically focused conference. This implies any macro content is likely to be in Warsh’s opening remarks, and brief at best. Yet,…
Business investment in AI is on track to significantly surpass all other U.S. investment booms of the last 150 years. In 2025, AI Capex accounted for 1.3% of GDP, and it is on track to account for 2.5% of GDP this year. This exceeds the impact of telecom and fiber…
Bond markets are throwing cold water on the outlook for stocks. Real yields (10-year Treasury yields adjusted for inflation) are now at the highest level since late 2023. As a result, stocks’ equity risk premium (ERP) is now lower than 75% of history since 1980. This range for the ERP…
The Fed’s recent shift toward a more hawkish bias has merit, according to measures of financial conditions as well as economic performance. Financial conditions are easier than any point since early 2022, boosted by ebullient equity markets, and the current combination of growth and inflation suggests the Fed funds rate…
Abstract: Oil is down almost 30% over the past month, and inflation breakevens have fallen right along with it. Yet, Fed Funds futures have only moved in the direction of future hikes. If inflation expectations are dropping, some may ask why rate-cut expectations are not dropping as well. The reason…
Financial markets’ inflation expectations have stabilized with peace talks in the Middle East, but it may be up to the Fed to help tame the inflation beast in the real economy. After years of above average inflation, consumer inflation expectations and small business inflation concerns both appear somewhat entrenched. Consumer…
The US’ strategic petroleum reserve (SPR) is hitting some of the lowest levels since the 1980s as drawdowns reaccelerated with the conflict in Iran and could approach its lower limits if a proposed peace deal falls through yet again or if traffic in the Strait of Hormuz remains limited. The…
The correlation between U.S. equity prices and bond yields is signaling another risk-off period may be lurking. The asset classes move in regimes – the correlation between stock prices and bond yields was largely positive from 2000-2022 as equities tended to move in the direction of yields as inflation mostly…
Abstract:Hyperscalers’ plans to spend more than $700 billion in 2026 and another $1 trillion in 2027 building AI infrastructure implies inflation risks may remain, even if supply constraints in the Middle East are resolved. While the financial markets appear to believe inflation is somewhat temporary and due to a supply…
Abstract: Monetary Policy Faces Three Big Changes with New Fed Chair With a new Chair calling for “regime change” on deck and the FOMC already on a relatively uncertain hold pending impacts from the war in the Middle East, monetary policy may be set to keep markets somewhat on edge…
Ceasefire in the Middle East is undoubtedly encouraging news, and if it leads to peace and stability in commodity prices and a stable reopening of the Strait of Hormuz, it could also help support the fundamental case for equities. However, even if peace is achieved in short order, earnings forecasts…
Even if the recent spike in commodity costs proves fleeting, a secular reality of higher average inflation with large spikes may be setting in, and this may be tricky for stocks to shrug off, particularly at current valuation levels. The bond market’s implied inflation expectations for the next year have surged beyond 5%, the highest level…
Producer prices rose at a faster than expected pace in February, continuing a streak of worrisome inflation signals for stocks. Core producer prices rose 3.9% over the last year, outpacing core consumer prices for the 5th consecutive month. Headline producer prices rose 3.4%, likewise outpacing overall consumer price growth by…
War in the Middle East and closure of the Strait of Hormuz has resulted in the largest spike in commodity costs since the start of the Russia-Ukraine war in 2022. Though the 2022 experience does not offer a perfect benchmark for what to expect this time, there are similarities in…
U.S. stocks remain off their highs and despite some relative performance improvement since the war in the Middle East broke out, have underperformed international stocks on a trailing 1-year and year to date basis. Stocks of the five hyperscalers are down 9.3% as a group in 2026, and only Alphabet…
U.S. large cap stocks have broken down through the key 100-day moving average support level as the simultaneous gain in oil prices and deterioration in employment added to the AI-fears and private credit strains that have been nagging markets for months. It is extremely rare to see job losses and…
It is no secret that private credit redemptions are rising as concerns about default risk hamper performance of this most beloved asset class. As the “Golden Age” of private credit normalizes, we may continue to see liquidity pressures rise and questions about underlying loan valuations emerge. As financial markets remain…
Geopolitical risks may weigh on the outlook for stocks in the short run, with the S&P 500 now testing but so far holding a key support level at its 100-day moving average. Events in the Middle East have historically been absorbed fairly quickly by equities, unless oil prices spike and…
Trade policy may remain a source of anxiety for markets for some time to come. Contrary to consensus beliefs that tariffs were 2025’s issue, the Supreme Court ruling and resulting new tariff plans from the President suggest uncertainty is back and may challenge market assumptions for robust cyclical recovery in…
