Powell says he'd "reserve the term stagflation for a much more serious set of circumstances." Fine. But he also admitted downside risks to labor and upside risks to inflation, in the same sentence. That's a policy trap by any other name. What would you call it? $TLT #finsky #EconSky
Quiet signal worth watching: HYG/LQD ratio is falling even as headline high-yield spreads stay tight at ~290bps. That isolates pure credit quality deterioration from rate moves. The divergence between calm headlines and deteriorating internals usually resolves one way. $HYG $LQD #finsky
Sector rotation is screaming stagflation: Energy +37% this quarter, Utilities +7.5%. Consumer Discretionary -9.3%, Financials -8.9%. Inflation beneficiaries and defensives leading, rate-sensitive getting hammered. When was the last time you saw a spread this clean? $XLE $XLU #finsky
This week's sitrep breaks down why the ceasefire rally just lost its catalyst, what Iran's formalized toll system means for oil's price floor, and the April 30 GDP+PCE convergence that could resolve the stagflation question. Free to read →
i spoke to a classroom of fifth graders today about being a journalist and it was a blast. kids are great!
Economists at the Dallas Fed try to model the effects on PCE inflation of a one-, two-, or three-quarter disruption of oil shipping through Hormuz
The model projects WTI prices peaking at $110, $132, or $167 per barrel depending on the length of the closure www.dallasfed.org/~/media/docu...
April 30 is the inflection point: GDP and PCE land on the same day. If growth comes in weak while inflation stays hot, the stagflation classification hardens. Full analysis in this week's free sitrep →
The Fed can "look through" supply shocks in theory. But when the shock lasts 6+ months, it feeds into expectations, transportation costs, food prices, and eventually wages. At some point transitory becomes structural by duration alone. That's the risk nobody's pricing. (4/5)
Goldman says if the closure extends another month, Brent stays above $100 for all of 2026, with a severe scenario pushing $120 in Q3. Rabobank's optimistic path assumes flows gradually resume and still sees Brent averaging $107 in Q2. The floor is structural now. (3/5) $BNO
The toll: ~$1/barrel on crude cargo, payable in yuan or crypto. A loaded VLCC pays roughly $2M per transit. Five-tier nationality ranking denies passage entirely to U.S.- and Israel-linked vessels. This isn't a blockade, it's a tollbooth with geopolitical pricing. (2/5) $USO
The Strait of Hormuz isn't just disrupted, it's being institutionalized. Iran's parliament approved a formal toll system on March 30. Here's why this puts a structural floor under oil and why "transitory" might not apply this time. A thread. (1/5) $USO $CL_F #finsky
March CPI hit 3.3%, highest in nearly two years. Gasoline alone surged 21.2% in a single month and drove three-quarters of the total increase. The Strait of Hormuz is doing what the Fed couldn't: re-accelerating inflation through a supply channel monetary policy can't touch. $SPY $USO #finsky
The war hasn’t created the Fed’s reluctance to cut so much as it had complicated an already-cautious posture. Even before the conflict, the path to rate cuts had narrowed. The labor market had stabilized enough to ease growth worries while inflation progress stalled. www.wsj.com/economy/cent...
Even before the ceasefire, the door to Fed cuts was already closing. The labor market held up better than expected and inflation in PCE terms wasn't coming down as fast as officials had hoped. The ceasefire removes the worst case outcomes on both sides, but energy prices may find a higher floor.
6 risk scenarios are active right now.
Highest severity:
• Stagflation Trap
• Earnings-Valuation Disconnect → Double Compression Risk
• Equity Risk Premium Negative → Stocks vs Bonds Mispriced
This week's sitrep breaks down the tripwires and what to watch. Free to read.
$GLD $TIP $SPY #finsky
"Labor force growth could be near-zero starting this year, driven by weak population growth reflecting low net immigration & population aging
...implies breakeven employment growth near-zero; making job losses almost as likely as job growth in any month"
www.federalreserve.gov/econres/note...
The data points that moved the needle this week:
▲ Credit Quality Ratio (HYG/LQD): Z=+3.0
▲ Institutional Equity/Bond Ratio: Z=+3.0
▲ Institutional Credit Risk Appetite: Z=+3.0
▼ Institutional Gold Exposure: Z=-2.9
$GLD $TIP $SPY #finsky