Seen rising toxicity over the 3yrs I've been active, accelerating post election.

Not just more trolls and politically motivated folks. Sad to see more large accounts focus on scoring points and ginning up mob attacks vs being collaborative & supportive (even with disagreement). What was a vibrant community of interaction is slowing decaying to individual silos & marketing posts b/c its the rational thing to do. Everyone worse off for it.

Particularly the silent majority of folks who passively consume the content here and learn from the interactions.

The Fed Turns Dovish as Inflation Rises

A broad look at the inflation data suggests price pressures continue to rise as disinflationary benefits like housing moderate and price pressures from tariffs flow through.

Thread. The US still has an inflation problem and the inflation impulse from rising tariffs is not helping the situation. Core PCE numbers reported a couple weeks ago remain almost 100bps above the Fed target and are set to march higher in coming quarters.

Anyone take a look at this Situation Awareness fund getting all the press? A client asked me so I took a look.

Claims 47% net returns YTD when 2 large 12/31/24 13F positions (MRVL & VRT) were down 44% & 36% and article claims limited short positions. If you just take their 13F filings and estimate the monthly returns of their holdings you get something that looks like this below, which nets out much closer to 0% return YTD. Seems like an ok proxy since holdings didn't change that much over the quarter.

Despite the political euphoria that's come from passing the BBB, netting out the impacts of immigration and tariffs under either current or likely policy suggests a negative shock to growth in coming quarters.

Thread. Federal government policies are typically reactive to underlying conditions in the private sector and so while they can be important influences on growth, they rarely drive substantial growth pressures as a standalone.

When most portfolios are long only, flexible strategies that can go short to cushion negative return periods are uniquely diversifying.

The challenge is finding cash efficient, low cost, positive return strategies that do it. Managed Futures run at 2x is an option.

Thread. Allocators often face challenges designing portfolios that can help limit losses in down market environments. Despite the need, there are few investment offerings that perform well when other assets underperform but don’t have burdensome drag on the portfolio over time.

The Housing Market Is Starting to Crack

For years the housing market has almost levitated despite drags from high rates and high prices thanks to limited supply and other assets financing demand. But in recent months that's started to flip. The housing market has been much more resilient in recent years than most had expected in the face of very high rates. The biggest reason for that was that while buying demand dried up following the post-covid surge in rates, so too did supply.

The Fed has no reason to cut based on the data that matters.

The risk of inflationary pressures ahead from both tariffs and rising oil prices due to the Mideast conflict will only further solidify their desire to keep rates steady for longer than most expect.

Thread. While many folks are calling for immediate substantial cuts, the data that the Fed cares about just doesn’t support any move at all. Take the UE rate. It’s remained low with any context and been flat for almost a year, suggesting current policy is roughly neutral.

There are broad signs inflation is picking up across the economy.

Despite surveys and timely price measures showing signs of increasing price growth, markets remain complacent. Unless tariffs reverse soon, higher inflation will quickly become a reality.

Thread. Today's measured inflation figures is the first to reflect the real impact of the tariffs (given the previous survey happened just after Liberation Day). Most economists are expecting a pickup in the CPI numbers for the first time in awhile, with core approaching % y/y again.

The new admin has collected trillions in promises for new investment in the US from companies and foreign countries.

While these announcements make for splashy headlines, the actual economic impact is likely to be much more limited.

Thread. It’s no surprise that a hoped for surge in business investment has become a real focus of many after it bailed out what would have otherwise been a pretty weak read on final demand in the 1Q25 GDP report back to highs of the cycle.

Despite US tariffs on Chinese running at 30%, recent data shows little indication of a slowdown in the Chinese economy.

As a new round of trade talks start today, the stable economic conditions suggest little urgency for the Chinese to make a disadvantageous deal.

Thread. For much of the last couple months the Chinese faced embargo level tariffs, which fell to a mere 30% about a month ago which is still very elevated compared to the roughly ~10% effective duty rate coming into the year. h/t @JosephPolitano

A broad look at US labor market data shows continued cooling.

That’s a concerning development for an economy reliant on an income-driven expansion, but probably not rapid enough to get the Fed to quicken cuts given tariff uncertainty.

Thread. The timeliest data pretty clearly shows a slowdown in the labor market. ADP, which covers a substantial portion of the private sector, has shown clear cooling since last summer.

The European economy is transitioning to what looks like a sweet spot of decent growth, monetary and fiscal stimulation and relatively low expectations px in.

It’s a mix that should favor Euro area assets ahead over other markets with much more euphoric expectations.

Thread. For much of the post-covid period the Eurozone was hampered by elevated inflation which sliced consumer spending power and forced ECB to be tighter than growth alone would suggest. That dynamic is pretty much over now:

Positioning is tough with such ambiguity about the magnitude & duration of negative growth policies and how and when it will flow to the real economy.

In such times it's better to look for short-term signal alignment than front-run medium-term likely outcomes.

Thread. There is no doubt that the admin is pursuing what is on net negative growth policies over the next 6-12m. Immigration is collapsing, cutting >1.5% off of labor force growth vs.’24.

https://x.com/BobEUnlimited/status/1927318402017661066

The timeliest hard-data reads on the US economy show only very modest slowing in recent months.

Claims, withholding, rail traffic and temp staffing all point to a touch of weakness through May, but far from the economic impact from an acute slowing.

Thread. There are a bunch of publicly available timely growth indicators, but many have challenges. The Atlanta Fed measure getting a lot of attention is focused on tracking *measured* GDP which is not necessarily a good indication of underlying growth in any quarter.

The current 15-20% tariff rate is starting to bite. The ~40bln in May duties under current policies suggests the tariff drag is a ~2% of GDP tax hike on the US economy.

Unless brought down soon (thru courts, deals, etc), it's going to start hitting the economy soon.

Thread. After months of speculation about what duties will be implemented, we are finally starting to fully see the impact of tariff policies in the government cashflows data. Today the blended rate stands at around ~17.5%.

The major US indexes are already pricing in a high chance that admin policies wont disrupt the underlying global economic momentum and improving liquidity at this point.

But it's not in many other markets. Those may provide better risk/return opportunities ahead.

Thread. If the US economy is set to run hot, probably the most notable mispricing is in short rate pricing which is still reflecting a couple cuts through the end of the year. Without weakening employment it's unlikely these cuts will come.

The global easing cycle continues.

Over the last year 80% of the most impactful global central banks cut rates and nearly all are biased to deliver further cuts. But unlike many past cutting cycles, it comes with decent global growth and loose financial conditions.

Thread. Overnight news of the BoK cuts and RBNZ further easing earlier this week continues a broader cycle of cuts over the last year from the vast majority of global central banks. Really only Brazil stands out as pursuing restrictive policy.

Immigration has collapsed since the new admin took office, and with it a key source of new demand and labor supply bolstering growth in recent years.

The '24 surge of 2.4mln work permits (1.4% of the labor force) is now reversing, creating an acute growth drag ahead.

Thread. Anytime I talk about such a politically charged policy shift there will inevitably a pile of comments about whether the policy is good or bad.

That doesn't matter a lick for macro investing. What matters is simply the mechanics of the impacts of those shifts on the economy.

Japan has a much bigger problem with growth than with inflation these days.

While CPI numbers make for clicks, surging rice prices are a key driver and services inflation is softening rapidly. With GDP already weak before the trade war, easy money is here to stay.

Thread. The latest inflation reads out overnight reaffirms that the inflation rise is being driven by supply shocks and not by an overheating of the underlying economy. On a SA basis headline has been basically flat over the last 3m.

While all eyes are on the expansionary Big Beautiful Bill, there are increasing indications that the tariff "pause" may end in something closer to a Liberation Day 2.0 than relief.

Thread. From a macro perspective the tariff policy outcome is far more important than the nuances of the big beautiful bill.

Even with the China "deal" a couple weeks ago rates are still quite elevated, with the question ahead of whether further relief comes or we revert back.

The Canadian economy was already in a malaise and is now quickly deteriorating with a recession on the horizon.

Plunging business conditions, weakening employment, and the rolling over of the critical housing market all point to the need for further easing ahead.

Thread. The Canadian economy has been weak for many years even before the recent concerns about the trade war. GDP per capita has been flat for a decade, and is only modestly above pre-GFC levels.