ATW (Attack the Week)
Oil Shocks and the Fed / Weekly Calendar / Dashboard Signals / Asset Allocation Update
Sunday Thoughts
Two papers crossed my desk last week that, taken together, paint a remarkably complete picture of how the Fed thinks about inflation and what that means for markets when oil gets volatile — which, given the Iran conflict and the current near-shutdown of Hormuz, couldn’t be more relevant.
The first one I introduced in last Friday’s thought piece, analyses nearly nine decades of FOMC meeting records to uncover how the committee has diagnosed inflation in real time — and how differently it has responded depending on whether it saw demand or supply forces at the root. The findings reshape how you should think about the Fed’s reaction function, particularly right now as we stare down two inflationary supply shocks at once: tariffs and an oil price spike driven by geopolitical conflict. Whether the Fed maintains its historical discipline or panics and fights the wrong type of inflation is, in my view, the single most important macro question of this cycle and will determine macro markets over the coming months. Read about it in the post below.
The second paper, which I am analysing further below in this post, tackles the other side of the coin — what oil price volatility actually does to firm-level price setting and whether it blunts monetary policy’s effectiveness. With Brent swinging violently on every Hormuz headline, this isn’t just an academic exercise.
I’ve written up both with the charts that matter and my take on what the research means for today’s policy stance, the rate curve, and how you should be thinking about positioning. Paid subscribers, it’s all yours below.
We then follow the usual script: look at the weekly global macro calendar, analyse the dashboard signals, and see what the asset allocation model has decided to do in this week’s rebalancing.
As always, Macro D is giving us his latest take on the markets while updating us on his Macro FX trades. The latest piece from him (see below) takes the philosophical frame and turns it into trade logic: how he thinks the market will keep swinging between horizons, and how he expresses that view through energy and macro pricing.
As a reminder, the new technical site at pa-globalmacro.com is live and delivering daily dashboard, chart and signal insights.
But now let’s first tackle that paper I mentioned above. Have a wonderful week ahead.
