Friday Thoughts

Markets want Truth / Macro Dinner Notes / Macro Week in Review

Over to you Warsh

I love it when markets take protagonists to a battle. Warsh will have to show his true colours. Smooth talking is one thing, but markets require more than that. The market beast wants to know what you are really about. After a CPI/PPI double-whammy washout, markets decided that July was too early for a rate hike and even priced September at just above 50% odds.

Since then, Oil has ripped, and front-ends globally have adjusted higher with 10-year yields back at their May highs. July is now pricing a decent chance of a hike. As said, markets like to punish indecision and impose their opinions. The July FOMC will be one of those events. The open interest of the July (August Fed Funds Futures) meeting is now 40% of all Fed funds contracts.

I had the pleasure of attending a macro event with other investors. Most of them don’t anticipate a hike in July but see the need for adjustment later in the year, even if that means a 50 bps adjustment. Many even expressed the view that the spot data is irrelevant as we are still dealing with a backlog of unfinished inflationary business. Fair points.

Meanwhile, we have a bit of trouble in AI-land. Google’s negative free cash flow sent a few waves into a spin. Rightly so. Are stocks caught in a crossfire of policy and rate sensitivity while earnings are being questioned? Hard to disentangle all relevant factors. I was arguing for a bit of an equity drawdown simply based on sentiment and some of the chart/momentum indicators we have received from our daily dashboard overview.

Will the Fed matter? A 25 bps hike, in a vacuum, may not have a big impact on risk assets, but when coupled with the forced re-widening of the right tail of the US rate distribution and increased rate volatility, it will absolutely hit equity sentiment, which will, in turn, impact the AI complex.

Oh yes, we, of course, have geopolitical tensions flaring up again. Given prior experiences, we now have a good indicator of when Trump might reverse course once again and smooth it all over. The chart below isn’t updated for today’s moves, but I would say we are now closer to a reading of 5. Stay tuned.

Below, behind the paywall, I share Macro D’s latest thoughts on the week gone by and any changes he is considering for his Macro FX book. There are many moving parts, and I am of the view that things will get spicy from here. I shared my thoughts in the Substack Chat with members on Wednesday, anticipating a more violent market. Timing has been good.

Alongside my views, our market technical engines work daily, informing our members of the most important macro developments. The summarised dashboard (see below) gives members a quick overview of the technicals of 200+ securities, from equity indices to FX, rates and crypto.

As a member here, you get access to the full toolset of our offering at pa-globalmacro.com. This goes beyond the dashboard summary and includes a detailed chart book for every security covered, a signal dashboard of major changes, a sector rotation map of US sectors, the 2026 buy-and-hold portfolio, which has started to outperform once again and the weekly bond and equity models. And there is more to come.

I am still running a 20% discount on subscriptions until the end of the month, so you have a week still to subscribe and benefit.

For rates market geeks, I have put together a comprehensive view of the major developed market STIR/Money market curves and examined some possible expressions. More on it in the post below.