Macro4Micro

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26

PCE Inflation, Income & Outlays March 2026: Inflation Anxiety Level?

Glenn Reynolds, CFA — Sun, 03 May 2026 19:37:42 GMT

The month of April printed equity returns not seen for a single month since 2020, but the inflation creep and lack of clear timelines for the Strait of Hormuz and energy cost relief is building the case for even more macro trouble. This coming week brings payroll numbers with CPI and PPI the following week. The reaction of the EU to auto tariff escalation by Trump raise trade risks and the same applies to USMCA talks ahead.
We update our Personal Income and Outlays chart set below. The inflation histories highlight how price pressure looms higher than any period since 2022-2023 and the Dec 2024 2.9% CPI. PCE and CPI are now both back above long-term medians. The spring 2022 oil price spike fueled by the Russian invasion of Ukraine still does not get raised as a contributor to the 2022 inflation experience by Team Trump. That might raise questions of cause and effect that apply in coming months.
The real fed funds level (using whatever inflation you want to net against fed funds) is heading in the direction of Trump’s wish list of negative real fed funds. That would comprise closet stimulus after a 1Q26 where 4% handle PCE inflation lines arrived with the month of March PCE inflation in the 3% handle zone (see 1Q26 GDP Advance Estimate: Consumer Fade, Investment Boom 4-30-26).
Equity markets have continued to rock in April despite inflation and Iran. We looked at asset returns for the month of April in separate LinkedIn posts. We will update the full asset return charts later.
The policy level chaos is only getting worse on the geopolitical front and domestic DOJ insanity. While it has taken Epstein out of the headlines and handed a set of ugly inflation metrics a back seat for now in equity markets and credit risk pricing, the lack of a clear action plan just keeps the global supplier chain fuse burning (see The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26).

The arrival of Warsh this month will make for some interesting balancing acts between monetary policy and inflation metrics. We can understand why he would rather not do press conferences (avoid direct questions) and also wants to change the data reporting strategy. The PCE metrics just came out with the GDP report for 1Q26 and for the month of March this past week. Those releases and data are making for challenging math for real fed funds.

The above chart frames the timeline for “effective fed funds minus Core PCE.” For this latest date posted, we are down to +0.4%. The level is well below the long-term median of 1.4%.If one sees inflation moving higher and demands from the White House to take rates lower, the economics class students could start wondering why they bother studying.

The above chart updates the long-term time series from 1972 for PCE vs. Core PCE across the decades and cycles. We see the 2.6% headline PCE long-term median in the lower left (below the current 3.5%) and the 2.6% Core PCE median (vs. current 3.2%). That 3.5% headline PCE for March is dramatically better than where we came from in July 2022 at 7.1% PCE, but it is still well above the 2.0% target and going in the wrong direction.

We include the 1997-2026 timeline above for a useful frame of reference on the PCE target of 2.0% that is routinely discussed by the Fed and in the markets. The shorter timeline from 1997 offers a better visual scale separate from the wild 1970s and 1980s.

The “1997 to 2026” period presents a rare stretch at or below the 2.0% PCE line and Core PCE median as noted in the chart. It took a lot to go wrong in that time horizon at the systemic level and in terms of macro shocks to cross below or at that 2.0% threshold. The events along the way included tech bubbles bursting in 2000-2001; oil crashes in the late 1990s and in the late 2014 to early 2016 period; and a bank system crisis from 2008 to 2011 (including sovereign stress) to get us there. The COVID pandemic in 2020 was a new one for the modern capital markets.

That gets us back to the debate over what is the correct formal inflation target or the “closet target” somewhere above 2%. There is not likely to be a formal change in the target, but the current backdrop would be missing it regardless and going in the wrong direction.

The above chart frames the long-term differential history between PCE and Core PCE since 1972. The long-term median differential is zero and we are currently at +0.3%. The volatility around that compressed long-term median ties into the energy wildcard with some food distortions also back in the 1970s.

We look at some of the CPI energy and food inflation moves in separate commentaries (see Inflation: The Grocery Price Thing vs. Energy 12-16-24, Inflation Timelines: Cyclical Histories, Key CPI Buckets11-20-23). Food and electricity inflation have been near the top of the affordability political rage-fest. Oil has joined in at this point, but there seems to be little interest from team Trump to argue that the 2022 inflation spike was heavily influenced by the Russian invasion of Ukraine. That evasion of the oil impact in 2022 crushes the credibility of the talking heads in the White House (Hassett, Bessent et al.).

The above time series plots headline CPI vs PCE across time. The debates around which inflation metric is the best is something more for the faculty club types, but the above chart drives home how each has behaved across time.

“Higher or lower or stable?” is a good place to start regardless. Any investor should be aware if the line item trends by product groupings, and relative weights are also useful to help guide the strategic reaction headline and core inflation metrics.

Food and Energy is crucial for the consumer even if the monetary ideologues will carry on their views around inflation as narrowly defined in academic terms. The household experience with prices underscore that consumers care about household discretionary cash flow and how their take-home pay frames up vs. their household basket. Derived metrics that do not match up their own checkbook experience (owners’ equivalent rent, health insurance CPI, etc.) matter less to many as their premiums go up and financing costs are higher for their major big-ticket purchases (e.g. autos).

The above chart is something we frequently include in updates as a reminder that political theme-spinning out of Washington on economic cycles and inflation are usually stacked with selective memories, false statements (self-serving lies), material omissions, and conceptually anorexic story telling (like “seller pays the tariffs”)

The above chart updates the trend line in disposable personal income (DPI) vs. personal consumption expenditures (PCE) that we get with each monthly PCE release. We like updating this chart each month for a reminder of what really happened given the waves of disinformation from the current administration. Revisionist history is one thing, but it is good to challenge gross falsehoods and misstatements with facts and history.

When PCE growth exceeds DPI growth, as we see again in March 2026, one conclusion is that many consumers are feeling good (i.e., ignore the sentiment metrics). Or perhaps they are tapping credit cards by necessity (e.g. the PCE could include outsized health care premiums put on their credit cards?).

The stimulus overload of 2021…

The 2021 period was a big macro rebound in GDP off the COVID peak period. The strong macro backdrop in 2021 and heavy dose of fiscal accommodation did not mesh well with residual supply-side shortages in goods broadly as 2022 saw the end of ZIRP and a material inflation spike ensued.

Oil was a problem after the Putin invasion of Ukraine in late Feb 2022, and inflation hit a high in June 2022 at +9.1% for CPI as a headline grabber (headline PCE at +7.1% in June 2022) before the steady inflation slide to under 3% by the end of 2024. Core PCE had dueling peaks at +5.6% for Feb 2022 and Sept 2022. Try to get Team Trump to even mention the oil price spike in 2022 as a factor in the 2022 CPI numbers. The questioning on the topic by mainstream media is also lame. The CNBC team does not push such Q&A since they are looking to take GOP interview share away from Bartiromo. They need to GOP to keep coming back. Tough questions don’t help that priority.

The COVID relief binge…

The above chart plots MoM Disposable Personal Income vs. PCE and offers a read on how wild things got during and right after the pandemic peak. This is a chart we use each month to revisit the DPI swings that came with the three COVID relief/stimulus packages. That included two COVID relief bills under Trump and one under Biden.

As a reminder, Trump signed the CARES Act in March 2020 (shows up in the DPI in April 2020) and Trump also signed the Dec 2020 legislation disbursed in Jan 2021 (Trump seldom mentions that Dec 2020 one since it is easier to blame Biden and Powell). Biden signed the America Rescue Plan (disbursed in March 2021) that was a demand pile-on (we would argue it was over the-top-stimulus) in a supply-constrained environment (thus inflation). The DPI and PCE wave tied to each of those shows up in the chart above.

As a reminder, the vaccine was announced in early Nov 2020 just ahead of two stimulus actions. That was soon to be a factor in PCE patterns and lag effects. The quarterly GDP numbers in 2021 on the post-COVID bounce were numbers generally not seen since the Reagan and Clinton years (see Presidential GDP Dance Off: Clinton vs. Trump 7-27-24, Presidential GDP Dance Off: Reagan vs. Trump 7-27-24).

COVID was a distinct period for supply chains and supply-demand imbalances. With tariffs and potential trade wars, it will remain important to look for similar imbalances whether in narrow product categories or in broad commodities and materials areas. We clearly face some now in oil and gas, refined products, fertilizers, aluminum, and numerous other inputs generating headlines (helium, sulfuric acid). Some shortages also undermine military readiness.

In terms of tariffs, the major trade partners have not initiated much in retaliation with the exception of a brief China spat. A “peace at all costs” strategy by the EU and USMCA partners has mitigated the damage, but that de facto submission could come back to haunt some major trade partners if others run for office with a “get tough on Trump” election pitch. Caving in to Trump on tariffs is getting less popular in the EU and Canada. Trump is also pushing his luck after Iran in attacking allies.

Jacking up aluminum, steel, and copper on the materials side and seeking even more tariffs on lumber was not and is not a great idea for keeping prices and costs contained. Auto tariffs under Section 232 are extreme even after the array of “deals” and could go higher if the USMCA breaks down in 2026. Trump also just fired a shot across the EU’s bow aimed at German autos.

We saw semis, pharma, and aircraft/engines/parts added to the Section 232 pipeline although most of the aircraft/parts risk was mitigated in EU talks. Those EU talks are now in jeopardy again. Other actions brought in commercial vehicles, branded pharma, cabinets, and a range of targets on national security grounds including upholstered furniture.

The most important development in the tariff area was the SCOTUS decision on IEEPA. Trump is launching tariffs under Section 122 laws and initiating more Section 301 actions (unfair trade) to maximize his flexibility with Section 232 (national security) also in the playbook.

The above chart covers the time horizon for DPI vs. PCE from early 2022 as the tightening cycle kicked into gear after March 2022. Life in Jan 2022 was still quiet for Disposable Personal Income. We like to include this chart and the prior chart just given the heavy mix of disinformation and politically axed story lines we constantly hear from Trump on Biden being the cause of all the macro problems even at the end of 2025 and into 2026.

Accurate factual and conceptual frameworks of “the now” matter more than qualitative political spin looking backwards. That said, having a sense of what the numbers were then helps clear up the misinformation nonsense. After all, this is a very different world of tariffs and top-down government policy with very different tax structures and priorities.

The above table plots the monthly Disposable Personal Income MoM change numbers vs. the Personal Consumption Expenditure MoM numbers across the years from 2020 through March 2026 (we dropped 2019 from the chart given chart crowding). It is an easy scan across key time periods for a look at turning points in DPI (e.g. stimulus payments) or PCE.

One exercise to do from time to time is to look at Table 1 in the monthly PCE release for the granular dollar amount on each DPI reconciliation line. The line items can sometimes show some volatility. We like to look for gaps between DPI and PCE and moves in Personal Savings.

Any reader of Table 1 can simply tick off which lines might come under pressure in coming months. Examples include expense lines such as Medicaid (post tax bill) or other health care premiums under ACA. There is also the recurring pressure on select durable goods that face tariffs.

It is always worth remembering that a tariff is a regressive tax that hits lower income consumers harder and the same for small businesses. The same is true in Medicaid costs based on the income brackets of Medicaid users. A loss of health care benefits and higher pharma costs is a zero-sum game with other consumption lines. The current ACA premium spikes will also be a zero sum “game” for many budgets.

The above chart updates the running savings rate reconciliation that comes with the Personal Income and Outlays each month. We see a fresh low in March 2026 of 3.6% or well below the April 2025 high of 5.5%.

The “Why?” of declining savings rates can be like a political Rorschach test on “buying on happiness” or “getting slammed on prices of the household basket, tariffs and financing costs.” The saving rate dipped below the 4% line in Dec 2025 and posted 3% handles in 3 of the past 4 months. That savings rate decline can be a function of various forces, but the inflation trends are eating more into wages.

Market Commentary: Asset Returns 4-26-26

Synchrony Financial: Favorable Consumer Credit Signals 4-24-26

Industrial Production March 2026: Mixed Picture, Big Questions Ahead 4-16-26

Existing Home Sales March 2026: New Beginnings or New Ends? 4-15-26

Producer Price Index March 2026: Heater or Curve Ball? 4-14-26

CPI March 2026: The CPI Cycle Could Prove Maddening 4-12-26

4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26

1Q26 GDP Advance Estimate: Consumer Fade, Investment Boom

Glenn Reynolds, CFA — Fri, 01 May 2026 00:46:38 GMT

Bears are under fire in this stock market.

The 1Q26 headline GDP growth marks a sequential strengthening from a very weak 4Q25, but the stark divergence across growth in PCE vs. Fixed Investment reminds us that there is a lot going on in the mix from the household level to corporate investment budgets and what is underway in tech sector evolution (see 4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26).
Personal Consumption Expenditures (PCE) posted growth of 1.6% for 1Q26, down from 1.9% in 4Q25 and the lowest since 0.6% in 1Q25. PCE growth in 1Q26 is lower than all 4 quarters of 2024 (Biden’s last year in office). That is what the objective numbers say. Subjective storytellers have other versions.
The real GDP growth movers were over in the fixed investment bucket where tech outlays carried the day. The line items notably diverged with total Nonresidential fixed investment at +10.6% on the back of the Equipment line at +17.2% and Intellectual Property Products at +13.0%. In contrast, we see Structures at -6.7% under the fixed investment line. Residential investment weighed in at -8.0%. The contribution to GDP (Table 2) from “Information and Processing Equipment” was 0.83% and dwarfs other equipment categories. Tech rules capex trends.
The GDP report includes details of a 4.5% PCE price index for 1Q26 vs. 2.9% in 4Q25. The core PCE price index stood at +4.3% in 1Q26 vs. 2.7% in 4Q25. The March monthly PCE price index data was also released this morning with some fairly ugly numbers. The 3.5% YoY for March was up from 2.8% in Feb 2026 while Core PCE YoY of 3.2% was up from 3.0% in Feb 2026. That is the wrong direction for easing. Goods PCE rose by 3.8% in March vs. 1.8% in Feb. The +14.4% YoY for PCE prices in Energy Goods and Services is a number with more lag effects to come.
The reality of sharply higher inflation across multiple line items brings the potential for an ongoing squeeze on real wages and more threats to an already soft PCE line in the GDP accounts. The Iran War (“excursion”?!) thus could further undermine the latitude for FOMC easing even if Warsh can play with the data and squeeze out enough outlying data points to make his inevitable advocacy for easing somewhat stronger. Perhaps the consumer will instead “trim the mean” on their household baskets, change diets, switch brands, and drive/travel less.

The chart above updates the key drivers of GDP with Personal Consumption Expenditures (PCE) always the dominant factor at around 68% of GDP. The Gross Private Domestic Investment categories account for almost 18% of nominal GDP and posted a very strong quarter. That is where the tech boom is playing out under Equipment and Intellectual Property. The dramatic swing in the Federal GDP contribution (from -16.6% in 4Q25 to +9.3% in 1Q26) tend to get discounted and segregated from the core economic story. The big move in government lines was the swing in the Nondefense Federal line from -24.3% in 4Q25 to +20.3% in 1Q26.

Coming off the +0.5% 4Q25 GDP and annual GDP growth rate of 2.1% for 2025, there is little to brag about in the GDP story until this Fixed Investment pop in 1Q26. PCE and Fixed Investment is the main story and not trade deficit deltas or working capital distortions (see 4Q25 GDP (Advance Est.): Less Distortion This Time 2-20-26, 3Q25 GDP: Morning After Variables to Ponder 12-27-25).

The annual GDP growth of 2.1% in 2025 was well below the 2024 growth rate of +2.8% (see 4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26) and no amount of “grinning and spinning” by Hassett et al. can make 2025 a good growth year. We now see the 1Q26 numbers getting better in fixed investment.

The multiplier effects of the impressive tech capex cycle show up in higher imports and exports both. We also see the major industrials getting some lift from the capex programs as underscored by Caterpillar’s stock response today as CAT rose by almost 10% with robust earnings and guidance. Both the “Construction” and “Power and Energy” segments showed impressive growth. CAT also reduced its tariff cost estimates (for now).

The PCE wildcard and the inflation X factor…

The numbers in the box above tell a story of weaker growth rates in historical context. A scan of the PCE price index in the 1Q26 GDP report was bad news, so the FOMC role as a potential tailwind (or not) is still up in the air with the oil scare. We saw mortgages briefly hit 6.5% yesterday, so the housing story and cost of durables financing by customers is a developing story with the Iran War fallout.

The 4% handle numbers for PCE inflation reported for 1Q26 might leave Warsh in need of a good qualitative sales pitch since the numbers are not helping the FOMC easing themes (no wonder he wants to change the data approach).

The YoY lines by product groups in GDP growth are also sobering with Goods at -0.1%, Durables at 0.0%, and Nondurables at -0.2% (Table 1). Services weighed in at +2.4% growth for 1Q26 in the GDP report. Overall, the PCE line and consumption growth rates rolled up into an unimpressive rate of growth that certainly does not fit under the heading of “Golden Age.” The tech story came through loud and clear on data centers and equipment demand.

Consumers don’t help the sustained expansion story so far…

The Personal Consumption Expenditure (PCE) lines are starting to show the wear and tear of policy chaos. It is hard to lean on a scenario of lower chaos levels ahead even if Iran can get worked out. The hectic headline uncertainty extends from tariffs to geopolitics. In tariffs, we have the USMCA up for review and Trump still does not even admit the buyer/importer writes the check, so what do you do with that? Trump even blasted out “Truth” social commentary along the way that tariff refunds would be going to foreign sellers and other countries.

The tariff topic will heat up again with Canada and Mexico, where the relationships have been rapidly deteriorating. No members of the sycophant legion have dared to explain the basic tariff mechanics to their leader. Or he is simply not telling the truth. Meanwhile, the Iranian nukes that had been “obliterated” (remember how mad Trump would get about anyone who said otherwise) are now the refrain (What is preventing a nuclear weapon worth? As repeated over and over by Hegseth to Congress this week.) Nukes are now the core rationale for the Iran War and the continued blockade.

Trump’s core strategy is based on the idea that a radicalized nation of over 90 million, including many hardened by a brutal Iran-Iraq war int the 1980s, would roll over like Venezuela, where the ancestral allies of Maduro remain at the helm. Extrapolation from Venezuela rolling over to expecting an easy victory in Iran will get written up in the history books for generations to come with a Trump brand stamped on it. Not in a good way.

Synchrony Financial: Favorable Consumer Credit Signals 4-24-26

Market Commentary: Asset Returns 4-19-26

Industrial Production March 2026: Mixed Picture, Big Questions Ahead 4-16-26

Existing Home Sales March 2026: New Beginnings or New Ends? 4-15-26

Producer Price Index March 2026: Heater or Curve Ball? 4-14-26

CPI March 2026: The CPI Cycle Could Prove Maddening 4-12-26

4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26

Market Commentary: Asset Returns 4-26-26

Glenn Reynolds, CFA — Sun, 26 Apr 2026 23:39:57 GMT

Hormuz negotiating team. Plan B.

Another oil spike this past week is tied to “blockading the blockade” as it sent WTI back above $94 by Friday close from below $83 the prior Friday close. The supply shock and supplier chain fallout now are open-ended with no defined deadline and a stalemate that keeps the lag effects of the supply shock stacking up.
The focus on “record NASDAQ” and “record S&P 500” on Friday led the headlines with a mixed tech rally favoring semiconductors vs. SaaS/software names that left numerous subsectors still in a negative zone for software and SaaS services.
The week ahead tees up the advance estimate for 1Q26 GDP after a very weak set of 4Q25 numbers and growing uncertainty around how long the consumer sector can absorb the headwinds (see 4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26).
The market will see 5 of the Mag 7 report this week (AMZN, GOOGL, MSFT, META, AAPL) with the Personal Income and Outlays report bringing a read on PCE inflation and how aggregate consumer spending is holding up vs. disposable income. Ford and GM as auto bellwethers will bring some color on the spring selling season, tariff impacts, expected fallout from Iran, and any updated color on EV strategies in the new world of Trump policies.
The FOMC meeting is likely to be the swan song press conference for Powell after Pirro (of Fox personality fame who was appointed by Trump to the Washington DOJ) “sort of” dropped the investigation of Powell in her usual dubious fashion. The statement included a veiled threat to reopen the case. Given the lack of evidence, a competent DOJ could clear up the case now. The judge already found “essentially zero evidence.” As we go to print, Tillis has indicated over the weekend that Pirro’s questionable statement cleared the bar and he will advance Warsh.

The above table breaks out the various timeline returns for the high level equity and bond benchmarks we monitor. Equities show a very strong month on the way to all positive numbers for 1, 3, and 6 months after some earlier rough patches post-Iran that generated a wave of negative numbers in March (see Market Commentary: Asset Returns 3-30-26).

The equity market rebound was capped off with record highs Friday for the S&P 500 and NASDAQ as the market is looking past the Hormuz stand-off and putting the bombing and Iranian wildcard in the rear-view mirror. That is a leap of faith embracing a rational and constructive outcome during a period of the irrational and destructive.

The rolling return visual

In the next section, we get into the details of the 32 ETFs and benchmarks for a mix of trailing periods. Below we offer a condensed 4-chart view for an easy visual on how the mix of positive vs. negative returns shape up. We see it as a useful exercise in looking for signals across industry groups and asset classes.

The symmetry of benchmark and ETF returns across the above time horizons showed a week biased to the negative side as covered further below. The 1-month, 3-month and LTM periods show a much healthier mix with tech still strong on balance in 2026 and some benefits of sector rotation after tech multiples went to such lofty levels. The market then saw a combination of cyclical comfort or at the very least “recession avoidance” despite lower GDP and soft payroll. Solid earnings expectations in 1Q26 narrowly and 2026 overall has been a tailwind.

The Magnificent 7 heavy ETFs…

Some of the benchmarks and industry ETFs we include have issuer concentration elements that leave them wagged by a few names. When looking across some of the bellwether industry and subsector ETFs in the rankings, it is good to keep in mind which narrow ETFs (vs. broad market benchmarks) get wagged more by the “Magnificent 7” including Consumer Discretionary (XLY) with Amazon and Tesla, Tech (XLK) with Microsoft, Apple, and NVIDIA, and Communications Services (XLC) with Alphabet and Meta.

The above chart updates the tech bellwethers and useful broad market indexes and ETF comps across a wide range of time horizons. We cover more single tech names and subsectors in our “Tech Check” charts further below, but these names include the Mag 7+3 (the “3” being Broadcom, Oracle and Taiwan Semi).

The Semi ETF (SOXX) took the top spot by a comfortable margin led by big numbers from a range of chip players on the week as broken out in the “Tech Check” returns below. Among big winners this week were Intel (INTC), Taiwan Semi (TSM), Texas Instruments (TXM), and Advanced Micro (AMD) among others.

The commentary below is mostly a cut-and-paste from an earlier post on LinkedIn on Saturday with some additional input:

The weekly return chart for the 32 benchmarks and ETFs we track are more mixed than might be assumed with headlines citing all-time highs for the S&P 500 and NASDAQ to close Friday. The chart shows 13 positive and 19 in negative range for the week.

A good start to the earnings season was not enough to fully offset setbacks in the Strait of Hormuz. The S&P 500 hit a record on a modest weekly gain that saw 5 of the 11 S&P sectors positive and 6 negative. Tech excitement bolstered the large caps as we cover in the separate weekly Tech Check review.

There is no end in sight for crude oil uncertainty, and the reverberating supplier chain disruptions linger from chemicals (e.g., fertilizers) to base metals (notably aluminum) and numerous other key supplier chain links.

The carefully crafted (sarcasm alert) blockade response to the blockade is getting bad reviews in the world of geopolitics and in domestic politics (sycophants excluded). More significantly, the open-ended closure is getting a bad review in the world of supply and demand as threatening lag effects loom. WTI moved from $82.59 last Friday to $94.40 this Friday. Energy ETFs made the top quartile with the E&P (XOP) at #1, the Energy ETF (XLE) at #3, and Midstream (AMLP) at #4.

The Tech ETF (XLK) held down the #2 spot with the NASDAQ at #5 and the Equal Weight NASDAQ 100 ETF (QQEW) at #6. The Friday move in Intel (INTC) of +23.6% ($415 bn market cap) was a headliner with Advanced Micro (AMD) outperforming Intel for the week as both posted 20% handle returns.

In what might have been a surprise, the Homebuilder ETF (XHB) made the top quartile despite weakness in housing markets. We get housing starts released this week, but the industry backdrop did not preclude a strong performance by numerous building suppliers in the XHB. Large homebuilders were mixed, but bellwether names such as DR Horton and Taylor Morrison were both positive in what will be a mixed earnings season for builders.

Sitting on the bottom of the returns was the Transports ETF (XTN), which is the flip side of the strong energy performance. For XTN, diesel costs and jet fuel will remain major problems that will hit airlines and challenge freight and logistics companies. Volume fears also weigh on cyclical sentiment. The Transport ETF (XTN) company mix posted a wide range of returns across the various business line concentrations.

We saw the BDCs (BIZD) post another negative week as the forward calendar will bring a lot of BDC reporting details to the market to help frame where the generalizations end and more nuanced details begin on private credit risks. Financials had a slow week with the Financials (XLF) and Regional Banks (KRE) both negative as the UST curve backed up and oil risk remains a recurring drag. All 7 bond ETFs were in the slight negative range.

The FOMC story line on easing is mixed. The Warsh hearings appeared to be a net perception negative on a lack of responsiveness and evasive, ambiguous answers. His refusal to answer simple questions like “Did you have any investments with Epstein?” or “Who won the 2020 election?” colored his partisan commitment. It would have been easier to say “no” (if it was “no”). That said, Warsh brings stellar qualifications even if it is clear to many that he will be a Trump servant. UST bulls hope that Warsh is smoother and more open and convincing with his FOMC voting peers than he was in his rubber stamp hearings. He will need to win over economists to get the easing votes. As we go to print, the FedWatch Oct FOMC meeting date shows a 68.9% chance of unchanged fed funds and 26.9% chance of 1 cut. The odds have been whipping around since Iran.

The commentary below is mostly a cut-and-paste from an earlier post on LinkedIn on Saturday with some additional input:

The weekly price return chart for the 32 market benchmarks and tech bellwethers show semiconductor names experienced an outsized rally week. We see a positive to negative score of 21-11 with semis leading the top quartile and software-related names clustered in the bottom quartile.

We see the Mag 7 names spread across the 4 quartiles with Amazon (AMZN) in the top quartile and Tesla (TSLA) in the bottom tier. The “Mag 7+3” posted 7 with positive returns and 3 negatives with TSLA, Meta (META), and Oracle (ORCL) in negative return range. The top performers across that group of 10 were Taiwan Semi (TSM) and AMZN in the top tier.

The big news on the week was Intel (INTC) earnings, which drove a monster rally on Friday of over 23%. As of Friday, that puts the INTC return for the trailing 1 year at +284% or over 9x the S&P 500. As a frame of reference, INTC’s struggle from May 2021 to 2Q25 saw around a -61% return vs. +48% for the S&P 500. INTC’s comeback is obviously impressive.

Headlines around massive layoffs at Amazon and Meta will keep payroll anxiety high in the tech sector after a serious bout of AI displacement jitters had been rising around the SaaS-heavy service operators. There is still a lot of concerns around how their business models will hold up under an expected AI onslaught that has richly rewarded the semiconductor names. The Semiconductor ETF (SOXX) was #3 on the week while the Software ETF (IGV) was able to edge into a slight positive return in the lower half of the 3rd quartile.

Software returns have presented a stark contrast with semis. Software faces a lot of bearish commentary from the equity markets and over in private credit. This week saw ServiceNow (NOW), FactSet (FDS), Zillow (Z), and Salesforce (CRM) in negative range in the bottom quartile. The bottom quartile of the “Tech Check” list for the YTD period is dominated by the SaaS-heavy services names with YTD returns running from -19% to -41% for the bottom tier. We detail that trend further below.

IBM reported earnings this week and returns were hurt again. IBM is an iconic legacy name cutting across a range of subsectors. IBM had a decent 1Q26, but IBM equity still ended up sitting on the bottom for the week at a -8.5% return. The market color was still more about the general anxiety effects the market has seen in services companies tied to potential AI fallout. IBM is in the bottom quartile for the week and over 1-month is in the red with the same for the YTD timeline.

The 1-month score of 28-4 was a solid rally off the initial beating on Iran fears that spread to bonds, inflation risk, the consumer, and the cycle. FOMC second guessing gave way to some mild optimism that easing was more likely than tightening. We see the 3 energy ETFs on the bottom, as oil prices are lower now over that 1-month period even if still materially above the $67 WTI of late Feb 2026.

The 1-month Tech Check weighs in at 26-6. The bottom tier is dominated by SaaS-centric services operations and software exposure. The top quartile shows 5 semiconductor names and the Semiconductor ETF (SOXX) with Amazon and Aphabet. We see 3 of the Mag 7 in the top tier. Intel (INTC) and Advanced Micro (AMD) were off the charts followed by the SOXX and Broadcom (AVGO).

The worst performers again were comprised of the SaaS-based services and software names along with TSLA. The Software ETF (IGV) was back in positive return range but in the bottom half of the 3^rd quartile.

The YTD story in the Tech Check mix is staying the course of where we have been in recent weeks with Semis big winners and Software and SaaS names big losers. The overall score is 17-15. If we remove the broader market ETFs (S&P 500, NASDAQ, Midcaps, Small Caps), the score is 13-15.

The bottom quartile is dominated by names victimized by the AI mini-panic and threats to those business models. The bottom quartile is bracketed by a -19.5% return on PLTR to a low of a -41.14% return on NOW.

The 3-month timeline includes around 7 weeks of post-Iran turmoil with a score of 24-8. The bottom tier includes weaker performances by BDCs (BIZD) on the bottom and weakness in Financials (XLF) and Health Care (XLV). Homebuilders (XHB) also struggled while the long-duration UST ETF (TLT) was in the red. Some of the mixed tech equity behavior is seen in the weak numbers from Communications Services (XLC) and the Equal Weight NASDAQ 100 ETF (QQEW).

The winners were naturally led by energy assets and power (XOP, XLE, AMLP, XLU) with the Tech ETF (XLK) and NASDAQ in the top tier. We see 6 of 7 bond ETFs in positive range. While NASDAQ was the winner over 3 months, the Russell 2000 small caps ranked higher than the S&P 400 Midcaps and the S&P 500.

The LTM returns score of 31-1 drives home what a good run it has been for equities with the secular boom in some large cap emerging growth areas in tech (AI, Semis). The solid corporate sector earnings overall have been reassuring despite tariffs and weak GDP growth. An easing cycle and expectations of more Fed support has helped. The risks of tariffs and energy turmoil will test Fed policy direction and global growth.

Trade war risks loom larger now with so much enmity fostered with the EU and Canada tied to Trump policies. The Middle East and economic risks are the worst since 1973 when the main event was Israel vs. the “Arab nations.” This time the US is the critical driver of the next steps in the war (a blockade of Iran is an act of war under international law).

There are no easy solutions at this point. The choices of escalation or sustained energy and supplier chain chaos both could bring economic damage. Blaming the EU and/or NATO is absurd and only sets off more chain reaction economic risks. This one will be taught in the future in history classes and military academies around “what not to do” if you want an easy way out.

Nationalism looms large from China to Russia to North America at a time the NATO foundation is crumbling, and the US defense budget is rising by 50% with budgets already stretched. Financing it requires demand for dollars and UST, which is not an easy assumption.

Event-driven handicapping is never easy when geopolitical conflict is on the menu. For now, the markets just assume “we will get past this.” Iran, the Gulf “partners,” China, Russia, Ukraine, and trade partners like Canada and Mexico may see the world differently.

Market Commentary: Asset Returns 4-19-26

Industrial Production March 2026: Mixed Picture, Big Questions Ahead 4-16-26

Existing Home Sales March 2026: New Beginnings or New Ends? 4-15-26

Producer Price Index March 2026: Heater or Curve Ball? 4-14-26

CPI March 2026: The CPI Cycle Could Prove Maddening 4-12-26

4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26

Synchrony Financial: Favorable Consumer Credit Signals

Glenn Reynolds, CFA — Fri, 24 Apr 2026 20:39:38 GMT

Diversity of sales platforms makes SYF a very useful consumer sector indicator.

Synchrony (SYF) posted a 1Q26 performance that sends favorable signals around the consumer sector and related spending trends while asset quality metrics held in quite well. A big test lies ahead in 2026 on a range of consumer headwinds and payroll worries that lurk. Household discretionary cash flow will be feeling the affordability pinch, as will many business lines, from the Iran fallout.
SYF has been our favorite bellwether to monitor given the mix of accounts, the scale of operations, and the disclosure granularity by sales platform. SYF’s narrow credit card focus offers more data to track across a range of subsectors in retail, health care, and other services. We covered the steadily expanding partner network in an earlier detailed report on SYF (see Synchrony: Credit Card Bellwether 10-30-25).
For 1Q26, we see charge-offs down YoY, 30-day and 90-day delinquencies essentially flat YoY, net interest margins higher YoY, and an allowance cushion that is almost double charge-offs.
Betting against the US consumer has typically been a bad idea even if occasionally betting against underwriting standards of various lenders is sometimes a good idea. Synchrony financial has not been one to bet against, however, even when consumer sentiment is at an all-time low, the affordability of the “household basket” is trending in a negative direction, and payrolls have been stagnant in cyclical context.

The above chart highlights the superior performance of Synchrony in the equity markets relative to other major consumer finance companies. We include Capital One in the chart as a good comp. We also include the Financials ETF (XLF) and Regional Bank ETF (KRE). We looked separately at a number of consumer finance operations and related asset quality metrics across the financials peer group. Each consumer lending operation can have its own flavor (credit cards, auto, instalment credit, etc.), but we see “cards” as one of the best gut checks on spending and asset quality.

For SYF, steady asset quality and very high net interest margins have brought rewards to shareholders across time. As detailed above, SYF has shown its resilience across the period from the end of 2019 and across a pandemic, an inflation spike, a Fed tightening cycle, and now into a low payroll and low consumer confidence stretch. From the end of 2019, SYF equity total returns soundly beat COF, the XLF ETF, and KRE.

The above SYF stock return chart plots the performance from the start of the tightening cycle in March 2022. SYF materially outperformed the Financials ETF (XLF), Regional Bank ETF (KRE) and Capital One (COF). The table below cuts across more short term and longer term time horizons and we expand the universe of comps to include the broader equity benchmarks as well as dropping in American Express and Ally. We line them up in descending order of total returns for the trailing 1-year period.

For the most recent activity, the news out of 1Q26 and the related guidance was favorable. With 1Q216 earnings, SYF announced a dividend increase of 13% and a major upsizing of its stock repurchase program to $6.5 bn.

Our interest in SYF is mostly about its role as a bellwether for credit card trends in the “normal people” crowd and not the “black card” types. The spending in areas such as the Home & Auto platform and the Health & Wellness market reflect some of the more challenging and sometimes unpredictable spending buckets in the typical household experience. The market is facing the headwinds of rising costs. We break out those platform and sector trends further below.

Given the “all-time low” headline around consumer sentiment, low employment growth, AI and services fears hitting various stocks and flowing into layoffs (Meta and Microsoft), and the recent Iran War fallout, the next two quarters will be a test in asset quality and delinquency trends. For now, the asset metrics mix is holding in quite well. Iran damage, tariff cost mitigation actions (i.e., layoffs) and AI capex causing payroll expense offsets roll up into a complex set of moving parts for the consumer in 2026.

The above table updates the chart we introduced in the Oct 2025 report (see Synchrony: Credit Card Bellwether 10-30-25). We see steady trends overall across charge-off metrics, allowance adequacy, and 30-day and 90-day delinquencies. The 1Q26 period saw charge-offs as a % average loan receivables improve more notably from 1Q25. Delinquency metrics were essentially flat YoY. Allowance coverage improved.

The above table highlights income statement line items and some key headline operating metrics such as purchase volume and average active accounts. SYF has shown discipline in its growth and is not chasing accounts at the expense of prudent risk management. The average active account numbers in 2025-2026 are below 2023-2024 with purchasing volume steady after a 2023 peak.

Net interest margins are an eye-opener at 15.5% with net charge-offs at a low 2% handle. The very brief threat earlier in the year by Trump to propose a10% cap on interest rates went away quickly. There were questions around whether it could even be done legally without legislation. Someone also more likely than not explained to Trump that such a move would damage the consumer finance sector, the banks, and in turn set off a wave of credit contraction that would crush the Personal Consumption Expenditure line (“PCE”) that contributes around 68% of GDP. That 10% cap threat briefly whipsawed some financial equities earlier in the year including SYF and COF (see Policy Mud on the Wall: Consumer Debt, Residential Mortgages 1-15-26).

Another key factor for the consumer finance companies and deposit heavy funders is the direction of FOMC policy and what it all means for funding costs and interest margins. The potential for easing has become more uncertain with the Iran War and how that could flow into Fed actions. The multiplier effects of inflation and energy cost fallout could also flow into consumer credit quality as well as spending appetites.

Other contingent threats ahead include AI multiplier effects into payrolls and distressed drawdown risks on credit cards. The 2026 consumer credit quality challenge is not straightforward. The good news for SYF security holders and lenders is a good track record across some wild macro backdrops even if just since 2020.

The above table breaks out the trends for the 5 sales platforms since 2019. The scale in each bucket is reflected in the purchase volume and relative receivables balance. A quick scan of the purchase volume and receivables columns comparing 2019 to 2025 tells the story.

The expansion of the partners and range of purchasing channels continues across everything from Health & Wellness (including dental groups and veterinarians) to the usual retail partner programs (Diversified & Value), and online marketplaces (Digital). Home & Auto is tied into demographics in a “driving country” and the rising cost of services and parts and merchandise.

As detailed on the 1Q26 earnings call, the expanded base of partners leaves SYF well positioned for growth in 2026:

We continue to expect accelerated growth in purchase volume and average active accounts without any further broad-based credit refinements as we move through the year. The outcome should more than offset the impact of elevated payment rates to drive mid-single-digit growth in ending loan receivables by year-end. The rate of receivables growth should follow seasonality and accelerate as we move into the back half of the year. This will be driven by growth in our core portfolio as well as a combination of both recently launched and soon-to-be launched programs, including Walmart OnePay, Bob’s Discount Furniture, RH and approximately $725 million of those commercial co-brand loan receivables, which was added in early April.

The new partners list keeps growing as SYF targets more retail product segments in each category across goods and services.

A quick balance sheet update…

Below we update the borrowing and leverage trend line. We wrote the commentary given SYF’s role as a bellwether for consumer asset quality, but the solid balance sheet, capital ratios and financial flexibility excite shareholders given the very favorable excess cash flow and capital ratios that allow SYF to rewards shareholders via dividends and buybacks.

The above table updates the routine quarterly disclosure on SYF capitalization metrics. SYF is very well positioned.

The above table drives home how cash generation has made life pleasant for shareholders as detailed earlier in the relative stock performance charts.

The above table breaks out the balance sheet line items with the most notable trends from 2019 being a larger earning asset base funded by a higher mix of deposits and a lower mix of total debt.

The above table details the mix of borrowings across the capital structure for the holding company and the bank level debt borrowing outside the much-enlarged deposit base detailed in the prior chart.

Synchrony gives some confidence to the market on credit quality with a lot of action to play out ahead with the payroll actions by large employers and small businesses wrestling with tariffs, the Iran War, and AI ramifications.

Industrial Production March 2026: Mixed Picture, Big Questions Ahead 4-16-26

Existing Home Sales March 2026: New Beginnings or New Ends? 4-15-26

Producer Price Index March 2026: Heater or Curve Ball? 4-14-26

CPI March 2026: The CPI Cycle Could Prove Maddening 4-12-26

4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26

Market Commentary: Asset Returns 4-19-26

Glenn Reynolds, CFA — Mon, 20 Apr 2026 01:01:02 GMT

In the cross-eyed eye of the beholder.

Geopolitical events and policy reaction fall into the “erratic is as erratic does” state of affairs. The Strait of Hormuz opened and closed again within 24 hours with a blockade of Iran continuing and the US military trying out its shoot-and-board operations on Sunday.
The military action against Iranian ports (a blockade is an act of war under international law) is a policy that is not yet showing enough room to maneuver if Trump’s goal is to declare victory and escape. The Houthis are on standby and the very strong desire to avoid boots-on-ground escalation is obvious even if a self-inflicted wound can never be ruled out with Team Trump.
Like many, we are not sure how much weight to give to logic on how this all plays out. Iran cannot be broken by threats and the willingness of religious zealots and the “bomb vest crowd” don’t fit into easy profiling strategies. Misjudging an opponent is easy to do when you think only about your advantages. The famous history book “The March of Folly” has a subtitle of “From Troy to Vietnam,” and that just sounds bad. The hope is that Team Trump will avoid writing its own chapter. There are plenty of small and large parallels in that book to Team Trump. That is a story for another day. The broad military purges did not help.
Despite the bad ending to the week after the close, the UST curve rallied and equities soared as we detail in the charts below. Some oil industry watchers were highlighting the threat to oil supply remains, and the rally to $83 on WTI futures (almost $11 of that on Friday) is extremely optimistic. As the markets opened up Sunday evening, WTI oil futures are heading higher by almost $7 as we go to print and equities are moving lower. This will be a busy week for US-Iran back and forth.
The major financials weighed in this past week, and the numbers are solid and offer some support that volatility in the headline themes (“war is hell”) and the flow-through risks of oil prices into consumer health, cyclical trends and stagflation risk will need time to play out – but from a strong starting position. Higher inflation and a very weak 4Q25 GDP print (the advance 1Q26 GDP numbers are released April 30) are not inspiring but earnings season will be favorable. Despite all the private credit risk unknowns on quality of marks (obviously low quality), broader credit contraction is not a front burner risk.
Consumer credit bellwethers Capital One (COF) and Synchrony Financials (SYF) turned in strong stock performances on the week and for the trailing 1-month period, so that offers some comfort for markets along with the major bank color. More regionals and small banks earnings reports are ahead.

We look across asset class returns below, but we thought it worth highlighting the 1-week UST deltas above (Friday close). The above details the UST moves this past week with the deluge of news flow and wave of big bank earnings. Inflation fears eased and FOMC odds shifted.

We will see this week how oil reacts and flows into curve risk as negotiations resume and misinformation flows freely. The UST rally from 2Y to 10Y that we see above helped all the bond ETFs post positive returns this week. We see another FOMC meeting later this month, and that seems far away given the Iran backdrop.

Above we update the UST deltas for the YTD period in what was an adverse move.

“I did it my way” could apply to a lot of bad actors across history…

The equity markets and bond asset class had tailwinds on the week as we detail below, but the challenge is pricing the risk on a forward basis despite some very unpredictable moving parts. Even as markets should be pricing for the next round of geopolitical news, the range of potential outcomes is just too wide.

The logic of the good scenarios are just as easy to frame as massive downside and escalation (Houthis weigh in, rockets and drones flying all over the Gulf, Iraq militia joins the party, too many US boots-on-ground, Israel gets busy again, etc.).

That set of military and oil risks would drive FOMC policy more than a new Fed chair with an axe to grind. Meanwhile, Trump is threatening to fire Powell while replaying Sinatra songs in a truth social post (“I did it my way”). That Sinatra classic was recorded in 1968 (the year when Trump dodged the draft and met the Vietnam challenge “his way”). Trump should have gone with “Luck be a lady tonight.” After all, gambling is more relevant to the decision (Guys and Dolls).

The above table updates the rolling time horizon returns for fixed income and equities. A couple of good weeks in April made all the difference with the 1-month and 3-month returns all in positive range for equities and debt. That was especially the case in equities after posting a very impressive rally following a grim March (see Market Commentary: Asset Returns 3-30-26). The above table has now flipped back from all negatives in debt and equities to end March in 1-month and 3-months into the current profile of all positive.

The rolling return visual

The symmetry of returns clearly shifted into April as peace threatened to break out. For now, that peace is highly uncertain in the Gulf with the policy strategy more a matter of what markets might speculate will unfold rather than what is a more rational outcome across irrational parties.

The Iranian game plan is intrinsically overlapping with religion while the US toggles between a focus purely on national security (nukes that had been billed as “obliterated” not long ago) and an uncertain mix of religion and brinkmanship from Hegseth, who spends far too much time attacking the media in his updates and openly brings his evangelical extremism into briefings.

Add Team Trump’s public dispute with the Pope, and it safe to say the White House and Defense leaders have not delivered FDR-style pep talks.

Hegseth really went off the rails in an Iran update this week, calling the media “Pharisees” and quoting Mark 3:1-6, which implies Trump is Jesus. That did not get much follow-up coverage from the mainstream media who are semi-cowed these days. Hegseth’s routine was flat out bizarre.

The following took too much of Hegseth’s briefing:

From the Book of Mark 3:1-6 (KJV)
1 And he entered again into the synagogue; and there was a man there which had a withered hand.
2 And they watched him, whether he would heal him on the sabbath day; that they might accuse him.
3 And he saith unto the man which had the withered hand, Stand forth.
4 And he saith unto them, Is it lawful to do good on the sabbath days, or to do evil? to save life, or to kill? But they held their peace.
5 And when he had looked round about on them with anger, being grieved for the hardness of their hearts, he saith unto the man, Stretch forth thine hand. And he stretched it out: and his hand was restored whole as the other.
6 And the Pharisees went forth, and straightway took counsel with the Herodians against him, how they might destroy him.

A former Fox news personality lecturing the media on honesty and facts is not without its intrinsic humor, but the religious extremism closes the gap on common style points with the Iranians on the other side.

Attacking the media at length and then citing the above passage was just flat out strange. The use of the Mark language by Hegseth basically says, “Trump is Jesus, the media are evil pharisees, and they are plotting to destroy him.” It is hard to read any other way even if they deny the intent.

I had 4 priests and a nun in the family, so no disrespect to the religious among us. Some of my great uncles were redemptorist missionaries during their time (primarily serving Latin America) and served when fundamentalist evangelicals raged against Irish and Italian Catholics and immigrants. Anti-Catholicism, racism, and xenophobia were rampant, and they griped about the Pope in those days also (Papists, etc.). We have come so far.

The impulse to politicize the military while invoking prayer and scripture in such extremist fashion further inflames the sense of domestic political risk linked to the authoritarian ambitions of the leadership team (see The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26).

The Magnificent 7 heavy ETFs…

The above table updates the returns for the tech bellwethers and various benchmarks and ETFs. The tech rebound was impressive to say the least with the volatile Oracle (ORCL) rebounding sharply but still negative over 3 months and 6 months. Taiwan Semi (TSM) was the only name slightly in the red, but TSM has been a winner YTD in the top quartile group.

We see 6 of the Mag 7 ahead of the S&P 500 and 5 of the Mag 7 ahead of the NASDAQ. The Software ETF (IGV) made a major comeback this past week but is still negative for 1 month, 3 months, 6 months and 1 year. The Semiconductor ETF (SOXX) has been the big winner vs. the IGV across 1-month and back across the other time horizons.

The commentary below is mostly a cut-and-paste from an earlier post on LinkedIn on Saturday with some additional input:

We update the 1-week total returns on the 32 benchmarks and ETFs we track. The scale and breadth of the rally was impressive as the market closed confident that the Strait of Hormuz was open and that the two sides (Trump vs. Iran) could climb down from the brink with stagflation threats easing.
After the market closed, the headlines turned sour. The Strait is no longer open as we go to print after Iran had closed it again (and fired on a tanker). Trump was active on the screen Saturday with extreme optimism, but that is a day ending in Y. He was making heavy threats again by Sunday and a vessel was fired upon and boarded by the US military.

The market needs to handicap outcomes facing the recurring problem that the representations of Trump and Iran are seldom on the same “fact” page – let alone how to interpret the “facts.” On one side, we have Trump, who changes his set of facts and opinions when the wind blows. It does not help that he seems to have a few loose bolts of late. On the other side, we have religious fanatics that hate America.

One person can see Trump as a game theory guru and brilliant negotiator while another person sees a serial liar whose faculties are on a shaky fault line. The world economy is in the grip of these negotiations. China is holding back on the situation so far with Iran a massive oil supplier. The potential boarding of a Chinese bound vessel could escalate tensions.

The idea that Iran would agree to all Trump’s demands was strange enough. A logical sequence would be that the Houthis would perk up and Iran’s response to Trump would be “You want ‘the dust’? Come and take it.” It all gets very subjective quickly.

The moving parts present a wide range of potential outcomes. That can make for herd investing and momentum chasing by investors with a range of time horizons that start “by lunchtime” and extend from there. More than a few are hanging on insider leaks and the disinformation circuit.

The 27-5 score above reflected the discounting of major progress peaking with the “Strait is open” news. The energy ETFs (XOP, XLE, AMLP) are in the bottom 5 joined by Utilities (XLU) and the chemicals-heavy Materials ETF (XLB).

The Tech ETF (XLK), Equal Weight NASDAQ 100 ETF (QQEW), and NASDAQ benchmarks were in the Top 5. We look at tech bellwethers in a separate weekly “Tech Check.”

The Transports ETF (XTN) ranked #1 as airlines soared on Iran expectations and related fuel optimism that might bring moderation in upward fare pressures that to this point have not put a dent in volume guidance – yet. The AAL M&A speculation helped during the week, but AAL rejected that overture by the weekend. Freight and logistics providers rallied impressively on a range of factors from Iran and diesel to an easing of AI jitters threatening business models (e.g. freight brokerage). BDCs (BIZD) posted their best week in a while and made the top quartile. The private credit drama will stay hot and heavy with 1Q26 earnings season.

The commentary below is mostly a cut-and-paste from an earlier post on LinkedIn on Saturday with some additional input:

The weekly Tech Check price return chart shows a wild rally for a wide range of the tech subsectors after some recent punishment of SaaS-centric services and software asset lines. The Iran chaos has been a problem for cyclical fears and valuation metrics setbacks that combined with anxiety around tech sector business model threats from AI.

The past week rode the Iran relief and some calming around the tech industry post-AI scenarios for some SaaS services names to post a 30-2 positive to negative score. Only Applied Materials (AMAT) and Taiwan Semi (TSM) were in the red but with very slightly negative returns. It is worth noting that AMAT and TSM are in the top quartile for returns in this mix on a YTD basis.

For the suffering holders of recent underperforming tech stocks, we see some good news with the SaaS-centric names in the top quartile and upper end of the second quartile. We see Zillow (Z) and ServiceNow (NOW) in the top 3 with the Software ETF (IGV) and Adobe (ADBE) also in the top tier. Just across the line we see Intuit (INTU), Salesforce (CRM), and FactSet (FDS) in the upper end of the second quartile. Those equities – INTU, NOW, Z, CRM, and ADBE – are the bottom 5 on a YTD basis with negative returns from -30% handles to -40% handles.

The winners on the week include Oracle (ORCL) at #1 (+26.8%) after a rough stretch that still shows ORCL at -10% YTD. The Mag 7 were spread across the quartiles with TSLA and MSFT in the top tier for this week but still being in negative range YTD with TSLA at -10.9% and MSFT at -12.5%. The bottom tier included Apple (AAPL) and Amazon (AMZN). Across the Mag 7+3, ORCL was leading the pack at #1 with Taiwan Semi at #31.

For the 32 benchmarks, ETFs, and bellwethers above, the median price return for the week was over +8.3%. Meanwhile, the median price return for this same mix on a YTD basis is only around +4.2% with a positive vs. negative score of 18-14.

The Hi-Lo return differential between #1 Intel and #32 Intuit is a lofty 126 price return points. If we throw out the Hi-Lo names, we see Micron at #2 vs. ServiceNow at #31 with a return differential of over 96 points YTD. We look at the broader time horizon mix in a separate asset return piece.

The 1-month returns in the 32 benchmarks and ETFs show 3 of the 4 major benchmarks in the top quartile with the small cap Russell 2000 at #4 just ahead of the NASDAQ at #5 and Midcaps at #6 with the S&P 500 in the upper end of the second quartile.

We see Transport ETF (XTN) getting a big boost this past week (see the 1-week numbers) as relief on jet fuel and fare pressure supported a rally for airlines. Meanwhile, less cyclical fears and relief on diesel help boost freight and logistic operators. The “AI panic” on business models has also eased a bit for data-centric freight brokerage operators.

The Tech ETF (XLK) at #3 is just behind Regional Banks (KRE) at #2. The Financials ETF (XLF) is just across the line the top of the 2^nd quartile.

Overall, that is a cyclically diverse mix in the top quartile. We even see the BDC ETF (BIZD) mounting a small comeback for this period with Homebuilders (XHB) climbing back after sitting in last place for 3 months.

In terms of bond ETFs, we see 6 of 7 in positive range. The long duration UST ETF (TLT) fell just below zero at -0.04%.

The 1-month “Tech Check” shows the divergence between semiconductors and software and the pain inflicted on the SaaS-centric services operators. The bottom 3 names include ServiceNow (NOW), Intuit (INTU), and Salesforce (CRM). Adobe (ADBE) has been another software name taking a beating along with Palantir (PLTR) as one of the bigger holdings in recent periods in the IGV ETF.

The gap between the Semiconductor ETF (SOXX) at +22.2% in the top quartile and the Software ETF (IGV) at -0.5% in the bottom quartile sizes up the recent trends. Some of the SaaS names have been swinging around in dramatic fashion such as Zillow (Z) and FactSet (FDS). Those two names were in positive range for the month but still deeply negative YTD as we cover in the next chart.

The YTD return profile for the Tech Check list of 32 is grim in broader market context at 18-14. If we exclude the 4 broad market benchmarks (S&P 500, NASDAQ, Midcap 400, Russell 2000) the score is14-14 in a market where the NASDAQ and S&P 500 have hit records.

The depth of the negative returns on the right side of the chart makes a statement with the bottom quartile running from -19.5% for the Software ETF (IGV) down to -40.6% for Intuit (INTU) in last place. The YTD price returns post a Hi-Lo range of 126 points. The AI panic around the sustainability of SaaS business models has been addressed constantly in recent weeks and the numbers are ugly YTD.

We see some old school legacy names on top with Intel (INTC) at #1 at over 85% followed by Micron (MU) at +59.4%, capex sensitive Applied Materials (AMAT) at +54.5%, and the Semiconductor ETF (SOXX) at #4 with 38.0%. As noted earlier, the return on SOXX blows away the Software ETF (IGV).

The score for 3 months for the 32 benchmarks and ETFs weighed in at 26-6. We see 3 energy ETFs in the top quartile with E&P (XOP), diversified Energy (XLE), and Midstream (AMLP). The Utilities ETF (XLU) is also in the top 5 with the chemicals-heavy and cyclically exposed Materials ETF (XLB). The Tech ETF (XLK) is the only tech-centric asset line in the top quartile, and we also see EM Equities (VWO) with the interest rate sensitive Real Estate ETF (XLRE).

As we discussed in the weekly and 1-month charts, we see Transports (XTN) rallying back impressively on what seemed to be a reasonable solution to the Strait of Hormuz problem before it immediately blew up.

Trump overplayed his hand by not easing the Iran blockade if his goal was to declare victory and avoid committing thousands of troops. If Iran was the GOP senate, he would be fine since they would all fold. Trump’s ignorance of Iran and the culture now put him in a very challenging situation that makes it harder for his ego risk. This in turn provides worse risk symmetry in the next steps.

The 6 negative returns in the mix are a diverse lot with Homebuilders (XHB) about more than mortgage rates as the outlook for housing has dimmed with consumer confidence tanking and fears of payroll setbacks and weaker real wage growth. The higher mortgage rates initially seen after Iran were joined by other headwinds for housing.

The trailing 1-year mix of returns is still riding a good 2025 with a mixed 2026 by sector. The 31-1 score just shows the BDC ETF (BIZD) at a modest negative. All the bond ETFs are positive with the 2025 UST shifts a bigger factor (Total Return Quilt Across Asset Classes 2008-2025 1-2-26). As noted earlier in the piece, the yield curve story in 2026 has been a tough one and remains highly uncertain around inflation and oil.

Existing Home Sales March 2026: New Beginnings or New Ends? 4-15-26

Producer Price Index March 2026: Heater or Curve Ball? 4-14-26

Market Commentary: Asset Returns 4-12-26

CPI March 2026: The CPI Cycle Could Prove Maddening 4-12-26

4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26

Industrial Production March 2026: Mixed Picture, Big Questions Ahead

Glenn Reynolds, CFA — Thu, 16 Apr 2026 18:57:43 GMT

Automotive chain sputtering a bit with EV upheaval and tariffs

The modest decline in Industrial Production saw a -0.5% drop, but 1Q26 grew at +2.4% ahead of the March fade. Capacity Utilization ticked slightly lower for March in Manufacturing, Durables, and Nondurables.
Manufacturing capacity utilization for 1Q26 ticked up from 4Q25 but was below 3Q25 as the industrial sector waffles. Manufacturing is struggling to show a clear trend in the midst of tariff pressures and the Iran War fallout. We have seen inflation in goods and some pricing power, so we know the demand side has not taken too much pain yet. Earnings expectations broadly for 1Q26 are also solid.
The market saw more notable sequential MoM weakness for Capacity Utilization in Mining and Utilities. The YoY numbers for Utilities come with the asterisk of +4.0% capacity growth while Mining capacity shrunk by -0.5%.
With respect to Industrial Production trends across Manufacturing “Market Groups,” we see Consumer Durables down by -3.4% YoY for March with Automotive products at -5.6% YoY. Business equipment showed strength at +4.6% YoY while Defense and Space Equipment posted +3.2%
Across “Industry Groups” (vs. “Market Groups”), “Aerospace and miscellaneous transportation equipment” generated a +6.2% increase with “Computer and electronics, electrical equipment, appliances, components” at +3.6%.

The above chart updates the running capacity utilization for manufacturing since 1967. The current 75.3% is well below the long-term median of 78.5% and below the post-COVID median of 76.3%. That is one of many metrics that take the label of “greatest economy in history” off the table.

We see the material swings across expansion booms and busts. That includes the aftermath of some highly damaging oil spikes that brought on cyclical weakness and later saw capacity utilization plunge. There were a lot more structural changes underway in those cycles than just oil and gas price pressures. That was notably the case in the 1980-1982 double dip as well as the recession of late 1973 to early 1975 when the Arab Oil Embargo set off chain reactions that turned the post-1973 period into an ebb-and-flow of macro nightmares for inflation and the consumer.

The May 1975 low of 71.6% was the first bout of severe stagflation that unfolded after the Arab Oil Embargo. The 1980-1982 double dip recession came after the 1979 inflation spike took off with the Iranian oil crisis.

Capacity utilization saw a 68.7% low in Dec 1982 as the economy was just coming off the recession trough. The first Gulf War came after the August 1990 invasion of Kuwait with capacity utilization hitting a low in March 1991 at 77.2%, which is comfortably above where capacity utilization stands now in 2026.

The age of tech and credit excess in the late 1990s brought some new swoons with 71.8% in Nov 2001 after the TMT meltdown and HY default wave rolled in. The Utilities and Power sector and Telecom capex all took a beating in that time frame.

Then came the post-credit crisis low of 63.4% at the recession trough in June 2009. Mortgages and derivative excess caused a very real systemic panic and deep risk aversion from the Lehman Sept 2008 period and well into 2009. That period was famous for the bankruptcy and bailout of GM and Chrysler. The credit contraction was very real, and the recovery in payrolls was slow to unfold with the consumer hammered by housing sector pain.

COVID edged out the June 2009 utilization bottom with a record low of 62.6 in April 2020 and a 2-month recession. That pandemic period saw ZIRP, supply-demand imbalances and later the Russian invasion of Ukraine and ensuing oil spike that set off inflation and a tightening cycle that still did not trigger a 2022 recession.

As we detail below in the recession histories, the idea of what is low or high for capacity utilization in the context of corporate sector profitability is not as direct as one might think. Breakeven volumes, cost structures and pricing power are key drivers of profits. The tariff excess as a core Trump policy only makes that unit cost analysis more complicated as we head into a new round of energy related cost pressures in 2026. Material costs, operating costs for companies, and consumer discretionary household cash flow headwinds make for a tricky set of moving parts shaped by erratic geopolitical decisions.

The AI fallout and related fears is also a new variable in the mix that cuts across both the services and goods sectors. What AI will mean for productivity improvement vs. payroll fallout will be an ongoing test of theories. Even if AI proves true to the valuation promises and brings a “revolution” of the economy, many will also pay the price. We have been getting a taste in the recent SaaS services panic. Those markets consume a lot of goods.

The above table breaks out the high-level groupings with total industry and total manufacturing declining. We include a “delta column” on the right. Mining and Utilities were down sharply for the month. We see Durables and Nondurables as the main events to track, and both are down. The Durables sector is especially important with all of the supplier-to-OEM multiplier effects. That also is the sector more meaningfully tagged by the Trump tariff policies.

Looking back from 2025 into early 2026, we see Manufacturing in a relatively narrow range and the same for Durables. Tariffs have not moved the production needle much at all so far, but that does not tell the profitability story on the tariff cost impact. Most people (outside the White House) know that buyers/importers write the check for the tariff, so that implies a higher breakeven volume or some offsetting action on other costs or pricing. Those impacts will only play out over time across working capital cycles. Pricing decisions were more likely to come at a lag given the White House pressures, so there is a lot more to play out in 2026 earnings seasons and company color.

The above table breaks out the details for the top 5 Durables lines and the two largest Nondurables lines. We include the capacity utilization deltas in the column on the right. We see a mixed picture across these major industries with only Motor Vehicles and Parts making a notable move lower. We see 2 of 5 Durables lines tick lower with Machinery slightly lower and Motor Vehicles and Parts taking a bigger hit. The two major Nondurables lines also declined with Chemicals and Food & Beverage.

The consumer story and the corporate sector capex optimism will be important to watch in coming weeks and months as guidance gets updated and the Iran fallout starts to flow into strategies from global players to small and midsized enterprises.

The above table updates the capacity utilization history for expansions and recessions. As we routinely discuss, the ability of companies to generate solid profits at lower capacity utilization in today’s markets relative to past cycles is tied to both automation and the evolution of low-cost global supplier chains.

Low-cost supplier chains are getting undermined by tariffs, so the demands to improve efficiency as tariff mitigation measures need to be monitored. We are also seeing some important low-cost suppliers in the Gulf, and that area is essentially in a multi-tiered blockade. The “AI story” and what it all means for productivity and headcount will be a big part of that theme.

The weakness in the dollar is not going to help supplier chain costs from offshore, and a weaker dollar has the effect of inflating the tariff cost in dollar terms depending on the import nation.

The above chart details economic expansion and recession averages and lines them up by height as a frame of reference. We see the current level on the left at 75.3%. The fact that the current capacity utilization is below numerous recession averages posted on the right side of the chart also scoffs at the recurring “Golden Age” and “hottest country” rhetoric.

In the context of the tariff priorities and reshoring ambitions, the slack capacity implied by the chart underscores the analysis is a lot more complicated than just “build more plants” and “keep tariffs high” to force reshoring. That is a story told on an industry-by-industry basis, and the weakness seen in auto sector production and utilization numbers is a sea level example of where an industry has arguably been hit the hardest by tariffs.

The multiplier effects are important, but the relocation of supplier chains and OEM relocation is by definition very slow to unfold given intrinsic lag times, tooling equipment and contracts in place. There is also the fact that the cost of relocation has also risen with all the tariff effects for materials, components, and qualified labor. Autos are the main relocation stories, but that is generally going to be tied to existing infrastructure and not a strategy of all-new greenfield plants. In the end, many companies can just wait for Trump to “move on.”

Producer Price Index March 2026: Heater or Curve Ball? 4-14-26

Market Commentary: Asset Returns 4-12-26

CPI March 2026: The CPI Cycle Could Prove Maddening 4-12-26

4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26

Existing Home Sales March 2026: New Beginnings or New Ends?

Glenn Reynolds, CFA — Wed, 15 Apr 2026 17:25:51 GMT

Existing Home Sales volumes declined by -3.6% MoM and by -1.0% YoY as the bad news for sales volumes continues. The absolute volume level is more like what we saw in the fall of 2023 when mortgage rates peaked in the high 7% range. Oct 2023 saw the Freddie Mac 30Y benchmark hit a cyclical high of 7.8% with a range of other mortgage surveys and 30Y product offerings around 8%. Freddie is currently 6.37%. The median home price increases YoY have not helped the monthly payment math. The March median existing home sales price edged higher YoY to $408.8K
The mix of household variables in this economy have taken a turn for the worse with weak payroll performance and rising inflation that further eats into real wage growth. Consumer sentiment plunged this past month to an all-time low.
While economists can debate recurring inflation risk, there is no question that “purchasing power” for a given “household basket” has taken a beating and discretionary household cash flow feels the price pressure including at the gas pump and in goods pricing broadly with tariffs (see Producer Price Index March 2026: Heater or Curve Ball? 4-14-26, CPI March 2026: The CPI Cycle Could Prove Maddening 4-12-26).

For this month, we moved the historical monthly chart to the top of the commentary as a reminder that the March numbers look more like the late 2023 period when mortgages had peaked (see Existing Home Sales Dec 2023: Rerun of Multi-Decade Low 1-19-24). The 30Y mortgage rates have moved within a 200 bps range since the Oct 2023 peak when Freddie Mac 30Y hit 7.8% and many mortgage offerings were near 8%.

The above chart updates the monthly existing home sales volume across the timeline from Jan 2023 through March 2026. In the interest of visual quality, we deleted the 2022 months when the market was posting 6 million and 5 million handle sales volumes in the first half of that year.

The March 2026 existing home sales number of 3.98 million is an obviously grim number and can be framed against the 3.85 million during the peak mortgage rates in Oct 2023 (see UST Deltas: Elevation Realities 3-29-26). The Freddie Mac 30Y is set on Thursday and posted 6.37% last week. We get an update tomorrow. The Mortgage News Daily Survey 30Y as of the latest close was 6.31%.

The above chart shows the sales volume delta by price tier for March 2026, and we see 4 of the 6 price tiers posting positive growth with only the two lowest price tiers posting declines. That was the same mix of deltas as last week. Note: We use “not seasonally adjusted data” for this chart so it clashes with the declines of overall sales discussed elsewhere in this commentary that use SAAR data (seasonally adjusted annual rate)

The volatility and disruption of the Iran War is undermining the rally we had seen in the mortgage markets with an uptick again in the post-Iran period. After a brief move below the 6.0% line into 5% handle range, the setbacks along the UST curve sent mortgages to 6.31% for the Mortgage News Daily survey as of the latest close. The range has been a tight one, but the recent pop above 6.4% after a brief drop below 6.0% reminds us that high oil prices are something the UST curve and the FOMC do not like. That is true of the bond market broadly. The current rates are still a relief from the 6.6% handles of March 2025 a year ago.

For existing home sales, the monthly payment math is still not working well for those looking to cash out, move up, or simply relocate. Expectations for a bull flattener in the UST market that would translate into low to mid 5% mortgage rates have been thwarted so far as we cover in other commentaries.

The three Fed cuts in the fall of 2025 (-75 bps) followed 3 actions (50, 25, 25) in the fall of 2024, in turn translated into UST curve steepening along the way. Back in the fall of 2024, the UST rally along the curve saw mortgage rates right around today’s level after easing. At that time, the 10Y UST dropped down to around 3.6% (current 4.27%) and mortgages were around 6.0% (current 6.3%). That Sept 2024 rally soon gave way to a steepening and tough road for mortgages into 2025 and now 2026.

Those expecting the 10Y UST to follow fed funds lower have been relatively disappointed since the easing cycle got underway, so the latest debates on how FOMC actions will play out under Warsh do not come with a sense of automatic bull flattening and lower mortgage rates.

Trump was also back on the rage fest today threatening to fire Powell and not supportive of dropping Pirro’s investigation (which Trump demanded). The theory on who could get dropped into a senior Fed role besides Warsh has included Miran, who never met a cut (or multiple cuts) he did not like. The effects of Iran as the dominant variable and the politics of rate bias have left the FedWatch handicapping all over the place in recent weeks as we have covered along the way.

The Iran oil spike and all the knock-on effects for CPI and PCE inflation that will come with energy pressure could make for a lot of frustration in the White House. We have seen the odds of cuts evaporate and hikes rise before falling back. As we go to print, if we look at the rate odds for the Oct 2026 meeting we see 80.3% chance of no change, 17.2% of 1 cut, and 1.3% odds of 1 hike. Looking back to 1 month ago, those October meeting odds of no action stood at 50.1% and the odds of 1 cut at 37.5%.

The above chart shows the geographic mix of volumes and details on price mix by region. The South is the main event in single family volumes whether new or existing at almost 47%.

For the bar chart, we break out the mix for each region by price tier. For example, the South shows almost 51% of its existing home sales volume in the $250K to $500K range and almost 19% of its sales in the $100K to $250K bucket.

The high cost of homes in the West (notably California) is clear enough just by glancing at the bar chart with over 16% at prices over $1 million. The second highest in the $1 million club is the Northeast at over 9%.

We see a major concentration across the regions in the $250K to $500K although the $100K to $250K bracket for the Midwest stands at over 31%. The West shows a high share of 28.5% in the $500 to $750K bracket, which again underscores how expensive the West region price tags remain in national context.

The map explains what states are in each Census region. There is a very wide range of home price profiles in the West and Midwest states.

Inventory for total existing homes ticked slightly higher MoM (as revised) to 1.36 million units for +3.0% MoM and +2.3% higher YoY. Current inventory is well below longer term medians including 2.06 million for the post-1998 median. The median from Jan 2011 (homebuilding low) to current times is 1.67 million. In other words, existing home sales inventory remains extremely low even if the level is materially higher than the stunning low of 850K of Feb 2022 ahead of the end of ZIRP and start of the tightening cycle in March 2022.

The existing home inventory balance had shown a steady rise off the sub-1 million lows of 2022. Inventory had risen to the 1.3 million handle range in 2024 before dipping back down to a recent low of 1.14 million to close out 2024. We bounced off those numbers in 2025 to get back above 1.5 million handles before the recent move lower to 1.2 and 1.3 million handles.

The above two-sided chart updates the trend line in total existing home sales vs. new single family homes. We had been operating without new home sales data from the Census Bureau since the shutdown. We now have January 2025 numbers for new and March for existing. Feb 2026 new home sales data is expected to be released on April 23.

The above chart breaks out the timeline for existing single family alone of 3.63 million vs. total existing home sales of 3.98 million. The 3.98 million for total is well below the long-term median (from Jan 1999) of 5.22 million. The total of 3.63 million for single family is well below the long-term median of 4.63 million.

Existing single family was -3.5% sequentially and -0.3% YoY (SAAR). The lower line is ex-condo/ex-coops. We saw 350K in condo and coop sales in March 2026, down from 380K YoY and down from 370K MoM.

The above chart updates the median price for existing single-family homes at $412.4K after June 2025 hit a record $438.6K. The median price in March 2026 is dramatically above the $308K level back in Jan 2021 and $277K in Dec 2019 when mortgage rates were in a different zip code and closer to 3.7% for 30Y Freddie Mac.

The above chart shows another angle on the sales mix across the price tiers. We just lift the numbers off the monthly handout for single family homes released by the NAR each month. The NAR totals add up to over 100% but the message is clear enough. Higher price homes and wealthier buyers have had a better time.

The $250K to $750K range as two tiers add up to almost 2/3 of the market with the $100K to $250K showing a big share in some of the Midwest states as detailed in an earlier chart. We also looked at the growth trends for each tier earlier. Lower price tiers declined while the top 4 tiers rose. The lower price tiers are more on the cusp of where affordability and mortgage eligibility could be strained at 6% handle mortgage rates.

Market Commentary: Asset Returns 4-12-26

CPI March 2026: The CPI Cycle Could Prove Maddening 4-12-26

4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Industrial Production Feb 2026: Capacity Utilization 3-16-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26

Producer Price Index March 2026: Heater or Curve Ball?

Glenn Reynolds, CFA — Tue, 14 Apr 2026 19:24:45 GMT

Wild Thing, I think you move me, but I wanna know for sure!

The PPI index showed material increases with Goods and Energy driving the move but with Services muted. The YoY move of +4.0% for headline final demand was up notably from 3.4% in Feb 2026. We see “PPI final demand goods” at +4.9% in March, up from +2.5% YoY in Feb, so there is plenty going on under the final demand stats.
Calling anything a leading indicator these days is tricky with so much event risk and behavioral uncertainty, but the PPI reflects negative trends on the energy and goods side and measure increases in services.
The “Final demand energy” line hit 11.2% in March, up from -0.7% in Feb as a sequential MoM move in March of +8.5% rang the bell. There are numerous energy lines detailed in the report, and the pressure from the Iran War is no surprise, Energy related effects without question an unpredictable broad bucket on the question of “How bad can it get and for how long?”
The headline PPI MoM level of +0.5% drops to +0.1% ex-Food and Energy. That cannot ignore the reality of the all-time low of consumer sentiment that is very much influenced by food and energy.

The PPI Final Demand time series is broken out above. The trend shows the sustained rise continuing this month as goods and energy line items keeps the pressure on. We see the low of +0.3% in mid-2023 after the supply and demand crash of April 2020 at -1.5%.

Negative PPI at the COVID peak later saw a demand rebound drive a massive PPI response on the supply-demand imbalances teamed up with extensive relief and stimulus programs with ZIRP added on top of that. The impact of the Russian invasion of Ukraine driving energy higher from the COVID crash seldom gets mentioned by Team Trump (too busy blaming Trump and Powell and they do not want to upset Putin).

That +11.2% in March 2022 came with the start of the tightening cycle as PPI went on its journey to 3.3% by the end of Dec 2024. The current 4.0% in March 2026 is above the 3.3% PPI posted in Dec 2024 (Biden’s last full month in office).

The above table includes a subset of the recent trends on the main PPI lines we choose to focus on for signals. There is certainly no shortage of lines in the PPI release (numerous pages and many lines across Table 1 and Table 2) under various final demand and intermediate goods and services categories for YoY and MoM moves. We covered some of the main groups in the chart, but a scan of the columns in the release looking for outliers is always a good drill. We include some categories that carry lower weightings that are of interest in terms of what they reflect.

PPI data always has a lot to review across the “cost ingredients” as leading indicators to how goods producers might need to consider pricing actions or might experience margin compression. Print out table 1 and Table 2 and ponder the 12-month YoY columns. The very wide range is easy to see.

Energy, materials, and goods are showing the cost pressures…

Energy setbacks are no surprise with gasoline posting a 15.7% MoM and +14.0% YoY. Gasoline was posting deflation as recently as Dec and Jan. Diesel is +42% MoM and +51% YoY, so that is going to be flowing into freight and logistics costs including surcharges. On the intermediate side of the chart collection, we see jet fuel at +42.2% YoY and +30.7% MoM. The disruptions of flights and pressure on airline fares has generated more than its share of headlines.

Food costs were very muted this month, and we have a hard time seeing how that does not change on the combination of energy costs and the pressure on fertilizer that has been in the headlines. Among notable food lines was “Fresh and dry vegetables” at +49% YoY (but -10.7% MoM in March) and +20.2% YoY for coffee (-1.6% March). Beef and veal at +19.7% YoY was down to +2.2% MoM.

“Final demand for Nonferrous metals” was +36.7% YoY for a wide range of reasons as discussed in other commentaries along the way. Unprocessed nonferrous metal ores are +75% YoY. Primary nonferrous metals are +67% YoY.

We see the final demand goods line showing the impact of tariffs and other cost pressures with “final demand goods” at +4.9% YoY and a 29.1% weighting. The Feb to March move of +1.6% come after +1.0% MoM for Jan to Feb after being slightly negative in Dec and Jan. We also see the sustained pressure in intermediate demand for “processed goods” in Feb and March at 6.6% YoY.

Services have been kind…

The “final demand services” line at a 68.3% weighting posted 3.7% YoY. That was not as bad as the goods since and that services line comprises a much bigger slice of what is a services economy in the US. Services even ticked down to 0.0% in March vs. positive increases in earlier months and notably MoM in Dec and Jan. If we drop down into “services for intermediate demand” we see only +2.9% YoY with Transportation and Warehousing a notable pressure point with a number of lines in the 7% handle area.

In the end, the PPI was an unfavorable number with a lot of action ahead subject to Iran outcomes and Goods pricing decisions with tariffs still very much a reality.

CPI March 2026: The CPI Cycle Could Prove Maddening 4-12-26

4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Producer Price Index Feb 2026: Getting Warmer 3-18-26

Industrial Production Feb 2026: Capacity Utilization 3-16-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26

Market Commentary: Asset Returns 4-12-26

Glenn Reynolds, CFA — Sun, 12 Apr 2026 20:29:47 GMT

It is only a small naval blockade…

The world just got a lot crazier with the failure of the Islamabad negotiations as Trump threatened a naval blockade of all traffic. That might not last the day once someone explains to him that is a de facto declaration of economic war on China, who can retaliate on a small scale (strategic metals, etc.) or large scale (Taiwan). Absolute control over the Taiwan economy would make the US captive overnight in semiconductors and electronics (see US-Taiwan Trade: Risks Behind the Curtain 2-1-26).
The latest round of asset return updates includes bullish views on the US-Iran war ceasefire working out, in turn leading oil to plunge with the Strait of Hormuz settled. If that was the case, the probabilities of supplier chain disruptions would be easier to handicap. The weekend just changed all that with Islamabad failing and now Trump threatening the counterintuitive action of reducing supply disruptions by dramatically increasing supply disruption.
In the meantime, trade issues are back in the headline with Trump threatening fertilizer producers on price gouging after his actions already sent fertilizer supplies into Gulf-based dislocations. The upcoming USMCA review includes Canada as one of the largest suppliers of fertilizer.
Under “bad allies for a thousand, Alex,” the active campaigning actions of Trump and Vance in favor of Orban might have flowed into US-EU relations (including trade) if Jan 6 style issues unfolded. However, as we go to print, we see that Orban has conceded defeat. Trump’s active support of Orban and the AfD in Germany already signal the authoritarian and pro-Russian flavor of Trump’s support. It seems more obvious across time that Trump desires to see the EU break up. Orban does not go into Trump’s win column.
The UST curve handicapping could go back into paroxysms following the Islamabad failure and the new threat of a full naval blockade. The world can hope for a TACO move there but it is uncertain. Behavioral odds-making is a very inexact science.
This week starts the financial sector earnings wave, and we will also get the PPI release on the heels of the commodity and materials cost pressures of March. Existing home sales will signal how the mortgage rate pressures of March weighed on volumes, and we get a fresh read on Industrial Production.

Even after a banner week in equities and some easing of UST curve pressures on bonds as detailed below, the trailing 1-month returns are a mixed bag with 3 of 4 bond benchmarks posting negative returns. Only US HY posted positive returns with a minimal +0.33%.

Equities have had tech challenges on multiple fronts with the fixation on AI threats to software worsened by the UST and inflation anxiety as discussed in commentaries along the way and broken out in the “Tech Check” charts further below. Looking back 3 months, we see NASDAQ and Russell 3000 Growth in the negative return range. The S&P 500 and the Dow were both in the red for 3 months.

Small caps have been the big winner looking back over 1 year and beat the NASDAQ and S&P 500. Small caps and Value stocks were the leaders over 6 months as the sector-rotation themes were playing out for value vs. growth and tech.

The rolling return visual

The 1-week and 1-month symmetry flipped back to positive with the ceasefire and hopes for a deal. That initial attempt at a deal just failed this weekend with the handicapping game a fresh new challenge for the markets. The 3-month symmetry is slightly positive at 19-13 while the 1 year timeline is still riding the rally at 31-1 with only the BDC ETF (BIZD) in the red.

The Magnificent 7 heavy ETFs…

The tech bellwethers were mixed for the week but with some key names having a very strong week as detailed further below in the “Tech Check” breakouts. The temporary relief on the US-Iran ceasefire will give way to turmoil in the markets later tonight and tomorrow as the global markets cast their votes not only on the failure to strike a deal in Islamabad but also on the threat of a full naval blockade that will make the supply shock that much worse.

For the week, software was again in the tank with the Software ETF (IGV) in last place at -7.06% for 1 week, -28.9% over 3 months, and -33.4% over 6 months. In contrast, the Semiconductor ETF (SOXX) was +13.8% for the week and +42.4% for 6 months. The stock picking challenge in the tech sector across 4Q25 and into 2026 is a major differentiator.

The setbacks since Friday have a very wide range of potential outcomes. If they can’t get back on track, the regions that will see the worst damage will be Asia and the EU given the consumption of Gulf product flows. Some US players can ride the global supply stress and pricing/cost impacts to their benefit as we have already seen (energy, petrochemicals, aluminum, fertilizer). Notable rallies were seen with Valero, CF Industries, Lyondell, and Alcoa.

The very detailed commentaries hitting the headlines in recent weeks around supplier chains (helium, fertilizer, aluminum, etc.) even beyond the oil-to-refined-products chain will get revisited on the customer fallout.

We assume someone will explain (very slowly) to Trump that a naval blockade will be worse by an order of magnitude than the current extortion by Iran. No supplies vs overpriced supplies could bring more production chains to a halt rather than just inflate the expenses in some cases.

The UST forecasts and inflation anxiety will go into a fresh round of handicapping while the FOMC will have an even worse set of circumstances to ponder later this month if we see any combination of boots on the ground or a full naval blockade. The full blockade plan and going after those that pay the fee to pass will be quickly adjusted since it is so self-destructive and damaging to global economies. It appears unworkable (boarding parties? Then what?). The explanation might have to come from a non-cabinet billionaire. The White House sycophants might not dare.

The commentary below is mostly a cut-and-paste from an earlier post on LinkedIn on Saturday with some additional input:

The chart updates the weekly total returns on the 32 benchmarks and ETFs we track. The Iran War has dulled the senses a bit through Friday with the end game getting worked on in Islamabad. With the complexity of the Israel-Lebanon War and its overlap with the US-Israel tag team on Iran, sorting out the pieces is no small challenge. As we know now, the Islamabad deal failed.

The complications are exacerbated by the fact that Team Trump and Iran have starkly different versions of what was agreed to the first time. The market last week was betting on a solution with a very strong week in equities.

With headlines flagging the “best week of the year in equities,” the NASDAQ came roaring back with all 4 major benchmarks (including Russell 2000, Midcaps and S&P 500) posting solid rallies. The market saw 10 of 11 S&P 500 sectors positive with only Energy negative. We saw 5% handles on the week for Communications Services and Tech in the S&P 500 sector mix with 4% handles on Real Estate, Industrials, and Consumer Discretionary. The Russell 2000 and Midcaps are still beating the large caps YTD.

Last week’s equity market performance was a bounce with breadth in a week when Trump started off with profane Easter rantings as he had threatened to annihilate a civilization and discussed moving on to the “next conquest.” The week saw Trump state that a “whole civilization will die tonight” if conditions were not met.

Such language – along with the hyped “Donroe Doctrine”– is not exactly a deterrent to China (Taiwan) or Russia (Ukraine, Baltics). In fact, it encourages a global carve-up. The potential domino effects of continuing down this path could pull in aggressive responses from China while Russia cashes in.

The scoresheet above is clear enough on what a solid performance the week saw in equities with a positive to negative score of 26-6. The 6 in negative return range include the 3 energy ETFs across the E&P ETF (XOP), the diversified Energy ETF (XLE), and Midstream ETF (AMLP). Those 3 are joined in the red by the BDC ETF (BIZD), the Equal Weight NASDAQ 100 (QQEW), and the long duration UST ETF (TLT) with a very slight negative.

The winners for the week cut across cyclically diverse subsectors including Transports (XTN), Homebuilders (XHB), EM Equities (VWO), Tech (XLK), Industrials (XLI), Regional Banks (KRE), and Consumer Discretionary (XLY). That breadth of rallies in the top quartile underscores how wide the damage from the Iran War was expected to be from inflation to FOMC policy to the consumer sector and the broader macro cycle. This coming week could see a quick reversal if damage control does not start right away.

Mortgage rates have declined from recent highs, and the FOMC easing odds have risen again off the recent plunge. The risk of tightening shifted lower as we covered in our separate CPI commentary (see CPI March 2026: The CPI Cycle Could Prove Maddening 4-12-26 ). Asset quality concerns remain a factor (private credit, pressure on consumer metrics). Those odds will once again get jumbled and gyrate again this week with the latest news.

The commentary below is mostly a cut-and-paste from an earlier post on LinkedIn on Saturday with some additional inputs:

The above chart frames price returns for the 32 benchmarks and tech-centric ETFs we track each week. At a 20-12 positive vs. negative score, there are more winners and losers on the week, but we see some very big moves for the winners in the top tier and material weakness for those among the bottom tier performers. The Hi-Lo range of returns was over 42 return points. That includes +23.8% for INTC at #1 and -18.6% for NOW at #32.

We see a big rally in the semiconductor-related names with two Mag 7 names in the top quartile (AMZN, META) and 2 Mag 7 names in the upper end of the 2nd quartile (Alphabet, NVIDIA). The Semiconductor ETF (SOXX) made the top 5. We see AAPL, MSFT and TSLA in the third quartile with MSFT and TSLA in the red. The Mag 7 score was 5-2 while the “Mag 7+3” was 7 positive and 3 negatives. Broadcom was a strong #2 at +18.1% behind Intel at #1 and Micron at #3 with a +14.8% return.

The SaaS-centric services names took a fresh beating this week with ServiceNow (NOW) sitting on the bottom at -18.6%. Joining NOW in double-digit negative range again is Intuit (INTU), Palantir (PLTR), and Salesforce (CRM). FactSet (FDS) in the bottom quartile and Zillow (Z) were again in the red. The software names again underperformed with the Software ETF (IGV) and Adobe (ADBE) in negative return range in the bottom quartile.

From discount rates in “long duration” tech equity valuation to cyclical and consumer sector worries, the Iran War risks directly impact the tech sector. The AI panic around software and related private credit noise was bad enough without the Iran War scenario spinning.

The 1-month score for the 32 benchmarks and ETFs was 20-12 as of Friday close. We see 5 of the 7 bond ETFs in negative zone on the UST curve spillover with HY bonds (HYG) and EM Sovereigns (EMB) slightly positive. The long duration 20+ UST ETF (TLT) is in negative range in the bottom quartile joined by the UST ETF (GOVT).

The top quartile was cyclically diverse but shows no tech. The top quartile included energy (XOP, XLE) but Transports (XTN) came out on top despite the airline damage from fuel. Regional Banks (KRE), the chemicals-heavy Materials ETF (XLB), and small caps (RUT) and Midcaps (MDY) were in the top tier.

The Tech Check group was a tie at 16 positive and 16 negative returns. We see a good story for semiconductors and ugliness for software and SaaS-based services operators. We have covered the tech noise and subsector setbacks in prior weekly comments and in the weekly returns above. The fear of AI giants causing “business model extinction” for SaaS-centric services operators has been impossible to fully offset so far.

For the 1-month period, we see a Hi-Lo range over 62 points in the returns of #1 Intel (INTC) at 33.4% vs. #32 ServiceNow (NOW) at -28.8%. In the bottom quartile as noted, only Zillow avoided double-digit negative returns at -9.5%.

We see 4 of the Mag 7 in the red for the month with Amazon alone of the 7 in the top quartile with Alphabet and NVIDIA in the 2^nd quartile.

The top quartile for the month was heavy on semis with Intel (INTC) at #1out in front followed by Advanced Micro (AMD) at #2, capex-sensitive Applied Materials at #3, and the Semiconductor ETF (SOXX) at #4. In contrast, the Software ETF (IGV) was down in the bottom quartile at -12.8%. Software has taken a beating from AI fears and private credit panic headlines.

The YTD “Tech Check” score posted 13-19 positive vs. negative but with some dazzling winners (Intel, Applied Materials, Micron) and beastly losers (Intuit, ServiceNow, Zillow, Salesforce, Adobe).

The main theme is “semis vs. software” with semis winning and a range of software and SaaS-based names taking a beating. The Semiconductor ETF (SOXX) posted +28.4% and ranked #4 while the Software ETF (IGV) posted a grim -29.4%. We see 13 lines well into double-digit negative returns with the 13^th worst (IBM) posting -22.1%.

The above chart shifts back to our usual group of 32 benchmarks and ETFs for 3 months. The score of 19-13 shows no tech name in the top quartile with its 3 energy related ETFs (XOP, XLE, AMLP) joined by Utilities (XLU) and Materials (XLB) in the top 5. Real Estate (XLRE), Industrials (XLI) and Consumer Staples (XLP) round out the top quartile. That mix highlights the rotation trade that was unfolding in 2026 and some of the related fears that gripped software and SaaS services.

Sitting in the bottom tier we see the Equal Weight NASDAQ 100 (QQEW) in dead last with the BDC ETF (BIZD) one off the bottom. Financials (XLF) have been taking heat on the private credit noise and the concerns around the FOMC easing probabilities.

Homebuilders (XHB) felt a combination of cyclical pressure in housing but also the mortgage rate creep that came with the Iran War scenarios. Obviously that UST curve and steepening/shifting risk will come back into the dialogue with the ceasefire setbacks and Trump’s threats of a naval blockade. He already seems to be backpedaling as media flows, but that has to play out.

The 31-1 score looking back a year posts a median line-item return of over 24%. That median and range still makes for a very good rolling 1 year despite the weak start to 2026. The BDC ETF (BIZD) is down to -3.7% with 6 of the 7 bond ETFs sitting in the bottom quartile and only EM Sovereigns among bonds breaking into the 3^rd quartile.

We see energy at #1 (XOP) and #3 (XLE) with Transports (XTN) at #2 and the Tech ETF (XLK) and Russell 2000 rounding out the top 5. It took 40.6% to make the top quartile, so that is a banner LTM run rate for equities.

4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Producer Price Index Feb 2026: Getting Warmer 3-18-26

Industrial Production Feb 2026: Capacity Utilization 3-16-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26

CPI March 2026: The CPI Cycle Could Prove Maddening

Glenn Reynolds, CFA — Sat, 11 Apr 2026 14:06:27 GMT

The fate of the energy sector and flow-through impacts across a wide range of markets are still a moving target. Meanwhile, uncertain goods pricing strategies in 2026 to deal with tariffs also keep the range of CPI scenarios a major challenge for budgeting decisions and economists finding confidence in the underlying variables. The CPI whipsaw in energy and the clear threat to food inflation from rising costs of fertilizer, oil, labor shortages and freight and logistics does not leave room for complacency even if the market yawned at the March 2026 CPI release.
Our favorite special aggregate CPI index is “All items less shelter” (Table 3 of the release) and it has now moved from reassuring to uncomfortably high at +3.4% YoY in March 2026. As we detail below, that 3.4% for CPI ex-Shelter is up by over a point this month from 2.1% in Feb. Within that special CPI aggregate index bucket, we see “All items less food and shelter” at 3.6% and “All items less medical care” at 3.3%. That is not a pretty picture even if subject to where the Iran war crisis evolves.
Our favorite example of a useless BLS CPI metric is now “health insurance” (0.9% weighting in CPI index). Headlines and the “real world” household experience of insurance premium spikes and a sharp erosion of coverage economics has somehow translated into YoY health insurance deflation of -5.3%. Meanwhile, the MoM CPI metric posted health care MoM deflation in Jan, Feb, and March 2026. That is a neat trick and might come as a surprise to those paying health insurance premiums. The 6.4% CPI YoY for “Hospital and related services” is not helping the medical services story line with “Home health care” at +7.6% and with “Nursing homes and adult day services” at 5.2%. That is tough CPI given current demographics.
Energy (6.4% weighting in the CPI index) spiked to +12.5% and naturally captured the headlines in March CPI with Energy Commodities at +19.4% (including Gasoline at 18.9% and 2.9% of the CPI index). Electricity inflation remains a problem separate from the latest Iran issues at 4.6%YoY CPI (2.5% of CPI index) and Utility Piped Gas at +6.4% (0.8% of CPI index). The commodities piece of CPI is tied into global trends from upstream oil and gas to refined products (including diesel, jet fuel, and marine fuel). The market is one sudden escalation away from supply and cost issues worsening (e.g., Houthis and the Red Sea).

The above chart plots the time series for headline and core CPI since Jan 2020 just ahead of COVID. We also detail the long-term medians for each from Jan 1973 with a 3.0% median for headline CPI and 2.9% for core.

Headline CPI of 3.3% is where the market was hovering back in Jan 2025, so we should not be seeing victory laps from the White House on CPI metrics. The Core CPI of 2.6% is above the Sept 2024 lows of +2.4% and also is not “end zone dance” material for Team Trump.

The 2.6% core number is clearly a respectable number in historical context and below the long- term median. That said, it is not a reassuring backdrop with Iran and tariffs still a major risk factor in how goods and services could get priced in 2026. The market also still faces uncertainty around the USMCA review, NATO withdrawal threats, and how that all plays into trade responses.

While economists typically prefer the “core CPI” metric, I remember putting gas in the car next to the supermarket after the Arab Oil Embargo (started Oct 1973 as part of an Israeli war response) was showing its stagflation effects. Headline CPI seemed more important to household purchasing power and household discretionary cash flow. Monetary theories were not the topic du jour in Brockton MA that year (notably in a town dominated by home heating oil at the time).

As we look back at the adventure across the inflation spike of 2022, the damage was mitigated by a well-managed set of Fed actions across 2022 and 2023 that took headline CPI down from 9.1% in June 2022 to 2.9% in Dec 2024. Trump speaks of his 2025-2026 performance as if he started in June 2022 when CPI was 9.1%. Headline CPI is 0.4 points higher now at 3.3%.

Our oft-stated objection to the cause-and-effect rhetoric is that Trump never mentions the role of Russia invading Ukraine in Feb 2022 or how that slammed global oil and LNG and fueled inflation in the US. In fact, Putin gets a red carpet and even gets to cash in on the current crisis in Iran. No blame there from Trump for any US inflation.

The above time series offers a reminder of the multiple inflationary market imbalances across the decades. We plot CPI vs. fed funds to give a sense of Fed policy and real fed funds rate. The combination of inflationary pressures and FOMC question marks could leave the market with negative real fed funds in 2026. If Trump gets his way on lower fed funds, that potential only rises.

As we go to print, the FedWatch “Vegas line” showed a 83.4% chance of no change by the Oct FOMC meeting. The chance of 1 hike by then is just below 2% with the odds of 1 cut by then at 13.9%. As we covered in earlier commentaries, those odds have been whipping around since the start of the Iran War (see Market Commentary: Asset Returns 3-30-26).

The CPI spike in the aftermath of the COVID supply crisis came on the other side of excessive stimulus action that turbocharged demand, in turn bringing major supply-demand imbalances in the goods markets. That inflation effect had ZIRP tailwinds with the invasion of Ukraine by Russia in late Feb 2022 serving as a critical inflationary factor that seldom gets mentioned in the partisan attacks.

The chart offers a look at the first major inflation spike since 1979, which brought Volcker into the job by August that year. The 1979 energy volatility is often framed as the “Iranian oil crisis” (sound familiar?). That earlier 1979 inflation spike rolled into the mother of all tightening cycles from Volcker (including some 20% fed funds days not evident in the weekly average data of that period). That chaos brought a double dip stagflation cycle across 1980-1982 that crushed many bellwether companies.

This current Iranian crisis is much more serious and damaging than the 1979 experience since the US is the #1 oil and gas producer in the world and a major exporter of oil and gas liquids and also includes downstream refined products. The unfolding downstream product supply crisis is doing serious damage from Europe to Asia with jet fuel supply leading the headlines this past week.

The US also neighbors to one of the largest bases of reserves with Canada, who is a major supplier with room for impressive growth if the Canadian policy makers can get out of their own way. Trump has given them plenty of reasons to build their global export capacity and be less dependent on US end markets. Canada is by far the largest oil importer into the US, which in turn frees up more US supply of oil, refined products, and LNG to export.

The above table details a subset of the special aggregate CPI indexes we watch. “All items less shelter” is flashing some warning signs with a significant move higher for YoY metrics during March 2026. Services CPI remains above the 3.0% line as does “Services less energy services” at 3.0%.

We see Durables MoM CPI remaining in check over the past two months as the market tries to handicap where the tariff actions will start to play a role. Nondurables CPI rose to almost 5% in March at 4.9%. “Nondurables less Food” (not shown) hit 7.4% YoY in March.

The above table details our Big 5 subsectors for CPI. These roll up to around 75% of the CPI index, so overall this mix is the main event. We already addressed energy and health insurance above. Energy has a very wide range of potential outcomes subject to the rather bizarre twists and turns of a “game theory” with no rules and too much “humanity” in the picture. The toxic mix includes high geopolitical economic stakes, massive egos, religious zeal, and an uncomfortably high mix of cultural ignorance, incompetence and rampant dishonesty.

Medical care services at 3.7% YoY includes “hospital and related services” and moved lower from 4.1% in Feb 2026. With health insurance premiums soaring (despite the BLS measurement), the -5.3% health insurance CPI number seems less than credible. The BLS needs to rework its methodology to better reflect reality. To the extent households drop off health insurance on affordability (notably in the ACA), they then must face that 6.4% CPI threat from “Hospital and related services.” That is down from 7.6% in Feb 2026.

We put together a version of Automotive that is around 11% of the CPI index if we exclude gasoline, which we include in energy (see Automotive Inflation: More than Meets the Eye10-17-22). The discipline shown by OEMs in new vehicle pricing could be coming to an end in 2026 with small increases going a long way on big ticket items and funding costs seeing little relief so far. The CPI cost of a vehicle does not include financing costs, so it comes with an “asterisk” on affordability.

The table above tells the story with “Food-all” at 2.7% (down from 3.1% in Feb 2026). If we use “Food at home,” the 1.9% in March is better than the 2.4% in Feb 2026. In other words, food inflation in general has improved sequentially but there is a lot of noise ahead with labor costs, fertilizer pressures, the cost of simply operating equipment before considering freight and logistics add-ons that flow into the consumer cost.

Both “Food at Home” and “Food Away from Home” are higher in March 2026 than in Dec 2024 (Biden’s last full month). The CPI levels by product line vary widely. Meat CPI at 6.8% YoY was down sequentially from Feb 2026 (Beef and Veal at 12.1%) with Lettuce at 13.8%, Tomatoes at 22.6%, Coffee at 18.7%, and Sweets at 8.1% on the list of gripes for many, including me (I cannot live without lettuce. Sarcasm alert).

The above table highlights a few categories near and dear to many households. Recreation services declined and are well below the 2022 to 2025 levels seen with the post-COVID boom in consumer spending.

We see the lofty tariffs on the “labor arb” countries (notably in Asia) starting to show up in the Apparel line. While 3.4% CPI on Apparel is not back at 2022 levels, there is room for trouble there. February and March were going the wrong way quickly in MoM metrics.

Next comes the simple cost of freight and logistics that will add to the cost recovery challenge. Diesel is up sharply, and that will weigh heavily on delivery costs and related surcharges for all goods and that includes apparel. That will show up in new inventory and cost of sales even as pricing decisions to mitigate tariffs see more visibility (note: buyer writes the check for tariffs, no matter what Trump says). The tariff and freight knock-on unit cost effects will lead to pass-through pricing decisions or worse margins. Choices need to be made.

Material costs in clothing also include a heavy mix of downstream hydrocarbon derivatives that feed clothing prices. While it may not match the market share of the polyester disco shirts (1970s), synthetic clothing costs can impact profit margins and pricing strategies in manufacturing.

Airline fares are tied to jet fuel prices, so that air fare CPI of 14.9% is up from 7.1% in Feb 2026 and 2.2% in January. Jet fuel as a refined product is high on price and short on supply globally. How that flows into vacation plans and business travel is a factor to watch. Summer is the peak travel season.

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Producer Price Index Feb 2026: Getting Warmer 3-18-26

Industrial Production Feb 2026: Capacity Utilization 3-16-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

PCE Inflation Jan 2026: Personal Income & Outlays 3-13-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

4Q25 GDP: More Adverse Revisions in the Golden Year

Glenn Reynolds, CFA — Thu, 09 Apr 2026 21:04:10 GMT

The key to GDP growth alchemy is disinformation, repetition, and a lack of shame.

The final revision for 4Q25 GDP moves the needle to +0.5% from +0.7% in the 2^nd estimate and +1.7% in the advance estimate. Weakness in personal consumption expenditures (PCE) was the dominant driver (Reminder: PCE is ~68% of nominal GDP).
The 4Q25 PCE line posted a contribution to 4Q25 GDP of 1.30%, down from the +2.61% of 4Q24. The PCE % change from the preceding period (Table 1.1) posted +1.9% in 4Q25 vs. +3.9% in 4Q24. The 4Q25 period and annual 2025 numbers do not qualify as “golden” or meet Trump’s description of the US as the “hottest” country. The objective numbers are not there.
Fixed investment was weak in 4Q25 at +1.5% vs. the prior period despite all the data center and capex themes. The Structures line was negative at -6.5% with Residential at -1.7%. The Net exports of goods and services line was only -0.22% after all the dramatic swings of earlier quarters as tariffs rolled in and working capital cycles swung around (3Q25 GDP: Morning After Variables to Ponder 12-27-25).
As the “greatest first year in Presidential history” goes, the final annual GDP story of 2025 leaves something to be desired with an annual GDP growth rate of only +2.1%. That +2.1% annual growth rate is lower than all 4 years of Biden (including 2022).
The “truth” social tirade this week revisited the “dead country” theory of what came before Trump. As dead countries go, the 2.8% annual GDP growth rate in 2024 was well above the “golden year” of 2025. The +2.1% annual GDP growth rate is the lowest year since 2020 in Trump 1.0. (see Cyclical Histories: Will Facts Be in Vogue in 2026? 1-2-26). Hassett will have to really up his “perma-grin” game to paint this as a good quarter and a good year. When he plays his game of citing nominal growth (vs. real), he should at least label it as such.

The above chart details the movement along the key GDP lines from the advance estimate on through the financial line items released today in the final cut. We include the latest delta from the second estimate on the right. The +0.5% 4Q25 GDP growth rate was a bad way to end the year that had started with a -0.6% GDP growth rate in 1Q25.

The PCE growth rate in 4Q25 of +1.9% (table 1.1) was the lowest since 1Q25 at +0.6%. Goods consumption was weak at +0.3% in 4Q25 with Durable Goods at only +0.1%. Fixed investment growth was only +1.5%. The best performer in fixed investment was Intellectual Property at +5.4% with Equipment at +4.3%. The setbacks in Fixed investment growth includes Structures at -6.5% and Residential at -1.7%.

Exports posted negative growth at -3.2% with imports at -1.0%. Government weighed in at -5.6% with Federal at -16.6% and the larger State and Local line at +1.5%.

Thinking in calendar year annual terms and the “contribution to GDP” schedule, we see lower contributions to annual GDP from PCE at 1.78% in 2025 vs. 2.0% in 2024. Gross private domestic investment (GPDI) is lower on the annual 2025 GDP line at +0.35% vs. +0.54% in 2024.

For the Government consumption and investment lines, the total is lower at the headline level with -5.6% in a mix that is lower at both the Federal and State and Local level in calendar 2025 vs. 2024. It is notable that both Government Consumption as well as Gross Investment are down at the State and Local level for calendar 2025. That is not just a “Federal cuts” story.

The above table updates the running GDP growth lines from 1Q22, which marked the rough ride from an unusually strong post-COVID rebound in 2021 that fed into an inflation spike and tightening cycle. The 2H22 period showed the resilience from low unemployment and a relatively steady consumer sector. The setbacks in 2022 were only made worse by the late-Feb 2022 Russian invasion of Ukraine and the energy market dislocations. The 2022 staying power against inflation is a reassuring data point in the face of the current Iran mess.

Despite that disarray in 2022, the calendar year saw an annual GDP growth rate of 2.5%, which is more than we just printed to 2025. The ability of the US economy to get through an ugly year like 2022 offers a reminder of how much needs to go wrong to drive a recession in such a well-diversified, services-intensive economy as the US.

The line items in the table start in a troubled 1Q22 and ends in 4Q25 with the +0.5% growth rate. We get the 1Q26 advance estimate at the end of this month that will include 1 month of the post-Iran chaos. We get the updated PCE inflation and Personal Income and Outlays data for March at the end of this month also.

4Q25 GDP (Advance Est.): Less Distortion This Time 2-20-26

3Q25 GDP: Updated Estimate 1-22-26

Cyclical Histories: Will Facts Be in Vogue in 2026? 1-2-26

3Q25 GDP: Morning After Variables to Ponder 12-27-25

2Q25 GDP Final Estimate: Big Upward Revision 9-25-25

1Q25 GDP: Final Estimate, Consumer Fade 6-26-25

1Q25 GDP Advance Estimate: Roll Your Own Distortions 4-30-25

Trump’s “Greatest Economy in History”: Not Even Close 3-5-25

Gut Checking Trump GDP Record 3-5-25

Presidential GDP Dance Off: Clinton vs. Trump 7-27-24

Presidential GDP Dance Off: Reagan vs. Trump 7-27-24

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR

Glenn Reynolds, CFA — Mon, 06 Apr 2026 18:28:12 GMT

Raise your hand if you are in favor of banning mail-in voting, weaponizing the Postal Service, and allowing the White House and DOJ to control state voter rolls.

With the SAVE Act faltering, Trump issued an Executive Order (“Ensuring Citizenship Verification and Integrity In Federal Elections”) that seeks to Federalize elections and to cede control of state voter rolls to Washington under the DOJ and executive branch. As evident in his recent challenge to birthright citizenship, Trump believes he has powers to ignore Congress and take action on anything he desires even if the constitution and/or legislation does not allow it (e.g., IEEPA, unilateral action on birthright citizenship, etc.). There is no constitutional line Trump will not cross.
After the rough trip to SCOTUS on the birthright citizenship debate, Trump now wants control of state voting rolls in what is an aggressive push to salvage midterms for the GOP and continue to feed his own story line that he did not get his ass royally kicked in 2020 by 7 million votes. This latest gambit once again crashes into clearly written constitutional rules.
The Executive Order comes with DOJ threats of criminal actions against state officials and enlists the postal service as well. Trump must be worried (he should be) that his plunging ratings to record lows will hit the GOP hard in midterms. Tariffs and now the Iran War have inflicted economic damage on both a global scale and at the national level and set the stage for pain in household budgets.
Trump’s less-than-dazzling performance on Iran includes his tragically incoherent, ill-advised, inconsistent, and self-contradictory statements this past week on what the goals were at the outset of the Iran War and what comes next. The economic fallout is unfolding into what could be a global disaster if escalation goes in the direction of “take the oil” or puts many boots on the ground. His grab of network time last week brought an internally inconsistent replay and offered nothing new. Trump is back to a countdown to blowing up all the power plants (a clear war crime).
The latest Executive Order on elections is the next step in his ambitions. Most people who read or are not “in denial of history” know the legacy of voter suppression – and literally disenfranchisement. Disenfranchisement and voter suppression are a matter of fact in the history books (see Martin Luther King Jr.—MLK was a Fact, Not a Theory 1-15-24). MLK was assassinated only 58 years ago this weekend (April 4, 1968), so it was a strange week to launch the order. It is not as if the baby boomers were not ringside and fully aware of the violent reaction to the 1965 Voting Rights Act. Trump’s Executive Order would be a stark setback.
We add a few links below as memory joggers on some ugly history some would deny and seek to erase. The fact that there is a lack of historical perspective on real events in the White House should not be a surprise since factual history is viewed as poison. These days, it is all about packaging themes and not the historical reality.

Trump should be quizzed by the press on the Elections Clause (Article I, Section 4, Clause 1). No way he read it. Or no way he cares.

Trump “going postal” and bringing DOJ threats…

Anyone can consult with the Constitution on who makes the call on state level voting rights. The “Elections Clause” is there for the reading. The Executive Order signed by Trump this past week will fail, but may have backstop plans to declare emergencies and try out a range of contingency plans to maintain power. Such a view is not far-fetched speculation since it is evidence-based (Jan 6, etc.). His motives could not be more transparent.

Trump’s order enlists the DOJ (now run by his personal attorney) and the Postal Service as he adds a new angle on “going postal.” If you read the executive order, it is easy to see the massive logistical maze that he is calling for and the extreme manpower demands and tech support to even execute something like what the order proposes.

The goal is to control voting rolls, but the intent of the plan design seems to be to assure failure. That would in turn justify other “emergency actions” by Trump. Remember back in 2020 when Trump’s appointee (a rich white male executive) was ordering high speed mail processing machines removed? This mail-in process is much worse as designed by Team Trump. It will be enforced and supervised by his executive branch loyalists.

Away from the illegitimacy and illegality of the executive order, the design of the proposal shows the darker side of intent. The US Postal Service lost $9 billion in FY 2025 and cannot even handle the burden it has now. Trump’s ability to influence the USPS can be debated, but the stakes are high.

This proposed voting process structure might offer a chance to Trump et al. to intercede on an emergency basis in 2026 and would also allow him to direct that disruptions of election operations be aimed toward key swing states and blue cities with high vote counts. What he proposes appears set up to fail and could allow for additional emergency action to throw out election results. It would also allow partisan state legislatures the opportunity to step in with some false grounds he devises. Refusal to certify elections could be a partisan maneuver in a way it was not (even if close) in 2020.

White House control of state voting rolls…

The immediate motive is to control elections at the White House and executive branch level. The main thrust is to have a subservient DOJ (provisionally run by his former personal lawyer) to mitigate Trump’s fear of power erosion. The legal risks to Team Trump of a Democratic led house include Epstein investigations and corruption hearings whether self-dealing conflicts of interest or family deals. That would get aired in detail.

It is also about Trump looking for more support for his “Big Lie” that he won the 2020 election (in a “landslide” for Trump) even though there is zero evidence produced despite the years that have passed. Trump still wants to obscure that he is 0 for 3 in winning 50% or more of the popular vote. The same is true for Trump losing the popular vote in 2 out of 3 elections.

The White House will try to understate the significance of his proposed mail-in actions, but it is an enormously threatening move. As a frame of reference, voting tallies in the 2024 election (won by Trump) indicates 1 in 3 voted by mail for an estimated 48 million. That includes 40% of that group comprised of voters 65+ years in age. The balance across “geographic settings” showed 1 in 3 urban, 1 in 3 suburban, and 1 in 4 rural voters. Of the 48 million, white voters were around 27 million. The stats include 1 in 4 Democrats and 1 in 4 GOP with 5 states showing 1 in 3 GOP. That is a lot of votes.

The desire to squeeze swing state turnout and especially in major urban areas is not a mystery if you give it a little thought. The election turns on Pennsylvania, Michigan, Wisconsin, Georgia, and Arizona. Trump also wants to mitigate risks in Nevada and Ohio (Obama carried in 2012 but GOP since).

Lack of evidence never gets in the way of a Trump story line…

We include some notable reading materials on immigration and voting below. The facts torpedo the false premises of Trump’s immigration themes and are worth a glance. The barriers to facts include disinformation waves and mental laziness exploited by Team Trump. Even the Heritage Foundation and CATO (the antithesis of left wing) have furnished studies and data that show how Trump’s claims on “illegals” voting are BS.

Trump is more of an adjective-heavy and “you lie, and I’ll swear to it” type. Trump has produced no factual support for his 2020 fraud claims – ever. He is a fact free, numbers free, declarative sentence and adjective-heavy kind of guy.

Evidence is not there, but it seldom matters in the power grab…

Trump’s Claims About Noncitizens Voting Are False. We Can Prove It. (CATO Institute)
Debunking Lies About Voting and Citizenship (Brennan Center for Justice)
How widespread is election fraud in the United States? Not very (Brookings)
Analysis: Heritage Foundation’s Database Undermines Claims of Recent Voter Fraud (Brennan)

As noted, we would highlight that the Heritage Foundation (the Project 2025 crowd) and CATO (Libertarian) are on the right wing and conservative side of the political spectrum on issues. Heritage is in a different zip code. Like Trump’s delusions around the 7 million votes in 2020, it is very hard for studies to find evidence of what is not there. Trump can just spout it without evidence and the red hat bobbleheads just fall into line.

Of the 47 Presidents, only two of them made this false claim of “rigged” election and massive, outcome-changing voter fraud, and they are both Trump (#45 and #47). Andrew Jackson had some gripes in 1824, so he gets a portrait on Trump’s Wall. Al Gore had the hanging chad controversy in 2000, but he was a classier and more patriotic guy than Trump. Of course, Gore would not complain at all if he had lost by 7 million votes. Trump’s behavior and recent executive order on voting is a sign of how far America has fallen as it starts to imitate an emerging market.

Jaded history of voter suppression…

While the historical revisionists who have been charged with rewriting history at the Smithsonian (JD Vance and his beauty queen legal eagle sidekick), the reality is that voter suppression has been a “great” American tradition.

The goal of undermining groups of Americans is usually about those that are on the “other side” politically or viewed in a racial or ethnophobic light. The word “disenfranchised” was a literal term for decades in the US. The history typically applied to blacks in the South, but it is now broader with a target on the back of immigrants broadly and those from Latin America and the Caribbean more narrowly.

The voter suppression topic is about historical facts vs. fiction and the need to cover up investigations of bad behavior (and worse intent) that we see today in many areas (e.g. Epstein). It literally takes a few minutes to google and confirm the voter suppression history even during the baby boomer years ahead of the Voting Rights Act. If we go deeper into Jim Crow history, it is of course much worse.

We include an excerpt below from an earlier note we published (see Martin Luther King Jr.—MLK was a Fact, Not a Theory 1-15-24). The history – denied or ignored by Team Trump – offers a reminder of why voting hurdles are such a sensitive topic. That is especially the case when the barriers being created are to deter a problem that has not been proven to even exist outside of Trump’s rambling blather and blind embrace by MAGA followers.

The history of voting rights ugly but Trump will not even admit it ever existed…

“A notable example of disenfranchisement… was Louisiana. Black voter registration fell from 95.6% before 1896 disenfranchisement laws were passed to 9.5% right after that and then down to 1.1% (not a typo) in 1904. Alabama voter registration fell from 180,000 in 1900 to 3,000 in 1903. Florida election law changes in 1888 saw black voter turnout fall from 62% to 11% in 1892 and to 5% by 1896. Black voter turnout in Mississippi was 29% in 1888, 2% in 1892, and 0% in 1895. You get the idea. There are a lot of examples.”

The above history is old, but it is a reminder that victories can soon give way to takebacks. That is the case with Trump’s latest actions. “Old news” does not change the history, and admitting it is a start for the voter rollback advocates to be taken seriously. Otherwise, it is just the same old racism and xenophobia and closet fascist impulses to suppress voting that extended into the early 1960s.

Those of us watching the voter suppression from afar on TV in the 1960s and reading the news in our younger years (Johnson Administration) underscore that it was not really that long ago with Year 250 for the nation teed up in 2026. This latest executive order from Trump would be a dismal way to celebrate the Declaration of Independence and the founding of the nation.

A few samples on suppression histories:

Mississippi as the champion of disenfranchisement and suppression: “Although Mississippi had the highest Black population of any state in the 1960s, only 6.7% of eligible Black voters were registered to vote by 1964.” The history of these states has made for a lot of movies. If you want to skip reading, check out Netflix or Prime. Mississippi Burning is a great one. So is the movie Selma for Alabama. The narrow topic of registration numbers (whether % of the black voters or the voter counts by number) are objective facts. The motive behind voting rules are more subjective these days (even if obvious to most rational thinkers).
Alabama is also on the All-America Team in disenfranchisement and voter suppression. The black voter registration numbers were ugly as JFK was on his way to the White House. Words like “Selma” and “Bloody Sunday” (1965) and racist cult heroes such as Bull Connor do not need much introduction. It is understandable that there would be sensitivities on voting rights as a topic in the ranks of baby boomers who witnessed it (live or on TV) or for anyone who can read a book (a group in apparent decline by choice). The movie Selma works for those bored by voter registration stats and blind acceptance of “voter ID” disinformation. The very real factual history underscores why many might challenge Trump’s desire to rewrite the Election Clause after he could not get Congress to pass suppression legislation (the election clause requires Congress to overrule states).
“In 1964, just prior to passage of the VRA, only Mississippi had a smaller percentage of eligible African Americans registered to vote than Alabama, 6.7 percent compared to 23.0 percent, though some sources say Alabama had less than that.”
Georgia looms larger than Alabama or Mississippi in the Senate and Presidential elections since GA is a critical swing state. GA leaders saw Trump pressure them to “fix” the election outcome after he lost that state. The GOP Governor and State Secretary told Trump to pound sand on his false claims. Such courage (integrity?) is scarce these days. GA is also in the top tier of suppression history. Senator Warnock has been taking heat (hate?) for his opposition to the SAVE Act. History is on Warnock’s side in Georgia. As a frame of reference, GA ranks #2 in the Tuskegee historical rankings for number of blacks lynched. Mississippi is #1, Texas #3, Louisiana #4, and Florida #5. Those don’t tie into voting rights, but they do tie into the concept of intimidation, violence and bad outcomes when people with hoods (or masks) hang out around the voting polls (about those ICE masks…).

The voting rights debate is intrinsically colored by racism and xenophobia …

The hard right political groups in the US, whether MAGA or old school Christian Nationalist racists, will deny the realities of the 3-state sample above (states like Louisiana and Texas are often overlooked in this peer group). The racists or historical revisionists will attack the whole concept of voter suppression in recent history, but at least the White House should admit the above histories are facts. They do not. That colors their current motives. After all, Trump had stated the Civil War could have been “negotiated” (he is not an avid reader of history).

There is plenty of history on voting rights struggles and bad stories across the decades with voting rights at the center of the issues and also as the trigger for Klan activity. Florida is a state that gets overshadowed by its noisier more troubled neighbors, but check out the movie Rosewood for some horrors of the past in Trump’s home state.

These are the types of histories that Trump and MAGA deny and will get erased by design. When it comes to voter actions from Trump, assume bad intent. It is not hard to find it if you look. His goal is to lower turnout and create room for challenges by his Federal and DOJ team with his personal lawyer now holding the top job at the DOJ.

You can’t blame a guy for trying? Yes, you can.

Trump using an Executive Order to take over state voting to suppress votes will violate the clear letter of the Constitution and the Elections Clause. That was the case in birthright citizenship also. The fact that they will push ahead on that path anyway speaks to the people involved and how the court was stacked.

Team Trump can ask “What have we to lose?” with such efforts. The country and its voters of course ask that same question. They have much to lose just like a few countries did in Europe in the 1920s and 1930s.

For many voters, running the gauntlet of ICE threats at the polling places has some parallels. The image of ICE as overpaid, underqualified, undertrained, masked thugs on high protein diets is not without merit. They freely beat up eligible voters and US citizens with immunity and get a blank check from above (it is on video but skate from accountability). So, what would regulate their behavior at the polls when it is risk free?

For voters, an ICE presence is not an incentive to get to the polling place. That is why Team Trump also wants to take away the mail option. Reduce the avenues available.

The bottom line is “ICE + voter intimidation + banning mail voting = lower turnout.” It is not complicated.

Some executive order excerpts…

The Executive Order seeks to institutionalize the control of state elections at the Federal level. We try to picture the DOJ and Trump taking arbitrary actions in swing states. It was not lost on Trump that his massive loss in 2020 was tied in part to the highest turnout rate since women got the right to vote. That turnout was still below many nations, so it is not impressive.

In other words, the voter turnout could rise quite a bit for a midterm if the Independents turn out and Democrats get off their couch. That outcome would be a major threat to Trump and his MAGA movement.

The 4 years of Trump 1.0 were enough for many to turn out after big wins in 2018 midterms. 4 years of Biden dimmed the enthusiasm in 2024. That expectation for a high turnout is likely to be back in the 2026 midterms, and Trump is panicking. Trump has to beat back that wave. It is that simple.

The legal challenges are already coming. The fact that Trump would go the route of issuing an executive order as his own personal Constitutional Amendment speaks volumes of his threat to Democracy and what might unfold. At some point, more global investors will question the role of the UST as the “risk-free asset.” Escalation on the level implied by his recent threats against Iran would take the US into a tier of crisis not seen since 1860.

Just a sampler of how votes can be challenged and derailed by the White House…

The bottom line is if Trump cannot ban voting by mail outright, his goal is to create as many administrative and institutional barriers as possible to deter people signing up. Then states can ban the voting by mail or face the challenge of hurdling the massive barriers that Trump seeks to build up. To the extent those mail-ins happen, Trump has failsafes in that the process is under his team’s supervision to sound the alarm. Trump can channel their actions toward key states and cities and suspend the election outcomes. Trump’s executive order piles on with more barriers led by appointees that he controls. It is the proverbial stacked deck.

Some excerpts from the executive order:

Team Trump dictates the plan to the states…(elections clause?)

Below we cut and paste some language from the executive order. It reeks of suppression via intentional burdensome institutional hurdles and tasks doomed to fail.

“The Secretary of Homeland Security, the Commissioner of SSA, and the Postmaster General shall coordinate with the Secretary of Commerce in effectuating all relevant aspects of the implementation of this order.”
“The Attorney General shall enforce compliance with the applicable Federal statutes referenced herein and provide guidance to election officials, including any instrumentalities thereof; contractors; individuals involved in the administration of Federal elections; or public or private entities engaged in the printing, production, shipment, or distribution of ballots.”
“The Secretary of Homeland Security shall, within 90 days of the date of this order, establish the infrastructure necessary to compile, maintain, and transmit the State Citizenship List described in section 2(a) of this order, and shall designate a point of contact within DHS to receive and process requests from individuals and State election officials regarding the relevant State Citizenship List. The Commissioner of SSA shall provide all necessary citizenship and identity data to the Secretary of Homeland Security in support of this requirement, consistent with applicable law, the Privacy Act, and all applicable use agreements.”

Our translation: Trump’s team rules the oversight of the process in case he needs to challenge later. The Feds will be de facto overseers of state election compliance. These sections alone underscore the nature of the people pulling the levers. This is a proverbial collection of lapdogs and includes some that are not exactly the brightest bulbs on the shelf. The sole virtue for Team Trump is unquestioned blind loyalty. That is what authoritarians need.

The weaponization of the post office or the excuse for the process failing?

For a sign of how convoluted this process is, we include a subset of the requirements below for state officials and the post office. The chain of mandated activity implies flawless execution by state and city officials, prudent and diligent focus by the voters to jump through all the hoops, and a post office system that will be locked in and very efficient. Those are impossible odds, and Team Trump knows it.

The bottom line is that your vote depends on civil servants, bureaucrats, and postal workers executing in record time with the validation of the votes still subject to White House appointees not throwing a penalty flag and staging a big excuse to challenge the outcomes.

In other words, once the turnout has been beaten down, Team Trump still gets a bite at the apple to challenge the outcome.

The civil service employees and administrative “cluster of circles” begs poor execution and failure subject to challenge as detailed earlier. We saw no reference to budgets and staffing support or a longer potential phase in period. They want to head off the 2026 elections now. One can suspect the swing states and blue cities would see their results challenged if SCOTUS lets this executive order fly. There is a target on their backs.

Some demands on the USPS (postal service):

Proposed provisions specifying that the USPS shall provide each State with a list of individuals (Mail-In and Absentee Participation List) who are enrolled with the USPS, pursuant to a process specified in the rulemaking directed by this subsection, for mail-in or absentee ballots provided by such State, along with unique ballot envelope identifiers, such as bar codes, for mail-in or absentee ballots provided to such individuals.

Proposed procedures enabling each State to routinely supplement and provide suggested modifications or amendments to the State’s Mail-In and Absentee Participation List in advance of any Federal election, consistent with applicable State law.
Proposed provisions specifying that all outbound ballot mail must be mailed in an envelope that:
(A) is marked as Official Election Mail, including through designated markings provided by USPS for this purpose, such as the Official Election Mail logo, as necessary and appropriate;
(B) is automation-compatible and bears a unique Intelligent Mail barcode, or successor USPS technology, that facilitates tracking and is consistent with the other requirements of this section; and
(C) has undergone a mail envelope design review by the USPS to ensure compliance with USPS mailing standards, including barcode placement.
(Proposed provisions specifying that, no fewer than 90 days prior to a Federal election, any State may choose to notify the USPS if it intends to allow for mail-in or absentee ballots to be transmitted by the USPS. As part of that notification, any notifying State should further indicate whether it intends to submit to the USPS, no fewer than 60 days before the election, a list of voters eligible to vote in a Federal election in such State to whom the State intends to provide a mail-in or absentee ballot to be transmitted via the USPS.

Our view: This is the hook where they ban mail-in voting in substance by using process obstacles and onerous admin demands even if not by outright policy that bans mail-in voting.

Proposed provisions specifying that the USPS shall not transmit mail-in or absentee ballots from any individual unless those individuals have been enrolled on a State-specific list…
Proposed provisions specifying that the USPS shall provide each State with a list of individuals (Mail-In and Absentee Participation List) who are enrolled with the USPS, pursuant to a process specified in the rulemaking directed by this subsection, for mail-in or absentee ballots provided by such State, along with unique ballot envelope identifiers, such as bar codes, for mail-in or absentee ballots provided to such individuals…

That authoritarian checklist needs voter suppression to succeed…

The usual playbook for authoritarians is not a big mystery. Two leading historians in this area who have published easy-to-read books include Ruth Ben-Ghiat (Strongmen) and Timothy Snyder (On Tyranny).

We look at some of the authoritarian checklist moves by Trump below just within the past year and a few months. Any single one is cause for alarm, but the collection is extraordinary and very dangerous for Democracy.

Those who have studied a lot of American geopolitical, domestic policy, and economic history cannot come up with anything close in prior American history to Trump’s totalitarian threat even in times of war (Wilson gave it a shot in killing free speech in WWI, and he was also a rabid racist. So he is the closest to Trump even if falling well short).

The view of the US among allies has been deteriorating rapidly and could get much worse in coming days if Trump pulls the trigger on massive escalation in the Mideast. At some point, the combination of massive deficits, economic uncertainty, and political instability will impact direct investment flowing into the US and could undermine offshore UST demand. The currency wildcard has already been on the table in 2025-2026. When the literal smoke clears in the Gulf, the petrodollar history of recycling into US investments could see material setbacks.

A QUICK LIST TO PONDER…

Constitutional amendments via executive order

We put this one first since it is recent and getting to be a habit with birthright citizenship and now state voting control in Trump’s crosshairs. The attempt to remove citizenship from those born in the US by immigrants does not hold up to a literal reading of the Constitution. Of course, some SCOTUS members are viewed as captive Trump votes, and some Supremes could change out of their originalist costumes when needed for their political “sponsor.” The arguments on the birthright topic is current news, so there is plenty to read on that topic.

The Team Trump argument on “birthright” was that it was “all about slavery.” That angle was decimated by the arguments that waves of immigrants (notably Irish) before and after the Civil War meant immigration factored into the 14^th amendment (ratified in 1868). Birthright citizenship had also been tested since SCOTUS affirmed it applied to immigrants in 1898 (a Chinese immigrant) at a time when blacks were being disenfranchised by Jim Crow laws in the South. A lot of Irish fought for the Union on the winning side as did many black soldiers. We will see how the Trump-stacked court, who Trump now calls “stupid,” plays this one out.

Attack the media

Attacks on media have escalated with threats to broadcast licenses by Trump and the head of the FCC (one of the Project 2025 authors). The situation has been worsened by direct attacks from the Presidential pulpit on media companies and specific journalists by name in tandem with White house freeze-outs. The rechanneling of focus to friendly right-wing media is par for the course.

The real threat is close allies of Trump gaining control of media assets and shifting the operations toward a state media profile in coming years. That would be a rather Soviet ambition. Fox News hosts are now in key positions in the Cabinet and DOJ.

That threat of media ownership concentration used to be closely monitored and prioritized by the FCC. Now it is tacitly supported by the FCC by favoring friendly interests. One recent example is how the White House put its thumb on the M&A scale to undermine Netflix and favor Trump allies.

Attack education

The attack on higher education from the White House is about inflicting financial damage on schools and painting universities and colleges as elitist, which is the enemy of MAGA. Painting schools as antisemitic is one strategy even though antisemitic idiots can be found in every school, the GOP, among the Democrats, and most certainly in MAGA and the White House crowd. It is not grounds for widespread attacks and financially trashing schools.

The criticism was more than justified for inaction and feeble, slow response, but it is interesting that memories lapsed about the Charlottesville Tiki Torch antisemites (“Jews will not replace us”) and how Trump could only muster up a comment of “Fine people on both sides.” (Reminder: Gary Cohn almost resigned over the weak Trump response).

My own personal view more narrowly on the head of Harvard was, at the very least, she was incompetent and lacked leadership skills. However, her gender and race were perfect for a MAGA broadside. Either way, any head of Harvard that cannot win a debate in Congress with Elise Stefanik should go back to the beginning and enroll in community college.

The leadership weakness at some of these schools was used as a smokescreen and provided a readily available tactic to insist on the “MAGA-fication” of higher education by the White House using a new arsenal of threats. That is tough to do when facts and concepts are core to higher education. Facts tend to be inconsistent with MAGA. It is a safe assumption that Team Trump will not be investigating any schools in deep red states for racism or Islamophobia.

Attacking education is an old trick, but it harms free speech and generates even more division in the country. Division is a Trump priority to preserve his power base and cow academics (grants, etc.) and Congress. Such actions also financially undermine schools and thus financial aid for the deserving students who worked hard and earned a spot (not everyone has a daddy that can buy them a seat).

Attacks on universities also undermines critical investment in areas such as plant and equipment, technology, and housing. The financial penalties discourage infrastructure investment in the local economies. The economic multiplier effects are there. The fact that such local economies tend to be blue cities of course was the cherry for Trump.

In the end, you cannot cut through the irony and hypocrisy with a chainsaw given how Trump has prioritized Ivy League status in his own life (still need to see those transcripts!). The fact that so many GOP noisemakers have Ivy League degrees reminds us that DEI applies to home state locations also (i.e. it is easier to get accepted from Arkansas than NY, Connecticut and Massachusetts). The JAG career plans of some notable GOP Senators who were part of the applicant pool to places like Harvard get some “diversity” treatment also for “military” status. Few would dare to admit that or even bring it up.

Attacking top universities also undermines research budgets for those who cure disease and reward the world (that is economically the best deal in town for research economics and risk-reward). China will exploit those penalties in areas such as biotech, medicine, and pharma. China has now eclipsed the MIT area in Cambridge in biotech. High value industries were supposed to be protected by Trump (see Not Again: Why the United States Can’t Afford to Lose Its Biopharma Industry 2-29-24). Recruiting biotech by China got more press in media such as the Boston Globe. The fact that Trump is slapping high tariffs on pharma while undermining academic research is more than a little dumb. Punishment of non-supporters takes priority.

Inflate external enemies and vilify opposition parties…

In the 1920s and 1930s, Germany used the threat from Communists (the “Reichstag moment” reference cited in the 2020 election period by Milley). Chile and Argentina had the same boogeyman on the way to mass murder (backed by US interests). China had the US as the enemy after 1949. North Korea is obvious enough, but they will just kill you if you look cross-eyed. That is a simpler model. Russia has Ukraine and Poland and anyone who is embracing Democracy. There is always something to inflate and use.

Now it is Democrats (“radical left”) as part of the overly repeated Trump refrain. European nations that are not led by strongmen are the bad guys. Attacks on Europe now get more ammo since they did not take orders from Trump after the fact on Iran. Russia gets a pass by Trump for Ukraine. Instead, China is the enemy for Trump and Congressional talking heads. The theory is that Trump wants the EU to break up and he can strike deals with China and Russia as the “new Triumvirate.”

That creates hard choices for the center right (“Join the red hats or die)”. The center left seems homeless and downtrodden. The reality here is that self-identified independents are bigger than the GOP or the Democrats. Trump will face an uphill battle with independents in 2026 if he continues down the current path. That said, the Democrats always fall for the traps and need to do better work in reaching Independents, who will be the key swing factor.

Attack law firms

This move against the legal profession was headline material for some time as Trump set a goal of vengeance on lawyers. He was targeting and financially damaging major firms that were willing to represent legal opposition to Trump policies in the White House or in his personal behavior. It could not have been more brazen. Some law firms fought and won. Some did not fight and saw no cash value in having a spine.

Stack the Department of Justice and Courts

The DOJ has been self-evident in staffing intent (Pirro, Patel, Halligan, Habba, the rogues gallery, etc.). In a discipline where knowledge of the law is supposed to reign, it is now about personal attachments to Trump and the vindictive pursuit of enemies. We will not dwell on it. Turn on the TV. The DOJ had widespread purges and has become a halfway house for loyalists and mediocrity who do Trump’s bidding.

Attack judges

This is a carryover from Trump 1.0 with a gender, ethnic and a racial tinge often at play. Now Trump feels emboldened to attack SCOTUS as we saw recently. They have jobs for life, so that may not be the best strategy.

Purge the military

This has been a self-evident process from the start but has accelerated with internal opposition to the Iran strategy. The recent senior military turnover begs more than a few questions on motives and intent. Hegseth has accelerated stacking his team with “his kind” (white, evangelical, and obedient). The blurring of religion and military power is considered an outrage even among many Christian military experts and retired leaders. His overt racism has infected the promotion process.

ICE as freelance enforcers

The role of ICE has been a major headline controversy that we do not need to replay. It has flowed into the budget shutdown with little room for compromise on basic reforms. The masks and violence is easy enough to see on video. The Gestapo and Stasi did not wear masks. Neither do city cops or “Staties.” Even the Nazi Brownshirts did not wear masks. A good compromise might be to have ICE wear armbands like the Brownshirts. At least there is a precedent.

That simple mask requirement is a divide without a bridge, which says a lot. The doxxing theme applies to all. On the short list of very bad ideas would be showing up at the door of a roid-rage ICE employee who owns an assault rifle and multiple handguns. On the other hand, if an ICE enforcer is ashamed to show his face, maybe he should think that through.

The massive budgets allocated to ICE is a warning sign for those worried about Trump ambitions as ICE moves from seizing and abusing immigrants (and beating on protestors) to manning airports. The logical question is “What will they be doing next?” Manning voting stations? Beating down 1^st amendment protests?

The extraordinary outlays to build more de facto internment facilities is a daunting wildcard in how far a “wannabe dictator” (to quote the former head of the Joint Chiefs) will go to suspend elections and discourage free speech and demonstrations. The fact that ICE has a bigger annual budget than the Marines raises some concerns for obvious reasons.

Shadow immunity promises for ICE. Jan 6 Part Deux?

The blanket pardon for all the Jan 6 criminals and the signals (clear statements in the case of JD Vance) of immunity from prosecution or state level prosecution for ICE sends a less-than-subtle signal to “stand back and stand by” as the next election approaches. What will happen before the election between now and then and what will happen after is a matter of speculation. What has happened already in pardons and non-prosecution is a fact. That encourages more bad behavior as Trump’s ratings hit all-time lows.

To go where no man has gone…

This above checklist is unprecedented in US history for a President even if some pieces of it surfaced occasionally along the way. It is a Trump-only set of behavior patterns across the 250 years the nation will be celebrating in 2026.

SCOTUS and Congress are the only ways to head this off. It’s time for courage and integrity to make a comeback.

Employment Situation March 2026

Glenn Reynolds, CFA — Sat, 04 Apr 2026 17:43:09 GMT

Fireside chats ain’t what they used to be.

With a confusing, repetitive, and internally inconsistent speech after demanding network time, the Trump Iran game plan remains in a state of confusion for those planning fixed investment and payroll decisions. WTI ended the week at a “post-Iran” high. That sets the tone for FOMC planning with decent jobs numbers as the Fed frames the inflation vs. payroll trade-off. The UST curve rallied during the week after a period of rising. The moving parts remain in flux.
The good news is that this past week brought solid March payroll numbers on Friday after earlier constructive ADP numbers. JOLTs have time lags, and those were less reassuring (see Payroll Focus: ADP Highlights March 2026 4-1-26, JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26).
The Establishment Survey posted a payroll increase of 178K, which is the highest since Dec 2024 and the first month in Trump 2.0 that exceeded the median monthly adds from Jan 2009 through March 2026. Services accounted for +143K of the increase with Goods at +43K and Government -8K. In contrast to the ADP report, BLS’ Manufacturing posted a positive number for March at +15K for a YoY tally down by -29K vs. March 2025. Fed 2026 payroll adds were revised lower to -133K while Jan 2026 was revised higher to +160K as confusion is the theme for FOMC handicapping.
The Household Data shows a decline in total employed in March 2026 from Feb 2026 of -64K and a decline of -661K YoY vs. Feb 2025. The ranks of the unemployed declined by -332K from Feb 2026 but total unemployed rose by 107K vs. March 2025. The net effect relative to the workforce is a tick down in the unemployment rate to 4.26%, which would be considered full employment in past cycles. The March 2026 U-6 ticked higher sequentially to +8.0% from 7.9% in Feb 2026 and 7.9% YoY vs. March 2025. It is hard for the FOMC to get too nervous over that 4.3% rate with oil at a cyclical high and the inflation side of the mandate still in the lead.

The monthly payroll adds/declines chart above starts in March 2022 with the end of ZIRP and the start of the tightening cycle. The bar chart tells an objective data story. The +178K for March 2026 drove the U-3 rate lower to 4.3% or back to the January 2026 level from 4.4% in Feb 2026.

The numbers in 2025 and 2026 include the only negative deltas on the chart with 6 months in the red during Trump 2.0. Furthermore, the 2025-2026 months were all below the post-Jan 2009 median of 176K until March 2026 edged above it.

That long-term median period includes a slice of the longest recession since the Great Depression, so it is not a high bar to clear. Those payroll numbers from Jan 2025 to March 2026 offer no bragging rights. Health Care and Social Assistance (89.9K) + Leisure and Hospitality (44.0K) comprised 133.9K of the job additions tally. We would tag those as low multiplier effect sectors.

The above chart plots the running job adds/declines since Jan 2009 against the unemployment rate, which ticked lower MoM to 4.3% from 4.4%. In the chart, we isolate the worst months of the COVID dislocations in the box for better visuals to capture the other periods.

The 4.3% U-3 is below the long-term median of 4.9%. The 4.3% is still a solid number across the cycles. Payroll has been struggling somewhat in relative terms, but history is kind to 4.3%. If the 2025-2026 frame of reference is 2024 (not a good jobs year) then the 2025-2026 numbers are not so bad. If we compare it to the 2022-2023 period, the current job adds run rates are grim.

The above chart updates the time series for the U-3 unemployment rate and U-6 structural underemployment rate across the years from 1994. As noted, the current U-3 rate ticked lower to 4.3% from 4.4%.

As a reminder, the U-6 metric is defined with the numerator as “total unemployed + persons marginally attached to the labor force + total employed part time for economic reasons.” The denominator is “civilian labor force + workers marginally attached to the labor force.”

The U-6 is the structural underemployment metric that is always useful to watch. The U-6 jumped to 8.7% in Nov 2025 from 8.1% in Sept 2025. To start 2025, the U-6 rose sharply in Feb 2025 to 8.0% from 7.5% in Jan 2025.

The current 8.0% is a tick lower from 7.9 % in Feb but is well above the 6% handles seen in spring of 2023. The U-6 is still below the median from 1994 of +9.3%, which notably includes the post-crisis shock and the longest recession since the Great Depression.

The time series above updates the U-6 minus U-3 differential as a measure of relative employment quality and to flag risks of major dislocations in large swaths of the economy (think oil patch collapse in the late 1980s, tech bubble imploding into a weak 2001-2003, financial services and automotive meltdown in 2009).

The current 3.7% differential is below the long-term median of 4.0%. The job ranks are still vulnerable now with the Iran war effects flowing into hiring decisions, industry fundamentals, and FOMC policy planning.

Many questions will be getting answers with respect to how tariffs and the oil spike will flow into hiring, investment, working capital cycles, new capacity planning. The wide range of potential outcomes is clear enough in that “boots on the ground” cannot be ruled out until those boots and bodies return home.

Escalation and “take the oil”

A material escalation would be about a lot more than the US and would hit Europe and Asia especially hard. It would not take much creativity to figure out how China (Taiwan) and Russia (Ukraine, Baltics) could react to exploit such chaos. Then the global cycle nerves begin anew.

The “take the oil” mantra from Trump by the end of the week implies massive manpower demand, military resources, budget bleeding (and UST supply) and unpredictable escalation of the conflict. That means even more problems from oil prices and supplier chain dislocations. That would necessarily hit payroll and economic growth.

Tariffs are still near the top of the risk checklist…

Reshoring has been very slow as the manufacturing payroll trends imply. We are seeing major plans to relocate automotive OEM capacity back to the US, and that should attract more supplier chain capex. The auto supplier to OEM chain will be a focal point in the upcoming USMCA review process with Canada and Mexico. Autos is only one small piece of the manufacturing picture despite all the headlines.

In contrast to autos, the idea of a major new aluminum smelter in the US will not happen based on economics and the timeline to build one. Low-cost power is essential for such smelting activities, and data centers would be happy to pay a multiple of what an aluminum smelter would see as cost effective. There are a lot of stories along the manufacturing chains with some good and plenty bad. For now, manufacturing payrolls are “net bad.”

Some of the risk issues get swept up in immigration and deportation numbers, but the analysis always comes back to the number of workers with paychecks. Employers will be making decisions to mitigate the tariff damage with tariff cost mitigation strategies (e.g., layoffs) if they are not passing along the cost in prices or want to limit the scale of price increases to customers.

The AI wildcard in manpower needs sees a lot of speculation in the manufacturing sectors but even more so in Services payrolls. That has been evident in some recent stock volatility across SaaS-based business services leaders.

There is no hiding from the need for economic reactions along the supplier-to-customer ecosystem. Someone always pays – including those “paying” with layoffs in tariff cost mitigation decisions.

The above chart updates total payroll vs. the unemployment rate. The trend needle has not moved much in 2026. More bodies with more paychecks are always a good thing. The trick from here is how the consumer deploys that paycheck and whether the zero-sum realities of household budgets undercut spending. The need for defensive spending habits in light of impaired household discretionary cash flow could become a bigger headwind in the aftermath of the Iran fallout.

As noted in the bullets at the top, the total employed in March 2026 moved lower from Feb 2026 by -64K and show a decline of -661K YoY vs. Feb 2025. That flunks the “more bodies, more paychecks” rule.

The above chart updates the total payroll number vs. job openings. JOLTS data analysis had been slowly recovering from the shutdown, and is now back into the lineup with its usual 1-month lag (see JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26).

Management teams have a lot of moving parts to factor into planning whether quantitative or qualitative. The final IEEPA decision from SCOTUS came in against Trump, but he was prepared to start slapping on tariffs under Section 122, 232, and 301. Notably, Section 301 tariffs (“fair trade”) are underway and are topics for other days. They will create more trade partner strife.

The trade flows have been looked at in many past commentaries (see Meanwhile…Back in Economics and Tariffs 3-2-26, US Trade with the World: Import-Export Mix 2-25-26). The latest trade disruptions from the Gulf and the related supply chain problems (oil, LNG, helium, aluminum, etc.) have been getting a lot of headline time. The disruption could get much worse via the Red Sea if the Iran War escalates and the Houthis pile on. There are also the contingent threats of Iraqi Shiite militia. The FOMC and the market both have much to digest.

The fallout in consumer spending from health care premium increases now are joined by energy price stress and $4 regular gasoline. Home heating oil bills could get much worse later in the year if this lasts.

The retrenchments in SNAP spending and eligibility criteria challenges promise household stress and could signal trouble ahead in the lower part of the “K” household mix. Trump’s latest budget plan offers little relief to the lower part of the K recovery and in fact piles on with cuts to many programs.

Inflation reports had generally brought good news relative to expectations given the scale of the forward threat from tariffs and lagging effects to be seen across working capital cycles. That said, the inflation creep and affordability strain has clearly been in evidence and taking a toll on inflation across select product groups. PCE inflation and CPI will see a lot of pressure as Iran effects and material costs roll in on top of tariff-based pricing decisions that have been slow to unfold.

Tariffs will stay in the thick of the pricing pressure battle, and industries such as autos are likely to see more upward price pressure after a year of relative caution by OEMs to protect their customer base and dealer network. The OEMs had wanted to move cautiously with Trump (which by itself is a sad comment on how free markets have suffered under this administration). Now we will be adding much higher energy inflation from gasoline to go with the very high electricity CPI metrics and utility piped gas inflation.

The overall economic impact of tariffs had been far less than feared given the reality that most trade partners backed down in 2025. That could change in 2026 with many more battles on the table such as a threatened embargo of Spain that would pull in the EU (Anti-Coercion bazooka?) and the USMCA review.

The breakdown of relationships with the EU, the #1 trade partner with the US, have dramatically worsened with Iran and Trump’s increasingly ugly rhetoric and behavior with allies. It is getting weird with insults tossed at Macron’s wife. That is just strange.

The USMCA review will inevitably create a lot of tension with Canada despite the US goods trade surplus the US posts ex-crude oil. Trump needs a cheat sheet on who are the best export markets with around 3 dozen states seeing Canada as the #1 export market.

The fertilizer sector is under stress right now on Gulf supply problems, and Canada is a critical part of that supply. With Qatar facing stress in the fertilizer shipment barriers right now, the Canadian position in potash might be worth keeping in mind. The synthetic crude oil supplies from Canada also offer high diesel yields for refiners that could be critical right now in tempering the rate of increase in freight costs since that flows into food and goods.

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Producer Price Index Feb 2026: Getting Warmer 3-18-26

Industrial Production Feb 2026: Capacity Utilization 3-16-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

PCE Inflation Jan 2026: Personal Income & Outlays 3-13-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

Employment Situation Feb 2026: Payrolls Get Ugly 3-8-26

Payroll Focus: ADP Highlights March 2026

Glenn Reynolds, CFA — Wed, 01 Apr 2026 17:59:41 GMT

With a AAA national average regular gasoline price of $4.06 today (+36% in 1 month) and food feeling broad inflationary pressures, ADPs release showing real wage growth and more jobs will be a good signal if it can be sustained. The ADP wage growth numbers included +4.5% for “job stayers” and +6.6% for “job-changers.”
The ADP private sector jobs numbers were constructive at +62K on the back of a solid growth rate in the South (+101K) while the Northeast (-29K) and Midwest (-26K) were both in negative range with modest positive growth in the West (+26K).
The half empty view is Manufacturing jobs were down by -11K with Construction (+30K) and Natural Resources/Mining (+11K) carrying the ball for the Goods sector (+30K). The market is still waiting for those tariff-driven manufacturing jobs. JOLTS also raises question on manufacturing jobs (see JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26).
We see some good news in the small business job count with the small establishment tier of 1-19 employees at +112K. Overall, Services comprised 32K of the 62K total with Goods at +30K.

The UST rally this week combined the tailwinds of hope for “peace breaking out” in Iran with all the very unpredictable moving parts that come with that scenario. History will not be kind to those who think they can predict the behavior of Trump while Iran’s reactions come with the wildcard of religious fanaticism and rage at the saturation bombing. Iran’s unpredictability comes with the innate capacity to endure suffering and holding the line against the “Great Satan” and infidels.

We are not sure day-to-day misinformation helps ease the challenges of interpreting Trump or Iran, but the jobs mandate for the FOMC is still waffling as investors juggle their assessment of energy-driven cost pressures flowing into inflation and the payroll risks. The scale of the supplier chain disruptions and multiplier effects make the opening of Hormuz the overriding X factor for inflation and cyclical scenarios, but those play out at a lag.

In the meantime, we have new, pending (and immediate) threats of attacks on tech companies (18 companies) and their operations in the Gulf. Iran has one eye on the stock market also. A fresh round of back and forth could see Trump pull the plug and tell the rest of the world “all yours.”

Then there is Houthis risk and the vulnerability of oil and freight to Red Sea attacks. Even Shiite militias in Iraq get invoked by those making risk checklists. Those factors can work their way into roll-your-own scenarios for global and regional cyclical pressures, cost threats, and how that all plays into stagflation risk.

With WTI at just under $100 as we go to print, the good news is that the US has plenty of oil and gas, so this is not the late 1973 backdrop or 1979. Both saw stagflation follow. That lack of comparison to the Arab Oil Embargo period in the US is not the case for Asia, who face threats that take us back to our memory of odd-even license plate gasoline rationing of early 1974. We were ringside for that one. Europe, the #1 trade partner for the US, is also in a bind even if not as severe as Asia.

Consumers drive economies, and the challenges to household discretionary cash flow will roll into both domestic growth and trade. Whether the pressure will pick up on US employment and reshape FOMC monetary policy remains part of a wider range of outcomes. Iran is part of the cart-and-horse handicapping by the Fed in our view. It is not chicken and egg since Iran remains the main event.

We get the full March payroll numbers on Good Friday.

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up

Glenn Reynolds, CFA — Tue, 31 Mar 2026 19:54:04 GMT

No joy in jobsville. Still waiting for those manufacturing jobs.

An almost 500K decline in sequential Hires is the main metric, but we see a decline in Job Openings in Feb 2026 of -358K with a rise in layoffs of a more manageable 61K.
The Feb activity largely predates Iran (bombing started Feb 28) and related shock waves across energy and supplier chains, so the March payroll data to be released on Friday will offer some more timely context.
The consumer spending swing factor from Iran could be more concentrated in Leisure and Hospitality payrolls in coming periods after a -213K decline in openings for that sector from Jan to Feb 2026. With health care premiums soaring, mortgage rates just under 6.5% after this week’s rally, retail gasoline materially higher, CPI lines very mixed, and consumer inflation expectations rising, it is fair to say economic growth faces a cloud after such a poor 4Q25 (see GDP 4Q25 Second Estimate: Sharp Move Lower 3-13-26).
Manufacturing is always a focal point in the context of the tariff story lines from the White House, but manufacturing hires MoM were down by -24K YoY even if only down by -4K sequentially from Jan 2026. Layoffs in manufacturing were down by -21K MoM in a signal of some stabilization before the Iran mess. Sequential job opening trends posted -71K in Manufacturing from Jan 2026 but with +39K YoY. The manufacturing openings are supposed to be higher under the tariff theory.

The above time series plots job openings across the timeline from 2007 to current. The sharp, downward trends from the end of ZIRP and start of the tightening cycle in March 2022 show little to celebrate. The high of 12.2 million off the lows of 4.6 million at the peak of the COVID panic are pretty dramatic, but recent periods are sot. Opening are at least running above the long-term median (5.92 million). The 5% decline YoY in job openings in Feb 2026 is bad news no matter how you slice it.

The above-median openings number comes in a market where secular growth and demographics need more job openings. That is especially the case to justify the tariff strategy. The strains on affordability in so many end markets since COVID (housing, health care, autos) combined with the threat of even more inflation tied to the Iran mess means even more jobs and higher salaries will be even more crucial.

The conversations will continue to focus on how many new job openings can be avoided through the deployment of AI tools and technology. The tariff cost mitigation strategies also do not help in budgeting for higher headcount.

The above chart plots Hires vs. Layoff/Discharges on a SAAR basis. Note: we remove the COVID numbers from several charts to support the visual value for “normal” periods. We comment on COVID history at the end of the note.

Hires declined by -498K sequentially from Jan 2026 while layoffs/discharges rose by 61K. The hires YoY declined by -387K or by 7.4%. No joy there in an expanding economy even if annual GDP growth of 2.1% lagged 2024’s 2.8% (just don’t tell Hassett). The numbers clearly signal negative payroll trends.

The biggest MoM decline in Hires occurred in Leisure and Hospitality at -185K with Professional and Business Services at -154K. The biggest increase in layoffs was Retail at +72K.

The above chart updates the ratio of Hires to Layoffs/Discharges. The relationship stands at 2.82, below the long-term median of 2.91 from 2007. The post-2007 period includes the effects of longest recession since the Great Depression (Dec 2007 – June 2009) followed by the longest expansion in history from June 2009 to COVID (Feb 2020).

The above chart plots Hires vs. Total Separations on a SAAR basis. Separations include Quits, Layoffs/Discharges, and “Other Separations.” Total Separations moved lower by -173K in Feb 2026 and were down by -314K YoY.

We typically do not find “Total Separations” particularly interesting as a multi-line net number. Much of the decline in Separations can be attributed to a -153K MoM decline in “Quits.” One theory is that trend signals lower confidence in finding a job on the other side of quitting.

The Hires minus Total Separations differential is plotted above. We recently had some major revisions. As covered above, the sharp decline in Hires is the main event. Separations also had a decline on lower Quits.

The net number above has moved notably lower in recent months and is in the negative range now. The differential is starkly below the long-term median of +175K.

The time series for Total Quits as a % of Separations (SAAR basis) was 59.8%, slightly above the long-term median of 57.9%. The classic “Quits Rate” is measured by Total Quits as a % Total Employment, and that metric moved slightly lower on the month to +1.9%, down from 2.0%. The Quits rate is also down slightly YoY from 2.0% to 1.9%.

The bottom line on the JOLTS numbers is that it was one that UST bulls might grasp onto for hopes of easing improving and the same for the long-suffering bull flattener advocates. The oil price wildcard has plenty of history, but this scale has more in common with the Iranian crisis if 1979.

While the US is a powerhouse in energy (oil, natural gas, and LNG) and has Canada as a neighbor (as badly as Trump treats them) and largest oil importer into the US by far, that backdrop takes useful comparisons to 1974 off the table. The Arab Oil Embargo of late 1973 and “odd-even license plate” rationing in the recession is being experienced by many nations at this point. Just not the US. That impacts global growth. Asia is especially vulnerable.

NOTE ON COVID DISTORTIONS

The Hires vs. Separations time series make for interesting numbers but tough charts to plot visually given how much the spike in Separations/Hiring during COVID distorted the numbers from March 2020 to June 2020. The swings literally were off the charts. For presentation purposes, we adjust the charts above to exclude the raw data for those months to get a better vantage point on somewhat more normal times. Compared to COVID, the credit crisis seems “normal” in terms of the job count moves.

For disclosure purposes, Separations across March 2020 (16.3 million), April 2020 (11.6 million), May (4.7 million), and June (5.2 million) were running against Hires in March (5.2 million), April (4.0 million), May (8.1 mi/lion), and June (7.4 ml/lion). We remove those from the charts to get better scale visuals on the periods that precede and follow as the market saw 50-year lows in unemployment in 2022. Wild swings were had by all as industries saw shutdowns and layoffs in the COVID recession. The long-term medians from 2007 to 2022 for Hires and Separations were very close.

Almost 28 million Separations combined in March-April 2020 was a brutal reminder of that period.

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Producer Price Index Feb 2026: Getting Warmer 3-18-26

Industrial Production Feb 2026: Capacity Utilization 3-16-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

PCE Inflation Jan 2026: Personal Income & Outlays 3-13-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

Employment Situation Feb 2026: Payrolls Get Ugly 3-8-26

Market Commentary: Asset Returns 3-30-26

Glenn Reynolds, CFA — Mon, 30 Mar 2026 14:53:11 GMT

It will only be a small, brief holy war! Trust me.

The asset return performance in 2026 has been ugly with a raft of negative numbers in tech and negative impacts on duration.
Unfavorable YTD UST curve shifts throw the favorable move of 2025 into reverse with sharply higher mortgage rates a threat to housing (see UST Deltas: Elevation Realities 3-29-26). We see bouts of UST curve relief (including today) as the handicapping ebbs and flows.
A wide array of energy related household costs and price threats could undermine consumer health, spending appetites, and GDP growth after a poor set of 4Q25 growth numbers (see GDP 4Q25 Second Estimate: Sharp Move Lower 3-13-26).
The stagflation threat remains real, and the juggling act of inflation vs. payroll fears and cyclical growth setbacks make for a very challenging set of conditions for the FOMC, which has seen the predictability of policy thrown into a state of disarray with Warsh facing a big challenge when he eventually gets in front of a confirmation process.

The update of the high-level debt and equity benchmarks captures the obvious pain of 2026 with all negative numbers for 1-month and 3-month timelines for both debt and equity. Tech and growth stock returns in the chart are especially ugly with double digit negative returns for the NASDAQ and Russell 3000 Growth lines.

The recent correction headlines for the Dow, NASDAQ and Russell 2000 raise the question of whether the S&P 500 will get there in the holiday-shortened week. The S&P 500 closed Friday only down by -8.74% from the late January peak. The “buy the dip” discussions will be a recurring feature until the escalation risk plays out to a finish.

The rolling return visual

The positive vs. negative symmetry has been grim over the 1-week, 1-month, and 3-month horizons. We see the weak numbers in 2026 starting to eat into the still favorable 1-year returns.

The Magnificent 7 heavy ETFs…

The tech bellwethers show only 1 positive weekly return with Apple (AAPL). We see zero positive returns looking back over 1 month. Over 3 months, the only 2 lines that are positive are Taiwan Semi (TSM) and the Semiconductor ETF (SOXX). For 6 months, we are up to 4 positive lines (only 3 tech lines) with the Semi ETF (SOXX) and Taiwan Semi (TSM) well ahead of the comps. Alphabet (GOOGL) is a distant #3. The Equal Weight S&P 500 Index (RSP) was barely positive for 6 months at +0.76%.

The commentary below is mostly a cut-and-paste from an earlier post on LinkedIn on Sunday with some additional inputs:

The chart details the weekly returns for the 32 benchmarks and ETFs we monitor. While this week overall was another grim one with NASDAQ and S&P 500 posting negative returns, the small cap Russell 2000 and Midcaps posted positive returns for the week even as they struggled YTD with small caps in the red and midcaps slightly above 0% YTD.

Small caps had already entered correction territory the prior week. The S&P 500 shows half the industry sectors in correction as the S&P 500 and NASDAQ reside in the bottom quartile this week as noted in the chart. The11 S&P 500 sectors showed a higher positive count this week than the last few with the positive count doubling to a still unsightly 4 of 11. The 4 positive S&P 500 sectors included Energy, Utilities, Consumer Staples, and Materials.

We see a positive vs. negative score of 13-19 this week in the 32 asset lines in the chart, and that is better than the 6-26 last week and the 3-29 the prior week. Tech was a mess last week with the Equal Weight NASDAQ 100 ETF (QQEW) in last place and the bottom 4 including Communications Services (XLC), the Tech ETF (XLK), and NASDAQ (IXIC).

The UST curve has been going the wrong way in 2026 with UST deltas rising YTD. We saw 6 of 7 bond ETFs in negative range this week with only the short duration UST (1Y-3Y) ETF (SHY) able to edge (barely) across the zero line into positive range.

We looked at the running YTD UST deltas in a LinkedIn post on Friday and updated that in a separate note on the weekend (see UST Deltas: Elevation Realities 3-29-26). The 30Y Mortgage rates have edged higher with the Mortgage News Daily survey closing at 6.64% on Friday. That comes after a brief dip below the 6.0% line in late February.

As already detailed in separate commentaries, the FOMC handicapping has been dramatically revised since the Iran fallout. Using the Oct 2026 FOMC meeting as a guide, FedWatch as of Monday morning has set the odds at 89.7% (up from 74.5% on the weekend) that fed funds will remain unchanged. There is an 8.1% (down from 23% on the weekend) chance of 1 hike and a 2% chance (up from 0% on the weekend) of 1 cut by then. As of 1 month ago, the odds were a 35% chance of 2 cuts.

The shifting debate is whether the oil spike will materially undermine growth and prompt Fed caution. It is worth noting that we have seen negative GDP growth in some quarters during past cycles without an NBER recession flag being thrown.

Iran has complicated life for the FOMC and Warsh. We assume Trump will continue to demand multiple cuts and negative real fed funds rates. That outcome just got more event-driven in nature. It takes more than a few Trump-appointed votes to make that happen.

The commentary below is mostly a cut-and-paste from an earlier post on LinkedIn on Sunday with some additional inputs:

The chart updates the weekly “Tech Check” list with 32 benchmarks and ETFs that we built out since the AI mini-panic and now the Iran drama. The simple realities include a higher UST curve flowing into discount rates that could be used in valuation. Shifting revenue expectations on price and volume are among the more obvious worries.

The positive vs. negative score is not pretty at 5-27 this week. That score is below the 8-24 from last week and 7-21 the prior week. If we take out the Russell 2000 and Midcaps (MDY) from the positive count this week, we only see Cisco (CSCO), Advanced Micro Devices (AMD), and Apple (AAPL) slightly positive.

We see a long negative tail with Micron (MU) on the bottom at -15.5% with Meta (META) also in double digit negative return range at -11.4% after the court decisions. Within the mix of Mag 7+3, we see 6 of the Mag 7 in the red and the same for 9 of the Mag 7+3. That’s a bad week.

The more mature “incumbents” are in the top quartile even if 3 of the top quartile members (Taiwan Semi, Tesla, Apple) posted negative returns. That is a low bar to clear to make the top tier.

The wrestling match around AI undermining current business models is ongoing, and the YTD returns for numerous SaaS-centric bellwethers are downright glum. The trailing 1-month score is 4-28 and 7-25 YTD.

For the YTD period, we see 5 of the bottom 6 in the YTD Tech Check from the SaaS-heavy services tier. YTD returns in the bottom 6 range from Zillow (Z) at -40.7% coming in last to FactSet (FDS) at -31.6%. FDS is 6 notches off the bottom. The top of the lowest quartile was the Software ETF (IGV) with a YTD return of -27.2%.

More investors are flagging the direct and indirect impacts of Iran on pricing, volumes, and overall demand and the potential to undermine unit cost structures. That includes the full range of global tech and services industries from semiconductors to data centers. Assumptions around growth rates (and thus multiples) are subject to challenge.

Meanwhile, cyclical anxiety can flow into IT budgets and what that means for tech sector growth rates and pricing power. Valuation and buy-the-dip signals get debated daily, but the moving parts are anything but straightforward when it comes to Iran. Tariffs were easier for investors to quantify with more confidence.

The 1-month review of the 32 benchmarks and ETFs weighed in at a score of 3-29 with only the 3 main energy ETFs in positive range across the E&P ETF (XOP), Energy (XLE), and Midstream ETF (AMLP). We see a Hi-Lo return range from #1 to #32 at 39 points with Homebuilders (XHB) sitting on the bottom at -16.1%. The median return in the mix of 32 was around -7.0%.

The trailing 1-month score for the 32 “Tech Check” names was 4-28 with Palantir (PLTR) at #1 followed by Intuit (INTU) at #2, Advanced Micro (AMD) at #3, and Cisco (CSCO) at #4. Taking the #1 rank only required a +4.28% return for PLTR. Meanwhile, the bottom quartile showed 7 of 8 lines with double-digit negative returns. Meta (META) sat in dead last at -18.9% after the adverse court decisions. We see 3 of the Mag 7 in the bottom quartile with Alphabet (GOOGL) and Tesla (TSLA) joining Meta in the lowest tier.

The YTD “Tech Check” list underscores a grim year with a 7-24 score. That includes Midcaps at barely positive. The heavy mix of SaaS-centric services names dominate the worst returns with Zillow (Z) in last place at -40.7%. We see such names comprising 5 of the worst 6 with Intuit (INTU) at -37.1%, ServiceNow (NOW) at -35.1%, Salesforce (CRM) at -32.3%, and FactSet at -31.6%.

At the top of the bottom quartile we see the Software ETF (IGV) at -27.2% just ahead of Oracle at -28.2%. That is a grim set of returns at the low end that drove a Hi-Lo range in the 32 Tech Check names of almost 72 points. At the top of the rankings we see Applied Materials (AMAT) at +31.2% with Micron (MU) #2 at +25.2% and longtime legacy leader Intel (INTC) at #3 with a +16.9% YTD.

The 3-month period for the broader mix of 32 benchmarks and ETFs posted a score of 9-23 with energy ETFs (XOP, XLE, AMLP) holding down the top 3 slots followed by the more defensive Utilities ETF (XLU). An interesting twist was the cyclical Materials ETF (XLB) given the heavy chemical mix and the ability of US petrochemicals names to see upward pricing power in the Iran global meltdown. The US producers maintain access to lower cost natural gas feedstocks.

For bond ETFs, we see 6 of the 7 in negative range with the short duration UST 1Y-3Y ETF (SHY) very slightly positive. We covered the UST curve dynamics in this post-Iran mess in a commentary posted yesterday (see UST Deltas: Elevation Realities 3-29-26). The to-and-fro on inflation risk vs. cyclical pressures on payrolls will keep bulls and bears armed with talking points, but the potential for stagflation is on a scale we have not seen since the early 1980s.

Trump was out this morning with escalation threats again and deadlines ahead. Putting war crime threats in print (power plants, water, etc.) is not a PR enhancer with allies. The potential response from the Houthis adds one more major threat to shipping costs and supply and even more importantly a fresh potential oil supply shock via the Bab-el-Mandeb Strait. The threatened actions against Kharg Island and Iran power plants would take the Iran War to a radically more intense level.

The trailing 1-year still impresses at 27-5 as the numbers keep benefiting from earlier results in 2025. The BDC ETF (BIZD) is the outlier at -19.3% with Financials (XLF) in second to last at only -3.26%. Homebuilders (XHB) and Real Estate (XLRE) are showing the adverse impact of the UST yield curve. The Equal Weight NASDAQ 100 ETF (QQEW) joined the 5 negative lines for the past year.

The top tier shows E&P (XOP) and Energy (XLE) well ahead of the pack. The Tech ETF (XLK) is still in the top tier despite the -9.9% performance over the last 3 months. A notable ranking for LTM is the fact that Russell 2000 is ahead of the NASDAQ and S&P 500 despite the small caps being the first benchmark to post a correction in this recent sell-off. The correction parade included the NASDAQ and the Dow to end last week with the S&P 500 a short distance away from the magic -10% correction line. We see a rally today (Monday morning) in stocks and bonds after a rough week.

See also:

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Producer Price Index Feb 2026: Getting Warmer 3-18-26

Industrial Production Feb 2026: Capacity Utilization 3-16-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

PCE Inflation Jan 2026: Personal Income & Outlays 3-13-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

Employment Situation Feb 2026: Payrolls Get Ugly 3-8-26

UST Deltas: Elevation Realities

Glenn Reynolds, CFA — Sun, 29 Mar 2026 18:45:09 GMT

Higher tariffs, energy costs, and UST supply are not all that magical.

The combination of Iran side effects and lingering tariff uncertainties is the enemy of duration given the UST trends, but the scenarios also bring materially negative fundamental factors into play at the industry and company level on a global scale.
The impact on mortgages has been damaging with Friday closing at 6.64% for 30Y mortgages. The shifting FOMC odds now point at hikes in 2026, so we can expect a lot of noise from the White House during a Fed transition period that is not even set yet with the DOJ think tank playing games on Powell and some Senate types not happy.
Lurking in the background is the USMCA review that will come at a crucial time when Trump sees worsening relations with all major trade partners around support for his chosen geopolitical game plan. China has much to worry about in the Middle East.

The commentary below builds off a recent LinkedIn post of ours.

The chart updates the YTD UST curve deltas as the market wrestles with inflation anxiety around Iran fallout and gauges how badly the odds of FOMC easing have been damaged. We now see FedWatch showing a higher chance of hikes in 2026 than cuts.

The more intensive the media coverage of the Strait of Hormuz, the more markets hear about the full scale of the supplier chain impacts that go well beyond oil and LNG and spill into a wide range of downstream production supply risks and unit cost pressures.

We have the Houthis in the picture now getting warmed up as well as yet another oil volume threat given the importance of the Red Sea shipping routes and the Bab-el-Mandeb Strait. Oil is the main focal point, but any escalation into the Red Sea would also flow into broader shipping and freight costs overall.

The relationship of cost pressure to pricing is a natural one as the market knew even if the White House was still learning (maybe). Even if the monetary purists will not call it “inflation” and take the “transitory” or “one time” interpretation, more Iran fallout would lead to even more erosion of affordability for the “household basket.”

The threats from Iran fallout cut across the full spectrum from high value-added to commodity-like products. We hear about market setbacks from semiconductors to fertilizers, organic and inorganic chemicals, pharma ingredients, and metals (notably aluminum) among others. Handicapping that into inflation targets from PPI to CPI across regions and subsectors is no small challenge for the burdened planners and economists.

The significance of low-cost power (notably electricity) in the Gulf covers a lot more than just fertilizer/metals. Even data centers are on the alert to risks of escalation and scenarios of more missiles and drones flying (and perhaps boots on the ground). The immediate speculation is around which military actions will amp up (82^nd Airborne drops, Marine landings, bombing escalation of energy assets and power plants, island seizures, etc.). The decisions could bring an exponential increase in secondary and tertiary multiplier effects. Extreme escalation could even pull in Iraq into more action given the heavy Shiite mix in its country and armed forces.

There are also the inherent knock-on effects of rising costs across the supply chain for materials and components as costs need to be eaten or passed on. That means Asia and Europe where exports to the US could have a price impact. At least the dollar is recovering, but that comes with higher rates and higher costs for nondollar economies to buy dollar-based energy and food (notably ag commodities).

The above chart breaks out just the past week’s UST deltas. The front end got a little relief.

The “FOMC Vegas Line” says hikes more likely than cuts….

The shifting odds in monetary policy are something you cannot blame on Powell. There are 19 bodies in the dot plot with 12 FOMC votes (not the 7 Board of Governors). Trump’s foreign policy actions are driving the bus, and the Fed will need to react under its dual mandate (price stability, full employment). We will get a slew of employment data this week including JOLTs, ADP, and the payroll data on Good Friday. The Iran wildcard shifted the weight back toward price stability from payroll unless the jobs data says otherwise.

The impact on the UST curve as shown in the chart is in flux. We already have seen material, stark revisions of FOMC handicapping and mortgages are climbing. The Mortgage News Daily (“MND”) and Freddie Mac 30Y numbers are on the rise with MND posting 6.64% Friday close. Freddie Mac 30Y was set Thursday afternoon at 6.38%, which is up from 6.22% last week and down from 6.65% last year at this time.

In terms of the “Vegas line” on FOMC (i.e., CME FedWatch), we can look to the Oct 2026 FOMC meeting as a guide. As we go to print, we see 74.5% odds of fed funds unchanged, 23.0% odds of 1 hike, 2.4% odds of 2 hikes, and the odds of 1 cut at a cool 0.0%. As of 1 month ago, the odds of 2 cuts by Oct 2026 was over 35%. That has been a very dramatic swing in the handicapping with a lot still to play out.

You can link to the FedWatch site and go meeting-by-meeting for shifting odds. The odds of a fed funds hike rise gradually into June (7.7%), July (9.5%), Sept (20.4%) and then Oct (23.0%). That was from Sunday morning post time.

The above chart is a simple YTD price performance chart of the short duration 1Y to 3Y ETF (SHY) vs. the long duration UST 20+Y ETF (TLT). It is a low ambition chart that breaks out how the bond ETF curve risks played out so far in 2026. We see both in negative territory YTD in price returns. Duration took a hit on the curve shift YTD.

For the TLT, the 1-month return as of Friday was -5.6% across a timeline when many were still talking about FOMC easing. As evident in the time series, TLT was shaping up as a winner into February and then reversed course with Iran and is now back in negative range. We covered those shifting odds on “cuts vs. hikes” in the prior chart. SHY for the 1-month was a slight negative at -0.68%.

The above swings unfolded during a period where we still heard Powell blamed by Trump for everything and Trump’s own policies blamed for nothing. That is his right to indulge, but the 19 (12 + 7) dots in the dot plot are more than one economist with opinions. They know as a fact the “buyer writes the check” for the tariff (Trump still says the seller and selling country pays. That is false.). The fact that Trump sticks to that version of “facts” on tariffs is alarming. Pride – whether admission of error or just being wrong – dictates reality. Export that mentality to “war decisions,” and that offers troubling signals.

If an asset allocation strategy is pondering the basic, high level asset allocation decision of equities vs. bonds, the last 60 days tell a story that life just got more complicated. Over the past month, the UST curve took a decided turn for the worse as detailed above. That backdrop faces considerable uncertainty in the Iran War and related reverberating effects that hit many different subsectors in the US as well as bringing severe global impact (see Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26).

The above chart updates the running 10Y UST vs. the Freddie Mac 30Y mortgage (Freddie is set on Thursday). We see the 5.98% recent low for 30Y ahead of the invasion. The 10Y UST drives 30Y mortgage rates and it has been going in the wrong direction.

The above chart updates some notable points in history for 30Y mortgages and the UST yield curve. The dates include Friday’s numbers and the yield curve and mortgage rates at the end of the peak homebuilding year of 2005. We also include mid-2006 as the quality erosion in RMBS (notably subprime) was starting to rattle some corners of the market.

That mid-2006 period was before more serious problems in 2007, when hedge funds started blowing up and mortgage banks were seeing the crisis unfold in the summer of 2007 (e.g., Countrywide was soon rescued by BofA) on the way to the systemic bank crisis of 2008.

We highlight that current mortgage rates just moved ahead of 2005 with the next stop potentially at the mid-2006 levels. Things did not go well for housing after that. We also highlight the flat yield curves of late 2005 and mid-2006 and how that contrasts with the upward slope of the UST we see today. Some FOMC tightening in 2026 or some upwards shifting by the UST curve would raise a lot of bearish lookback commentaries.

The above chart updates the 2Y to 30Y slope using the shorter time horizon while the chart below details the long-term time horizon from 1984. We see the curve slope effects of rising inflation and then into a tightening/easing cycle with the recent 2Y to 30Y at +110 bps, which is only modestly below the long-term median of +122 bps.

The period from early 2021 to current times was very distinctive on the journey from ZIRP and then across the most intensive inflation cycle since the early 1980s. The 2022/23 period saw a relatively brief but very successful tightening cycle that triggered no recession. By the end of 2024, CPI was back straddling the 3.0% line at 2.9% in Dec 2024 (see CPI Feb 2026: It’s Making You Wait… 3-11-26). Trump likes to pretend his term started in Jan 2025 at 9.1% inflation.

During 2022, the economy pushed right through the worst of it with low unemployment and higher rates of personal consumption expenditure (PCE) growth (see Unemployment, Recessions, and the Potter Stewart Rule 10-7-22). Financial assets (debt and equity) were slammed in 2022 by the tightening cycle and market worries but came storming back in 2023-2025 (see Total Return Quilt Across Asset Classes 2008-2025 1-2-26).

The challenge now has more fundamental factors at work that are hitting economies hard globally with the worst of the lag effects ahead.

The journey across the cycles – economic or monetary – shows a wild ride with the 2Y to 30Y slope posting material moves for bond asset allocation in the “duration vs. credit” decision.

A stagflation scenario makes the allocation process especially difficult. That will be the challenging exercise in allocation decision-making ahead. We have not faced this type of decision since the period when the modern capital markets and corporate bonds were just getting launched in debt markets (early 1980s).

The severity of the “Iran trap” and very unstable and dysfunctional US political backdrop will be brutal to navigate. Even getting Warsh nominated is being held back by the brain trust at the DOJ investigating Powell in a politically motivated intimidation action. The leadership of the FOMC is thus under a cloud for a while.

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Producer Price Index Feb 2026: Getting Warmer 3-18-26

Industrial Production Feb 2026: Capacity Utilization 3-16-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

PCE Inflation Jan 2026: Personal Income & Outlays 3-13-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

Employment Situation Feb 2026: Payrolls Get Ugly 3-8-26

Market Commentary: Asset Returns 3-23-26

Glenn Reynolds, CFA — Mon, 23 Mar 2026 19:20:57 GMT

A Whole New World…for 5 days?

The wags are already out there declaring “Taco Monday” but the ability to manipulate markets with a combination of brinkmanship and false deal chatter will remain a tactic to watch… that is, until it stops being a tactic.
The matchup of Trump whims vs. Iranian ideologues is a very challenging game when one side is offered extinction (or submission) and the other side shows a lack of consistency and confuses the world with so many conflicting statements. The backdrop will remain an endurance contest until the offramp materializes and Hormuz opens to a wider range of nations.
The rising cost of energy remains a fact of life with the question of “how high and for how long” the ongoing handicapping exercise. The big decline in oil today still sits on a very thin layer of assumptions. As we saw in the FOMC odds-making data (e.g. FedWatch) the probability has now shifted to negligible odds of FOMC easing in 2026 with higher odds of hikes by the fall per FedWatch (see Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26).
Given the whipsaws of information and disinformation that are intrinsic to this high stakes “game theory” (if it can be called that), we saw the VIX swing to 31 before dropping back to just over 25 as we go to print. The Hormuz situation is being managed in a way that helps Iran (and Russia) and takes some pressure off China and others in Asia who are getting very annoyed. Meanwhile, Europe and Trump hold tighter to their mutual disdain (see VIX: Market Still Not Getting the Vapors 3-6-26). That could spell trouble later on trade.

The above table updates the running returns across a range of timelines for our high-level debt and equity benchmarks. We line up the indexes in descending order of 1-year total returns.

The ugly 1-month numbers are apparent in the across-the-board negatives for debt and equity. For the rolling 3-months, only the Russell 2000 small caps generated a minimal positive return of just under +1.0%. Looking back over 6 months, large caps still struggled in the red zone while Russell 2000 and Russell 3000 value were at least positive. Growth benchmarks were negative with NASDAQ at -4.0% and Russell 3000 growth at -8.5%.

The rolling return visual

There is not much mystery in the return symmetry over 1-week, 1-month, and 3 months with the heavy weighting of negative returns. The story is clear with the word “correction” creeping into the market commentary lately.

The reality is corrections are quite common across cycles, so that is routine across time. The 2018 volatility in Trump 1.0 saw some corrections and even bear market commentary after a summer of 2018 that also saw some record highs (see Histories: Asset Return Journey from 2016 to 2023 1-21-24). Few in Washington seem to remember that 2018, back during Trump 1.0, saw negative returns on all the major bond and equity indexes. Cash was a top performer with sub 2% returns. 2018 continued what would be a record expansion from mid-2009 until COVID in Feb 2020.

What makes this market different is the long-term speculative flavor in tech and AI and now the turbocharged short-term speculation of geopolitics and how an Iran War will play out. Relative to the fruitless wars in Afghanistan and Iraq, a sustained clash with Iran would be without doubt the most unpredictable kind of war. That is especially the case given the history with the US vs. Iran, the decades of preparation by Iran for a war with the US, and the radical extremism of a heavily indoctrinated nation of over 90 million. Trump is not dealing with a spineless GOP Congress. This is the “bomb vest crowd” and not a limp and lame Senator looking to duck a primary. Trump may be using the wrong tactics.

Further below, we also look at the YTD “Tech Check” peer group of 32. That YTD timeline had a top quartile with negative returns in the bottom 2 slots with the Russell 2000 and Midcaps. The YTD charts for the tech check showed a 6-26 score for positive vs. negative.

Tech was the defining broad sector play with “AI fixation” but that started to go awry on AI fallout speculation. Now we add a damaging Iran War backdrop, energy spike, and supply crisis not only in energy but also across numerous critical supplier chains (helium sulfur, fertilizers, pharma inputs, etc.) that flow into pain for tech and agriculture among others.

The Magnificent 7 heavy ETFs…

The above table updates the tech bellwethers against some broad benchmarks and notable subsector ETFs. For the week, we see a single line in positive range with the Semiconductor ETF (SOXX). All the Mag 7 names are negative and the same for the collective Mag7+3 (with Taiwan Semi, Broadcom, and Oracle). The Equal Weight NASDAQ 100 ETF (QQEW) was second with a negative return while Tesla was on the bottom at -5.9% and NVIDIA second to last at -4.2%.

We see a lot of negative returns across 1-month and 3-months with Tesla uglier than most back to 3 months. Even NVIDIA is in the red back to 6 months. Microsoft is in the red all the way back to trailing 1 year. Meta and Amazon generated negative returns back to 6 months. This backdrop is not 1999-2000 with the wide array of cash bleeders, but the valuation excess debate will not go away.

The software leveraged finance excess will remain a hot topic in private credit and how more trouble could reprice higher risk credit alternatives and lead to more dramatic HY bond repricing from the bottom up, but that is a story for another time.

The commentary below is mostly a cut-and-paste from an earlier post on LinkedIn on Sunday with some additional inputs:

The above chart posts the weekly returns for 32 benchmarks/ETFs we monitor. The 6-26 positive-to-negative score marked an improvement from the 3-29 last week. That was a low bar.

Narrowing down themes is hard since it was a week where most everything went wrong even if energy assets performed well. Rates, cyclical expectations, fear of stagflation and myriad scenarios including steady escalation of a damaging war has dramatically shifted the odds of Fed easing and rising odds of FOMC hikes.

We cover the revised probabilities from FedWatch in a separate note (see Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26). The news is not good even if Trump once again backed down by Monday on his threat to escalate by bombing civilian power assets (actually a war crime). That action would have crushed markets and set off chain reactions in the Gulf. The stagflation scenarios remain stubborn.

The checklist presents a range of fundamental, financial and geopolitical risks subject to decisions that face a lot of scrutiny. There is no shortage of “March of Folly” history where leaders ignore the realities of critical risks that cause wars and bring severe consequences. The rise of nationalism (think Vietnam), political ideologies (think China), ethnic enmity (think Balkans), religious factors (think Middle East) or racial lines (think South Africa) have brought their share of brutal wars and mass death.

Power-hungry, arrogant leaders often think they know more than everyone else (whether “the Best and Brightest” of Camelot or MAGA) and often fail to properly factor in underweighted risks. If they fail, they go about finding someone to blame when it all blows up. We are now in one of those N+1 moments.

Bad decisions and flawed assumptions are reflected in the current misinformation waves and recurring brinkmanship. The idea seems to be you just threaten to kill people to get them to submit. It is not a new strategy, but it is usually not plan A when you threaten the “martyr” and “bomb vest” culture.

Away from war scenarios, interest rate sensitivity and global cyclicality remain headwinds with Base Metals (DBB) last in weekly returns and Utilities (XLU), Materials (XLB), Homebuilders (XHB), Consumer Staples (XLP) and Real Estate (XLRE) among the worst performers. Materials (XLB) faces hydrocarbon-heavy costs and cyclical end markets.

The S&P 500 posted positive returns in only 2 of 11 sectors with Energy and Financials. In the ETF mix, XLF faced tough headlines and negative returns for the 1-month and 3-months. XLF is 2nd to last over 3 months with only Consumer Discretionary (XLY) worse. When financials and consumer names both struggle, that should ring some bells.

The 6 of 32 positive include 3 across E&P (XOP), Energy (XLE), and Midstream (AMLP). We see stragglers such as Financials (XLF) and the BDC ETF (BIZD) back in positive range this week. BDCs were a rock bottom performer over LTM at -15.6%.

Transports (XTN) was barely positive after posting negative double-digit returns over the trailing 1-month on airline pain and the potential for freight trouble as fuel cost soar and working capital dislocation could plague trade flows.

The commentary below is mostly a cut-and-paste from an earlier post on LinkedIn on Sunday with some additional inputs:

The above chart updates the returns on our “Tech Check” names that we started tracking with the AI replacement panic before the Iran War pyrotechnics. This week we added 4 more names to the list for a total of 32 companies, market benchmarks, and ETFs.

In descending order of market cap, we added Micron (MU) with $477 bn in market cap, IBM with $227 bn, ServiceNow (NOW) at $115.4 bn, and Adobe (ADBE) at over $101 bn.

IBM checks off a box as a legacy diversified tech and services operator. NOW and ADBE are in the IGV ETF. Of the four added, Micron was ranked #1 in performance YTD with IBM in the 3rd quartile and NOW in the bottom quartile at a YTD of -27.9% just ahead of ADBE at -29.1%.

The return score weighed in at 8-24 for positive vs. negative with fresh signs of a slow SaaS rally as AI displacement fears struggle to find the right valuation. Intuit (INTU), Zillow (Z), FactSet (FDS), and Salesforce (CRM) were in the top quartile this week. All four of those are deeply negative YTD and in the bottom quartile returns.

The top tier performers for this week were Applied Materials (AMAT) at #1 followed by Advanced Micro (AMD) at #2 with Qualcomm (QCOM) and the Semi ETF (SOXX) in the bottom two slots of the top tier.

The Mag 7 was entirely in the red with 4 of 7 in the bottom quartile (TSLA, NVDA, MSFT, and META). We see Alphabet (GOOGL) near the upper end of the second quartile with Apple a few slots below that, also in negative range. Within the Mag 7+3, we see Oracle (ORCL) and Broadcom (AVGO) in the bottom quartile with Taiwan Semi (TSM) just across the line at the bottom of the 3rd quartile.

Making a top quartile spot only required a positive return. The NASDAQ was negative and in the third quartile with the S&P 500, Midcaps, and the small cap Russell 2000. The Software ETF (IGV) was at the top of the third quartile.

We await the market wrestling with how to treat the Iran War fallout and how that could impact corporate sector IT budgets, AI economics, and how the software players will navigate what is expected to be some credit contraction headlines ahead in private credit.

The 1-month returns for the broader peer group of 32 benchmarks and ETFs weighed in at an ugly 3-29 positive vs. negative. The 3 positive lines were comprised of the E&P ETF (XOP), the broad Energy ETF (XLE), and midstream energy ETF (AMLP). We see 5 of the 8 names in the top quartile with negative returns for the month. That tells the story by itself.

The bottom tier shows the increasing worries about UST curve dynamics and stagflation worries. We already detailed the radical shift in FOMC handicapping, and the steep UST curve in a separate commentary (see Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26).

The bottom performer was Homebuilding (XHB) as residential struggles in this market (see New Homes Sales Jan 2026: The Nays Carry 3-19-26, Existing Home Sales Feb 2026 3-10-26). We see some of the commodities sensitive cost structures feeling the pain and the same for cyclicals. The Transports ETF (XTN) has been hit hard as jet fuel spikes and diesel costs soar. Airlines (excluding Delta) have been crushed even if they see some relief today on the oil plunge of the day.

The 1-month “tech check” names posted a score of 8-24 on many of the same issues we discussed in the 1-week section. The challenge for tech valuation is increasing now given the inherent cyclicality of many customers and the potential need to revisit expense and capex budgets.

Challenges such as power costs will keep the focus on unfavorable energy CPI trends (even ex-oil) as electricity and piped utilities gas have been major headlines. Now we add oil into the equation along with soaring downstream products (gasoline, jet fuel, diesel).

We see the top quartile posting positive returns and everything else negative. Within that top quartile mix, we see some gradual recovery from the pain delivered in the SaaS panic. The YTD negative returns are broken out in the next chart. The top quartile in the 1-month returns includes such names as Intuit (INTU), FactSet (FDS), ServiceNow (NOW), and Salesforce (CRM). As detailed in the next chart, all 4 of these names remain deeply negative YTD. We see Zillow still in dead last YTD as that name had more than its share of other challenges.

The YTD Tech check tells a clear story with a score of 6-26. Two of the top quartile names are negative and comprised of Midcaps S&P 400 ETF (MDY) and Russell 2000 at #7 and #8, respectively.

The winners YTD include Micron (MU) at #1 with a dramatic ride higher of +48.2%, Applied Materials (AMAT) at #2 with 38.9%, and Intel (INTC) #3 at 18.9% with the SOXX ETF at #4. Taiwan Semi (TSM) and another legacy name, Cisco (CSCO), rounded out the 6 of 32 running with positive returns YTD.

Sitting on the bottom is the collection of names impacted by the AI displacement panic. We see Zillow (Z), Intuit (INTU), ServicesNow (NOW), FactSet (FDS), and Salesforce (CRM) all worse than a -26% return YTD. Adobe (ADBE) was also in the bottom mix at -29.1% as various software names drove the Software ETF (IGV) to -21.4% at the bottom of the 3^rd quartile.

The 3-month mix across 32 benchmarks and ETFs stayed relatively consistent with a score of 10-22 and energy related ETFs (XOP, XLE, AMLP) holding down the top 3 spots with Utilities (XLU) a distant #4.

We see no tech-centric names in the top quartile, but the benefits of the earlier sector rotation saw the top quartile feature Industrials (XLI), Materials (XLB), and Consumer Staples (XLP). Real Estate (XLE) managed to edge into the top quartile despite the UST curve setbacks.

The bottom quartile mixed in some tech with interest rate sensitive equities (XHB) and some asset quality concerns found in the BDC ETF (BIZD) and Financials (XLF).

The trailing 1-year score of 29-3 is still living off the “old days” with the top quartile featuring Energy (XOP, XLE) on top and the Tech ETF (XLK), NASDAQ, and Communications Services (XLC) in the upper tier mix. Industrials (XLI) has been a steady, solid performer with a display of cyclical resilience and solid earnings trends. Small caps had a good year and beat the S&P 500, but that has been faltering of late.

Producer Price Index Feb 2026: Getting Warmer 3-18-26

Industrial Production Feb 2026: Capacity Utilization 3-16-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Market Commentary: Asset Returns 3-15-26

PCE Inflation Jan 2026: Personal Income & Outlays 3-13-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

Market Commentary: Asset Returns 3-8-26

Employment Situation Feb 2026: Payrolls Get Ugly 3-8-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Glenn Reynolds, CFA — Sun, 22 Mar 2026 20:00:38 GMT

All I said was “We don’t use the Strait.”

The “we don’t use the Strait” line is on a very long list of statements that Trump’s own terminology would qualify as “low IQ and stupid.” A globally connected market is a reality whether with or without tariffs. The Strait is a crucial factor for all major US trading partners. Under the Powell “you break it, you own it” rule, the Iran War and energy fallout is another case of “the buck stops everywhere else.”
The game of framing secondary and tertiary multiplier effects of policy actions has never been a strength of Team Trump or the economic mouthpiece echo chamber at the White House (think “seller pays the tariffs”). Hasset saying the economy would not be affected but “the consumer might be” was a new low. National Retail Gasoline hit $3.94 per gallon (3-22-26, Source: AAA) and is up 35% in a month. Diesel, which is literally a key driver of freight costs, rose to $ 5.25 or +41% higher in one month.
The energy market chaos is now juxtaposed against the material tech valuation uncertainty that has spilled over from AI. Inflation worries are heightened. The FOMC outlook is now posting odds that favor “no easing” for the remainder of 2026. We even see rising tightening odds. Trump can’t blame Powell or Biden for this one (but he will). Higher short rates or any bear steepener of the UST curve undermines sea level economics (demand, unit costs, working capital, durable goods financing, and more), hurts valuation of growth equities, and falls directly on the housing sector via mortgage rates. The Mortgage News Daily survey ended Friday at 6.53%.
The Fed meeting gave the impression that the SEP report and dot plot should be discounted. The SEP report saw mixed adjustments to the overall 2026 expectations given the array of highly uncertain variables. Even Powell essentially said (our paraphrase): “If you were going to skip a SEP report, this would be the one.” We revisit the overall flavor of FOMC updates and the dot plot further below.
The geopolitical policy incoherence on the Iran War game plan dictates energy market handicapping (escalation risk by US, duration of Hormuz closing, damage to infrastructure now or potentially coming, Gulf nation planning for their operations). The discussion of how to frame inflation fallout is complex, but monetary policy predictions lean toward “do nothing for a while.” That is what the market is signaling. The consumer reactions and corporate budgeting plans in turn will set the bar for the cyclical outlook with the consumer (PCE) at 68% of GDP and small business the key driver of payroll. Fixed investment plans (capex) could shift along the GDP line mix.
The global nature of oil and gas supply/demand imbalances means global cost trends and supplier chains face turmoil regardless of the US being a major oil exporter. The US energy players will mint cash flow. So will the Canadian oil sands. On the other hand, the semiconductor chain (helium has been a hot topic), pharma ingredients (downstream derivatives), the fertilizer chain, and myriad unit cost pressures along the supplier-to-OEM chain will be headwinds. Cyclical end market demand comes into play as moving parts across US export demand and US import pricing. Data centers will face new challenges in costs and project economics. That gets back into the AI longer term valuations.

The above chart updates the equity market fallout across some of the major trade partners using benchmark indexes. We detail US, Europe, China, and Canada above. The returns on such ETFs reflect the effects of Iran, and it is not pretty. We have commented on these time series frequently. The US had been lagging in last place through much of 2025 on weak currency trends. That has now shifted as everyone tanks.

What we see since the Iran War started is that the US has moved up to #2 behind Canada but everyone has faded sharply. The Iran fallout hits everyone even if you don’t – in Trumps words – “use the Strait.” For the record, that statement is factually incorrect since the Strait “supplies the suppliers” with Europe, China, Taiwan (and more) very much influenced directly by the Strait. Similarly, the tech sector has been getting analyzed by industry experts on how the supplies out of the Gulf region are critical drivers of tech activity in Taiwan and South Korea, who are both selling critical tech goods to the US. That certainly matters to the US. So does the fertilizer cost issues in the ag sector.

FOMC update: small moves, big questions

The FOMC is not getting the focus it was getting in 2025, with minimal expectations of near-term action priced into the market. For a quick summary of the SEP moving parts, we line up a few points below for those who took Powell’s unspoken (sort of) advice to discount current forecasts in light of the magnitude of the risks and moving target variables:

Dot Plot: The score was 7 of 19 votes calling for no change in 2026 and 7 calling for 1 cut as “appropriate.” There were 2 dots calling for 2 cuts, 2 votes for 3 cuts and 1 calling for 4 cuts. The 4 cuts would be in the 2.5% to 2.75% range. As of now, Trump has been demanding a negative real fed funds rate.
GDP Growth: The median ticked higher to 2.4% in March from 2.3% in the December meeting, so it is better than what we saw in 2025 after the weak 4Q25 numbers (see GDP 4Q25 Second Estimate: Sharp Move Lower 3-13-26). The 2% handle GDP growth is standard mediocrity in the new millennium. As a reminder, annual GDP growth was 2.1% in calendar 2025 vs. 2.8% in 2024 (just don’t tell Hassett).
PCE inflation: The headline PCE inflation median ticked up to 2.7% for 2026 from the 2.4% in December 2025. The energy cost and tariff cost estimates require a Ouija board at this point to commune with dead doves and stuffed hawks. Payroll will be the swing factor but with the first stagflation threat since the Volcker years.
Core PCE inflation: The Core PCE median rose to 2.7% in March from 2.5% in Dec 2025. That is still well above target, and that might be one reason why we saw a single hike cited as appropriate on the dot plot in 2027 (none for 2026). Odds of hikes in 2026 are rising on FedWatch.
Fed funds rate: the median projected fed funds rate for 2026 was 3.4% again in March or the same as in the December meeting.

The “Summary of Economic Projections” (“SEP report”) did not seem to have much impact at all with the Iran War ramping up, Trump raging, energy costs soaring with supply shrinking, and macro variables moving. The fact that the FedWatch odds have shifted so dramatically across the week was troubling and we just saw a whole new set of numbers roll into the FedWatch site today (Sunday).

If we use the Oct 2026 Fed meeting as an example of shifting odds, the volatility of these odds are picking up. We had been updating the odds this weekend and this morning before we looked back at the data, and it has been radically overhauled on the FedWatch site. That tells a story of the rate uncertainty.

The odds of no action in Oct 2026 was 92.0% to end the week. Those just shifted today to 59% odds of unchanged. Now the odds of one rate hike are at 29.2%. One week ago, the odds of a rate hike in Oct was 0%. That is a major shift in the numbers updated as of today. Last week, the odds of a cut by Oct 2026 was 50%. The odds of a single cut in Oct 2026 are now down to 6%. Two hikes is now at 5.4%.

Handicapping how the slope of the UST curve will shift in longer maturity segments of the yield curve has been a major wildcard since the easing cycle began back in Sept 2024. The bear steepener that unfolded after the initial bull flattener in fall 2024 and into 2025 has been tough to shake (see The Curve 12-15-25). We could see a growing worry over an upward UST curve shift.

The above chart updates the DXY trend line showing the recovery of the dollar since the Iran War kicked into high gear. We track that against the 30Y UST. The good news is that the currency risk might now be down the list for international investors. The flip side is the international investors can worry about US inflation, rising rates, and an ungodly increase in UST supply to fund much higher deficits.

“War is hell” is an old one even if Hegseth fails to footnote Sherman (we suspect Hegseth might have desired a different outcome than Sherman. Too DEI.). “War is expensive” also. We will see if any “Supplemental” bill to fund the Iran War expenses (headlines signal $200 bn) will include revenue proposals (aka taxes). Another theory is that the supplemental will be rolled into the $1.5 trillion defense ask for the 2027 budget, or essentially a 50% increase talking point even before the Iran War activity.

The time series updates the 30Y Freddie Mac mortgage benchmark (set each Thursday), and we see 6.22% or around 30 bps below where the Mortgage News Daily survey closed Friday (6.53%).

As housing support legislation gets debated, any potential benefit gets wiped away by Iran War effects as mortgage rates rise. This rate pressure can hit new home sales (see New Homes Sales Jan 2026: The Nays Carry 3-19-26, Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26) as well as existing home sales (see Existing Home Sales Feb 2026 3-10-26).

The golden handcuffs in existing sales just got tighter on refinancing costs from the heavy mix of 3% and 4% mortgages held by potential sellers.

The above chart frames the current UST yield curve and Freddie Mac benchmark (horizontal line). The current 6.22% Freddie Mac 30Y is flat with the rate posted at the end of 2005, which was the peak homebuilding year of the housing bubble. We also break out the differential of the Freddie 30Y mortgage vs. the 10Y UST. The current differential is moving closer to the mid-range between the bubble period of 2005 and 2006 when a growing share of RMBS quality was getting “found out” as very high risk in the structured credit boom.

The yield curve now also presents a very different slope than what the market saw in 2005 and 2006. That period saw flat yield curves and an upward shift from 2005 to 2006. The rule of thumb is that flat signals peak or possible recession risks. The other rule of thumb is that stagflation risk throws a lot of rules out the window.

We know what came after that 2006 period as the credit markets melted down in 2008 after freezing in the summer of 2007. The fact that the S&P 500 kept on rising to highs well into Oct 2007 despite the credit market pain is worth remembering.

The above breaks out the UST deltas for the past week in what was a bad news week for the yield curve. As we cover in a separate chart set, all the bond ETFs were negative in what was even a worse week for equities.

The above chart updates the running YTD UST yield curve deltas. The +44 bps on the 2Y UST reflects serious doubt on FOMC easing unless Trump can get Pirro to investigate the entire FOMC. We assume “Judge Jeanine” is still trying to get through Monetary Policy for Dummies. Alternatively, Trump can have Markwayne Mullin threaten to beat up Warsh and any other takers.

As we cover below, there is ample room for the 3M to 10Y slope to steepen based on historical medians. The energy and tariff pain adds to the strain on global “alliances” and potential UST demand challenge (as in ongoing insults and alienation do not promote UST exposure). We also will face a lot more trade clashes in 2026 on Trump tariff action. The record US deficits and funding needs make for a strain on bull flattening optimism if allies start to dial back UST holdings. Stagflation as a threat complicates the journey to a flattening outcome.

The above chart updates the 3M to 10Y slope since 1984. As a reminder, we chose 1984 as a starting point to isolate the distorting visual effects of the record steepening and inversions of the 1980-1982 stagflation double dip. That period saw Volcker prevail in the war on inflation (CPI 1% handle reached by1986).

We detail the UST segment slopes in the box with current levels and long-term medians. The lack of confidence in FOMC cuts during 2026 leaves the shapeshifting debate more about the 10Y UST area. As detailed earlier, the 10Y UST is higher by +21 bps YTD with 3M UST +7 bps higher. The 2025 period posted a bull steepener. As of now, the 2026 action has been a bear flattener from 2Y to 30Y.

Producer Price Index Feb 2026: Getting Warmer 3-18-26

Industrial Production Feb 2026: Capacity Utilization 3-16-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Market Commentary: Asset Returns 3-15-26

PCE Inflation Jan 2026: Personal Income & Outlays 3-13-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

Market Commentary: Asset Returns 3-8-26