Macro4Micro: Market Commentary

Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Refined Product Spikes: The Putin and Trump Effects

Glenn Reynolds, CFA — Sun, 13 Sep 2026 17:37:39 GMT

The chart details the price per gallon for diesel and regular gasoline from late 2021 through Friday. The current diesel spike is a major problem given its role in freight and logistics service costs (notably in trucking), the agricultural sector, and broader array of equipment markets. It brings a cost shock that will find its way into pricing or margins as well as the health of many small businesses. The 2022 and current price spikes are radical outliers in the time series.

Considering the scale, a glaring fact of political life is that you seldom hear about the Putin energy spike from Team Trump on the Biden era inflation pain. It is no different with his Congressional flock of sheep as they pretend the massive effects of the Putin invasion did not tie directly into the US inflation pain of 2022. It is almost as if the fact had been intentionally removed as part of partisan talking points. The main goal is just to say “Biden, Biden, Biden” over and over. Trump says Putin would never have dared invade Ukraine had Trump been President but we don’t see Putin backing down since Trump’s been in office. Quite the opposite.

Like the Putin aggression of 2022, Trump’s current Iran fiasco has done a lot of damage to CPI and PPI (CPI Aug 2026: Staying Stubborn, Not Accelerating 9-11-26, PPI August 2026: Leading Indicator Signaling Struggling 9-10-26). The PPI inputs were bad this past month but CPI less so. The PPI lines are feeling the latest shock, and those inputs in theory flow into the CPI and PCE numbers for September and beyond.

The 2022 chaos had the added challenge of over-stimulated, ZIRP-driven demand on the way into March 2022 and beyond. The massive supply-demand imbalances coming out of COVID had effects like the glaring example of 40% and 30% handle used car CPI. We also saw double digit CPI in new cars (see CPI: The Big 5 Buckets and the Add-Ons 11-10-22).

Those were strange times, and Team Biden and the Fed did plenty to make it worse. The effects of supply and demand do matter. We suspect the auto dealers were not sitting around chatting about monetary aggregates in the parking lot back in March 2022.

That said, the failure of Team Trump to cite that oil and refined product spike in 2022 reeks of partisan fact and concept avoidance (hardly an isolated event in politics). The same misinformation applies today. It is safe to say that Biden did not invade Ukraine. As we head into coming weeks, the events seem to be getting worse and not better with the Houthis and Iraqi elements going after Saudi Arabian oil assets and the Bab al-Mandeb strait under siege (see UST Curve: A Brutal Week 9-12-26). That is a direct result of Trump actions.

Nobody ever lays blame on Putin in Trump World for a big slice of the 2022 inflation. Putin even got a royal welcome and red-carpet treatment in August 2025 that you seldom see. In contrast, Ukraine was chewed out in the Oval Office.

Putin could have at least said, “Sorry, my bad on the oil spike.”

Weekly Tech Check Returns 9-12-26

Glenn Reynolds, CFA — Sun, 13 Sep 2026 01:11:50 GMT

The chart details the weekly price returns on the Tech Check mix of single names, ETFs, and broad market benchmarks. The balanced score of 16-16 shows a higher mix of AI ecosystem names in the top quartile with the bottom quartile heavier in the software names.

The Mag 7 mix cuts across all quartiles with 3 in the top quartile (META, AAPL, TSLA), 1 in the 2^nd quartile (GOOGL), 2 in the 3^rd quartile (AMZN, MSFT), and 1 in the bottom tier (NVDA). The low quartile shows 6 of 8 from the software universe along with 2 semis in Micron (MU) and NVDA.

The winners show DELL at #1, Advanced Micro (AMD) at #2, Qualcomm (QCOM) at #3, and Intel (INTC) at #4, so AI-based names are still at the helm. The Semiconductor ETF (SOXX) weighed in at +1.39% in the upper end of the 2^nd quartile with the Software ETF (IGV) at -2.92% for a 4.3% return differential this week. The YTD differential on SOXX vs. IGV was 79 points as of Friday. That differential was only around 1 point for the past month.

We see the Tech ETF (XLK), NASDAQ, and the tech-heavy S&P 500 hanging around the middle of this Tech Check mix this week. On a YTD basis, the broader NASDAQ and S&P 500 are modestly above the median return of this group at just under 10%. 2026 has been a game of picking winners and losers across the mix of tech broadly in semis and software. There were some very big winners in AI ecosystem names and very big losers in software. The YTD Hi-Lo return differential in this group between #1 and #32 is over 400 percentage points.

Glenn Reynolds, CFA — Sun, 13 Sep 2026 00:19:38 GMT

The chart details a grim week for the benchmarks and ETFs we monitor with a score of 5-27. Asset performance has been a struggle, and the negative vs. positive score is barely better over the trailing 1-month period at 6-26 with all four broad equity benchmarks and bond ETFs in the red.

Of the 5 positive asset lines, we see 3 of 5 from energy with E&P (XOP) at #1, Energy (XLE) at #2, and Midstream (AMLP) at #4. Communication Services (XLC) ranked #3 with only +0.51% and the Tech ETF (XLK) rounded out the top 5 barely positive.

The broad benchmarks were all in the red with NASDAQ negative but still in the top quartile. The S&P 500 was negative at the top of the second quartile. The S&P 500 saw 9 of its 11 sectors in the red. The Russell 2000 brought up the rear among benchmarks in the bottom quartile with Midcaps (MDY) only slightly better at the bottom of the 3^rd quartile. The breadth of poor performance was highlighted by the Equal Weight S&P 500 (RSP) in the red in the bottom quartile joined by the Equal Weight NASDAQ 100 (QQEW).

The US benchmarks were hardly alone with a large swath of indexes in Europe and Asia also negative the past week. Oil markets and downstream petroleum products are making economic life difficult for many. Sovereign yield curves have been getting no shortage of headlines along with rapidly rising UST yields.

The bottom dwellers in the US include the Homebuilder ETF (XHB) as mortgage pressure continues unabated. The Mortgage News Daily survey edged above 7.1% to end the week. The higher quality Freddie Mac mortgage rate priced at 6.76% on Thursday in its weekly reset, up from 6.35% at this point last year. For housing color, we get 3Q26 earnings this week from Lennar (LEN). LEN is one of the Big 2 of homebuilders. D.R. Horton is a Sept 4Q fiscal year, but LEN has struggled in this market.

The monthly payment burden in mortgages is only getting worse at this point, and the tariff wave and related costs are not going to make pricing strategies any easier with a wide range of supplies costing more. We get a builder 3Q26 earnings wave ahead when the Sept earnings season kicks off.

We also see Transports (XTN) getting hit by aviation fuel costs and as the marginal costs in vacation travel intrinsically shave off some leisure and corporate travel spending at the margin (including angry Canadian snowbird bookings). Diesel costs cannot be making life easier for truckers and freight and logistics operators.

The Materials ETF (XLB) is chemical-heavy in issuer mix, and the results there can vary widely based on feedstocks and product mix. BDCs (BIZD) felt some pressure again this week as investors gear up for floating rate liability pressure and questions on the quality trends of the most leveraged subset.

UST Curve: A Brutal Week

Glenn Reynolds, CFA — Sat, 12 Sep 2026 19:22:15 GMT

There goes the neighborhood…

The worst week in recent memory for the UST curve unfolded with the 10Y at 4.97%, just below the 4.99% Oct 2023 highs. The odds of 1 hike for this coming week edged above 87% to end the week. The Mortgage News Daily survey closed the week at 7.12%.
Oil (WTI) ran higher to $104 WTI at one point intraday during the week with the Friday close of just over $100 per bbl Friday for WTI and with Brent just under $105 per bbl. $100 WTI is a long way from the $82 handles just a month ago on Friday August 14.
PPI showed an ugly set of numbers. CPI did not bring a negative surprise while also not offering relief (see PPI August 2026: Leading Indicator Signaling Struggling 9-10-26, PPI August 2026: Leading Indicator Signaling Struggling 9-10-26).
We look at asset return results in a separate commentary, but all the major equity benchmarks were in the red from large caps down to small caps and the 7 bond ETFs we monitor were also in the red. The Homebuilder ETF (XHB) was in dead last in the bottom quartile along with the Equal Weight S&P 500 (RSP) and Equal Weight NASDAQ 100 (QQEW). This highlights the breadth of pain.

The above chart details the weekly UST deltas with the 2Y at +26 bps and 10Y UST at +18 bps to just under 5.0%. This week we get the FOMC answer and see what else Bessent will pull out of his hat.

The above yield curve migration chart shows the move toward the Oct 2023 highs. Note: We see over 4.97% on the 10Y UST at the end of Friday, but Y Charts time-stamped it at 4.96% in its data set.

We like including the 9-16-24 chart in this mix to show where the UST curve was just ahead of the Nov 2024 election. From that point on, the steepening that set in blew away many of the bull flattener forecasts that were in place for 2025. The bear steepener arrived with a vengeance. The recent trends have focused quite a bit on duration pain in the bond asset class.

The 10Y UST is a critical driver of market sentiment and 30Y mortgages, but the move to 5.35% has also generated a lot of headlines even with Bessent’s ineffectual liability management strategies.

The above chart updates the post-Iran UST deltas (bombing started 2-28-26). The policy effects are clear.

The above chart offers a reminder of what the UST curve was doing before Iran. Iran was not a great geopolitical or macroeconomic decision. We are not sure who told Trump that the “bomb vest crowd” would immediately surrender unconditionally. To avoid embarrassment, they just keep repeating “nuclear weapon” after already earlier stating such capacity had been obliterated.

What unfolded was a massive resource choke point in the Strait of Hormuz that spread to military escalation and worsening regional infrastructure damage. We now have the Houthis making their move on Red Sea economic damage with control of Bab al-Mandeb. Weapons stockpiles are already low for the US, so any response to the Houthis from the US will be a challenging decision point.

As reported on Friday, the Saudis have shut down their East-West pipeline that had offered some cushion to the Hormuz shortfall. The estimates we see cited include 4% to 5% of global supply. The EIA cited 8% of total 2Q26 crude oil + petroleum products.

The Red Sea share of total merchandise was reported at 12% of global trade, so the supplier chains could be heading into a new zone of trouble. That could mean even more inflation tied to supply-demand imbalances across the wider array of products. That is notably the case with Europe-Asia volumes.

The above UST deltas updates where the UST yield curve has trended YTD.

The above chart is one we typically include as a memory jogger on the troubled journey from COVID and ZIRP across the tightening and easing cycles. We detail the easing and tightening actions by month and magnitude across time in the boxes.

We see the shift after March 2022 to year end 2022 on the tightening and inflation pressures. That was clearly a major move from March to Dec 2022. This timeline cuts across the easing in late 2024 and 2025.

Trade wars and tariffs will play a role, and that is getting worse. Wages have been an X factor in past inflation cycles and that has not arrived (yet). Many eyes are looking for any hint of wage pressure, but that has not shown up at all at this point (see Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26).

Negative real wages in a steady economic cycle are supposed to move the needle higher on wage expectations, and that affordability discontent can show up in politics (election year) and policy decisions. Collective bargaining also can play a role.

The above chart does a similar exercise but drops in a yield curve for 9-16-24 just ahead of a fresh easing cycle. The inversion of Sept 2024 into an easing cycle in late 2024 and 2025 has not brought the results promised by Team Trump. They continue to demand easing, but the FOMC is likely to be resistant. The markets clearly are not on board. This week could bring some political fireworks.

The above UST history revisits the shift from the Carter inversion and peak of 1978 across the stagflationary 1980-1982 double dip that kicked off after an Iranian oil crisis in 1979.

We see the 9-16-24 UST curve sitting on the bottom during the late stages of the Biden administration, but we suspect Trump, Hassett, and Bessent will not be flagging that memory. After all, the UST curve had sent mortgage rates higher again after team Trump was put in office. We just crossed above the 7% threshold. We are still below the peak mortgage rates of Oct 2023 but closing the gap.

One of the key takeaways from history is that flat curves that arrive after some FOMC tightening in a cyclical peak can lead to trouble. The question will get louder if the Fed tightens again by year end and follows up with more.

Worries get worse if we start to see an inversion, but that appears a long way off unless the oil markets crash. Credit market peaks such as the transition across 1989 into 1990, the move into 2000 after a +86% NASDAQ year in 1999, and the tail end of 2006 on the way into 2007 all make for some interesting compare-and-contrast drills.

We look at some of these histories in the links at the end of this commentary.

The above chart updates the 3M to 10Y slope history from the January 2021 ZIRP period. The current +89 bps is well below the long-term median of +154 bps. In the recent post-ZIRP tightening cycle that shifted into an easing cycle by Sept 2024, we see a peak slope of +227 bps in May 2022 ahead of peak inversions of -189 bps (May and June 2023). The median from Jan 2021 through Friday close was only +13 bps.

The box also breaks out other current slopes and medians for UST segments we monitor.

The 3M-10Y slope timeline is posted above from January 1984. It highlights the dramatic swings across economic and monetary cycles. We left out the wild, distorted 1979-1982 years to avoid impairment of the visuals across remotely normal cycles.

Existing Home Sales Aug 2026: Headwinds Still Driving the Story 9-10-26

PPI August 2026: Leading Indicator Signaling Struggling 9-10-26

Weekly Tech Check: Semis vs. Software Push-Pull 9-7-26

Weekly Returns: Benchmarks and ETFs 9-7-26

Duration Daze: Post-ZIRP Bond Returns 9-7-26

Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Some yield curve histories:

Business Cycles: The Recession Dating Game 10-10-22

Bear Flattener: Today vs. 1994 and Aftermath 10-18-22

Fed Funds, CPI, and the Stairway to Where? 10-20-22

Greenspan’s First Cyclical Ride: 1987-1992 10-24-22

Greenspan’s Last Hurrah: His Wild Finish Before the Crisis 10-30-22

Yield Curve Lookbacks: UST Shifts at Cyclical Turns 10-16-23

UST Moves 1978-1982: The Inflation and Stagflation Years 10-18-23

UST Moves: The 1990-1991 Risk Factor Pig Pile 10-24-23

Remembering a Day of Days

Glenn Reynolds, CFA — Fri, 11 Sep 2026 13:35:52 GMT

Weekly Tech Check: Semis vs. Software Push-Pull

Glenn Reynolds, CFA — Mon, 07 Sep 2026 23:56:05 GMT

The chart updates our Tech Check mix, and we see the semiconductor names and AI ecosystem asset lines back in charge for the week with software and SaaS taking another beating in the erratic comeback from the “SaaS-pocalypse.”

The Semiconductor ETF (SOXX) placed in the upper end of the second quartile at +2.21% with the Software ETF (IGV) in the bottom quartile at -4.5% for a price return differential of 6.7%. The rankings were less bifurcated than some other recent weeks with some software names also performing well on the week (e.g., Oracle/ORCL, Salesforce/CRM).

The top tier performers saw Dell pull away again with +14.9% on a strong earnings report while Micron (MU), Intel (INTC), and NVIDIA (NVDA) rounded out the semis in the top 5 with Qualcomm (QCOM) and Taiwan Semi (TSM) also in the top tier. ORCL made the top quartile from the software group and as a constituent in IGV and reports earnings this week.

The Mag 7 were spread across the quartiles with 2 in the top quartile (META, NVDA), 1 in the 2^nd quartile (TSLA), 2 in the 3^rd quartile (AAPL, GOOGL) and 2 in the bottom quartile (MSFT, AMZN). As we see in the chart, the broad benchmarks were clustered near the middle with 3 of 4 (NASDAQ, Midcaps, Russell 2000) in the bottom of the 2nd quartile and the S&P 500 just across the line at the top of the 3^rd quartile.

Bringing up the rear was Adobe (ADBE) with Intuit (INTU) in the 2^nd to last slot and Palantir (PLTR) 3^rd to last. The software names comprised 6 of the 8 in the bottom tier joined by Amazon (AMZN) and Broadcom (AVGO), who reported last week. Adobe reports earnings this week. Half of the 14 asset lines in negative range were software related (6 single names + IGV).

Duration Daze: Post-ZIRP Bond Returns 9-7-26

Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Weekly Returns: Benchmarks and ETFs

Glenn Reynolds, CFA — Mon, 07 Sep 2026 23:07:20 GMT

The chart updates weekly returns on the 32 benchmarks and ETFs we monitor. The positive negative score of 15-17 this week shows some balance but with 6 of 7 bond ETFs in the red. The 4 major benchmarks (NASDAQ, S&P 500, Russell 2000, Midcaps) were concentrated in the 2^nd quartile as the UST curve posted a modest bear steepener (see separate post on the UST curve). The S&P 500 saw the 11 sectors split at 6 negative 4 positive, and one flat.

We see the three energy ETFs in the top tier again with the latest Iran escalation activity and new round of threats. E&P (XOP) was #1 and Energy (XLE) was #2 with Midstream (AMLP) also in the top quartile. WTI rose to $91.48 by the Friday close ($92.70 Labor Day) from $83.40 the prior Friday. Refined products stayed under extreme pressure with diesel hitting a record for Labor Day. That is bad for household discretionary cash flow and bad for inflation expectations.

The tech picture was mixed with the Tech ETF (XLK) making the top quartile on some strong rallies from the AI ecosystem and Semiconductors. We look at our Tech Check list of returns in a separate commentary, but the short form version is the Semiconductor ETF (SOXX) posted a +2.2% week and was ahead of the Software ETF (IGV) at -4.5%. The concentration of the major tech names winning is evident in the Tech ETF (XLK) in the top quartile while the Equal Weight NASDAQ 100 (QQEW) placed in dead last in the group of 32.

Financials held in well with the Regional Bank ETF (KRE) in the top tier and broad Financials (XLF) in the second tier. The recently resilient BDC ETF (BIZD) was in the middle of the third tier with a slight negative. Higher short rates could generate more income for some of the underlying private credit loans but also put more debt service stress on the more troubled exposures.

This week brings CPI and PPI, and that will potentially be a swing factor after the surprisingly strong payroll number (“strong” vs. expectations – not in absolute terms). The FOMC is still about votes and not who Trump dials up every week. We covered the payroll story separately, and the 162K in job additions was slightly below the median line from Jan 2009 and well below typical 2022-2023 run rates. It was a bit overhyped in broader context and the quality of the mix, which we break out in detail separately.

Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Duration Daze: Post-ZIRP Bond Returns

Glenn Reynolds, CFA — Mon, 07 Sep 2026 21:33:57 GMT

I grant you 3 wishes to destroy the global economy!

We look at total returns for a few benchmark bond ETFs from March 2022 through Friday close. We use SHY vs. GOVT vs. TLT in a stark look at duration effect differentials.
“LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT…” (Trump’s all caps) is yet another “threat post” by Trump. This one is aimed at the Fed and takes crazy to the next level while shredding most basic economic policy concepts.
The door opens to more scenarios than one wants to ponder. The range of potentially damaging outcomes are daunting.

The chart plots the total returns since the beginning of March 2022 for 3 benchmark UST ETFs. Duration getting punished during that period is certainly not a mystery, but trying to guess the differentials prompted me to plot the chart. Such periods are always worth quantifying.

It is a simple exercise framing short-term UST bonds (using SHY, the 1-3Y UST ETF) with its current 1.85 years duration vs. intermediate term government exposure (using GOVT, the UST ETF) with its 5.58 years duration, and the long duration UST using (TLT, the 20+Y UST ETF) with 14.8 yrs duration as of Sept 2026.

The -31.1% total return on TLT is an eye grabber vs. -1.5% on GOVT and positive returns on SHY at +11.3%. With worries around a potential steepening or upward shift in the UST curve under more than a few scenarios, the pressure to stay short to intermediate remains compelling unless there is a strong view that oil tanks (it might), the FOMC eases, consumers stall, and the economic cycle slows.

Anyone who has been around oil forecasts since the early 1980s has seen the streets littered with high conviction calls on oil prices. The only certainty appears to be that the national debt will keep on climbing, tariffs are more likely to get worse before they get better, and that Trump’s hostile and broadly Neanderthal approach to geopolitics will lead to fewer international buyers of UST.

The journey of the UST curve across the rounds of ZIRP starting with the credit crisis in late 2008, across a muted, relatively brief normalization period into 2018, some fresh easing in 2019, and the return to ZIRP with COVID is a story for the ages in capital markets history. With the world now back in what the “1980s/1990s crowd” might call “normal” the UST returns from the post-ZIRP period from March 2022 above offer food for thought while asset allocators assess the range of potential outcomes ahead. That has a lot of moving parts.

And now for something completely different…

The word “unusual” is the world’s most understated way to describe the combination of current fiscal policy, trade policy, and even potential monetary policy. The threat this past week to cancel trade to coerce the FOMC is not getting enough coverage for how disconnected that threat is from reality and basic economics.

The quote below (note: all-caps are Trump’s) is hard to misinterpret:

“LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT…” - Trump (Truth Social 9-4-26)

It is notable how little coverage was given to those words in the financial media channels (print and cable etc.) who do not want to offend Trump by highlighting his own words (thus embarrassing him) and venturing a guess on what he might be thinking. It is an easy call of “BS.” After all, there is no good explanation that does not insult the President even as his sheep herd says nothing about it.

Anyone can easily see a wide range of scenarios that could unfold in retaliation by trade partners. The most obvious is to withhold critical supplies or slap high export taxes on them. Multiyear projects and order books could be canceled. The “One China” policy could simply lead China to say, “If you won’t trade with me, I am canceling exports from Taiwan, which we now control 100% of.” Goodbye stock market and AI ecosystem valuations.

These are all extreme and doubtful scenarios, but just reread the all-caps threat from Trump and he brings them all to life. He links trade deficits with the fed funds rate. Over the weekend he started in on currencies so “here we go again” (to quote Reagan).

The “oldie but goodie” counter from trade partners is a buyers’ strike on UST (just let the maturities roll off) or sell down some positions on the long end to rattle the UST curve. Remember the regional bank crisis in March 2023 and all those increased losses on long-dated UST bonds? (See Regional Banks: The Credit Crisis Contraction Theme 5-7-23, Banks and Macro Nerves: When Regional Becomes National 3-19-23).

A first grader would see the risk of higher UST rates and inflation risk in Trump’s trade plan/threats. Supply-demand imbalances were one of the main drivers in 2021-2022 along with the Russian-driven energy spike. Massive disruptions in production chains today on the threats would be the reality far and wide in the US. Retail shelves would head toward empty as we already saw with China. It offers a reminder that Trump has learned very little since Trump 1.0.

See also:

Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26

Market Commentary: Asset Returns 8-31-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

UST Market: Curve Meets Knuckler

Glenn Reynolds, CFA — Mon, 07 Sep 2026 16:40:28 GMT

The pitch on trade and the FOMC is moving slowly and unpredictably.

The focal point for UST markets in gauging FOMC moves is typically inflation and jobs. The exercise also looks at wage trends (currently painfully low) and supply-demand conditions which are currently constructive except for commodity inflation (esp. Iran and oil) and tariffs. Economically supportive payroll numbers were seen last week with PPI and CPI due this week. The overhyped payroll beat came in slightly below the post-Jan 2009 median but still was better news than the alternative. With jobs, Warsh has one less excuse to pause and wait a month from the Sept (15-16^th) for the Oct (27-28^th) meeting (see Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26).
As we go to print, the odds of 1 hike for Sept stand at 60.4%. The odds of 2 hikes (400-425 bps range) by the Dec 2026 meeting are now 36.7%. The question is whether a median-level jobs month can alter views of more FOMC members away from hawk mode and wait for more data (see Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26).
In the realm of the irrational, Trump’s threat to end all trade with any trade partner with a trade surplus if the FOMC does not ease defies printable adjectives. Just about every major trade partner including the EU, Mexico, Canada, China, and Taiwan would be in that bucket. The fact that Canada is a massive oil producer and resource exporter to the US saw the relatively small Canada goods trade surplus remain somewhat stable YoY through July 2026 to $28.2 billion. That includes ~$56.3 bn in crude oil and a lot of resources the US needs.
If Trump attacks all major surpluses, he must really hate Taiwan, who has seen its trade surplus spike to $127.8 bn through July 2026 from $70.8 bn. That would be a dangerous one that he seldom speaks to. The stock market and AI ecosystem would simply love him using that deficit as an example (he would not dare). Cutting off trade with Canada is impossible given the US resource needs and inflation threats to refined products and fertilizer (and thus food prices).
Taiwan and Canada offer a reminder that there are often very good reasons for trade deficits. Of course, Trump still claims the “seller pays” the tariff, so reality is on a different plane than Trump’s thought patterns. Concept-lite and fact-free is not great for policy consistency as companies try to frame where to commit capex for longer term projects. There will be no Congressional legislative check even if the Democrats sweep the Senate and House. Just a lot of hearings.

For the week, we see a slight UST steepener from 2Y UST to 10Y with a lot of action to come this week with CPI and PPI. We will also get more shrill commentary from the White House ahead of the following week’s FOMC action. The start of Canada tariffs will get a response from the White House and twice the usual number of AI generated imagery (this weekend was especially crazy and extremely militaristic and threatening to the world).

The weekly UST deltas were remarkably unexciting considering the level of noise and heightened pressure on FOMC from Trump and Vance along with the attempts by Bessent to execute on his homegrown shapeshifting strategy out the curve. He has also joined the schoolyard insult game to please Trump when he should be rising above that fray.

Over the weekend, Trump has now waded back into the currency topic with an attack on Canada. That was featured in the trade noise of Trump 1.0 when competitive devaluations were the hot topic. Back then (2017), Navarro was swerving way outside his lane by attacking the euro valuation and Germany with its trade surplus (YTD July 2026 trade surplus by Germany of -$36.9 bn).

Back in Trump 1.0, Navarro cited the weak euro vs. the dollar and a distorted “implied deutschemark” exchange rate. Team Trump appears to be rolling that one out for Canada. Trump also opens a fresh door for Bessent to walk through if Trump stays on the topic. At some point, more of the targeted trade partners will scale back UST holdings. Team Trump can at least celebrate a victory by “fellow travelers” AfD in a state level election.

In a back-to-the-future moment, we now are seeing Argentina rattling its saber around the Falklands again (flash back to Reagan 1.0 in 1982). Trump is supposed to weigh in, so we could see another major European and NATO “ally” clash with the US. Since Trump and his “Donroe” doctrine took wing, this could be one more catalyst for trouble with NATO allies and major UST holders. The UK is outside the EU, so Trump’s ability to wave the tariff flag more narrowly at the UK is a risk if Trump is spoiling for an “Argentina beef” with the UK.

The above chart updates the UST migration from the start of the easing cycle after mid-Sept 2024 up through the pre-Iran curve, and then on into the latest round of inflation and steepening. We detail the yields in the box, and the recent moves are edging toward the Oct 2023 highs on the 10Y.

That Oct 2023 period is a crucial focal point given the peak cyclical mortgage rates that briefly hit 8% in some surveys (see Sept Existing Home Sales: The 7% Solution Running Low 10-19-23). As of Friday, the Mortgage News Daily survey stood at 6.89%. The 10Y UST is only around 20 bps from the Oct 2023 highs, so the housing sector is still in harm’s way subject to any adjustments in mortgage spreads. Iran military action over the weekend remains a wildcard that does not look to go away.

Market Commentary: Asset Returns 8-31-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Remembering Gloria Steinem

Glenn Reynolds, CFA — Thu, 03 Sep 2026 15:02:09 GMT

Market Commentary: Asset Returns 8-31-26

Glenn Reynolds, CFA — Mon, 31 Aug 2026 20:13:55 GMT

The Oil Anschluss demands 65 billion barrels you say?!

The Warsh speech carried the week, but inflation stayed stubborn as the UST curve rolled into a bear flattener with FOMC tightening odds quickly moving higher over the course of a week for a Sept hike and for 2 hikes by the Dec 2026 FOMC meeting (see Market Commentary: The Curve 8-30-26).
For the week, the PCE inflation numbers were unfriendly and remain well above target. That pressure continues to hold back bond returns and undermine confidence in interest rate sensitive assets. Housing also posted more weak numbers (see PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26, 2Q26 GDP: 2nd Estimate 8-26-26, New Home Sales July 2026 8-25-26).
The week saw low returns across benchmarks and subsector ETFs in a compressed Hi-Lo range. Muted numbers were posted by the tech highfliers even with NVIDIA posting spectacular earnings. The software sector sustained its slow and steady recovery while the AI ecosystem saw a “pause” for the week in a fast-forward year.
We get payrolls this week after a barrage of data last week that includes PCE inflation (income and outlays) and 2Q26 GDP updates that also showed materially unfavorable inflation trends in 2Q26. That came along with a soft headline number of 1.5% that includes supportive PCE growth and fixed investment numbers in the moving parts that were more reassuring than the headline growth number would suggest.
The Venezuela deal was a headline grabbing anomaly as the theme of annexations and trade extortion has colored US economic policy and geopolitics. In the Venezuela case, private ownership structures scream corruption risk and future political turmoil. Based on what we have seen, even the Pentagon is getting their “piece of the action” as the private and public sector lines get very blurry.
The value maximization equation for US interests in Venezuelan oil could easily clash with the concept of free and fair elections in Venezuela. The US is essentially seizing oil assets by cutting a deal without an election. It will be written up in the future for what it is – military-based expropriation with cash and prizes for the Pentagon and corporate allies of the White House.

The above table details the time horizon returns for the debt and equity benchmarks we monitor. It continues the pattern of solid equity performance and soft fixed income numbers we have been seeing with the Russell 2000 stalling the past month. Tech remains a story with major swings week to week.

The tech bellwethers had a solid week led by software and SaaS names with only a few major names in the red with Tesla (TSLA) still volatile and negative YTD. The Semiconductor ETF (SOXX) was one of 3 tech-heavy lines in the red with TSLA and Taiwan Semi (TSM). We see 6 of the Mag 7 in positive range. The Software ETF (IGV) was ranked #2 in this group at +5.93% with SOXX near the bottom.

We get Dell (DELL) and Broadcom (AVGO) earnings this week for another pulse check on Semi and AI ecosystem names. After the 1% handle return on NVIDIA (NVDA) this week and in the face of an amazing quarterly earnings report, the AVGO reaction will be illuminating about market sentiment. SOXX is now -10.65% over 3 months vs. +69.1% YTD.

The chart updates the weekly total returns for the 32 benchmarks and ETFs we monitor, and we see a balanced score of positive vs. negative at 15-17. The absolute total returns on the leaderboard are extremely low in the context of recent weeks and months.

We see a +1.43% return earning the #1 ranking with Communications Services (XLC) and the weekly return dropping below 1.0% in the top quartile at #5 (Midstream ETF AMLP). The Hi-Lo range for the 32 asset lines was only 3.41%.

The same sub-2% profile holds true on the bottom with last place Health Care ETF (XLV) at only -1.98% with E&P in 2nd to last at -1.90%. Considering the headline intensity, the returns were muted. We had Warsh at Jackson Hole, NVIDIA earnings, the PCE inflation release, updated 2Q26 GDP and related PCE inflation for the quarter, and oil dropping from an $87 handle to $83 handle. One might have expected more action.

With the exception of the long duration UST 20+ ETF (TLT) in the top quartile at the #4 ranking with +1.01%, the remaining 6 bond ETF returns were clustered near the 0% return line. The IG Corporate ETF (LQD) was in the 2nd quartile and was the #2 performer among bond ETFs at only +0.41%. We see GOVT at #5 among bond ETFs with +0.04% with the lowest returns of the 7 bond ETFs posted by the short UST 1-3Y ETF (SHY) at -0.13%.

The short end of the UST curve saw the worst UST deltas coming off the Warsh meeting on Friday while the 30Y hung in much better despite debates around the Bessent UST curve liability management gambit. We cover the UST deltas and Bessent actions in other posts (see Market Commentary: The Curve 8-30-26 ).

For all the excitement around the dazzling NVIDIA (NVDA) earnings report, the tech needle did not move much on the week with NVDA at a +1.32% price return for the Tech ETF (XLK) at only +1.3% holding down the #2 ranking here. NASDAQ made the top quartile with only +0.85% and the Equal Weight NASDAQ 100 (QQEW) made the top tier with only +0.68%.
The broad market S&P 500 was down in the 2nd quartile with 7 of 11 sectors in the red but edging into positive on a good week for Tech, Financials, and Communications Services among 3 of the largest sectors in the benchmark. The Russell 2000 dropped into the red and the bottom quartile with Midcaps (MDY) sitting at the bottom of the 3rd quartile.

The losing side includes Energy names (XOP, XLE) with the oil price drop and odds shifting for some resolution in the Strait. That just hit a speed bump by Monday with fresh clash and new exchanges of fire. There was some pressure on interest rate sensitive sectors such as Homebuilders (XHB) and Real Estate (XLRE). Homebuilders also reported a major drop in new home sales. Health Care (XLV) had a bad week and a mediocre month but is still #1 over 3 months and near the middle of the pack YTD.

The tech check mix we monitor had a solid week with a 20-12 score led by a rally in the software and SaaS names that comprised 6 of the 8 top quartile names including Microsoft of the Mag 7. Those were joined in the top tier this week by two other Mag 7 names in Meta (META) and Apple (AAPL). We see the Software ETF (IGV) ranked #4 on the week at +5.93% well ahead of the Semiconductor ETF (SOXX) in the bottom quartile at -2.20%.

Salesforce (CRM) was the outlier on the week at #1 with +22.4% with ServiceNow (NOW) a distant #2 at +12.6%, which was well ahead of #3 Microsoft (MSFT) at 6.3%. Adobe (ADBE) and Palantir (PLTR) also made the top tier. CRM, NOW, and ADBE remain in negative return range on a YTD basis while PLTR is slightly positive YTD at +4.8%. The long road back is steady and is getting attention from value seekers for what many consider an early overreaction.

CRM reported a very strong quarter and cited growth plans in its agentic AI business. As a CRM competitor, NOW hitched a ride on the CRM numbers.
This week continued the slow and erratic rebound for those software and SaaS-based services names that were battered in the “SaaS-pocalyse” that was tied to a massive disruption of business models and “AI replacement theory.” Market watchers highlighted how the fears around such enterprise software names had grown neurotic and overdone.

The semiconductor and AI ecosystem names were beat up in relative terms this week with Applied Materials (AMAT) in the bottom quartile and 4 of the 8 bottom tier names tied into semis. We also see the Russell 2000 and Midcaps (MDY) in the bottom tier with Cisco (CSCO), Intel (INTC), and Taiwan Semi (TSM) in negative return range just across the line in the bottom of the 3rd quartile.

This week has Dell (DELL) and Broadcom (AVGO) scheduled for earnings for a fresh gut check on volume and pricing trends tied into the data center end markets and overall “AI trade.” DELL was steady this week while AVGO was barely positive even with the stunning earnings growth posted by NVIDIA (NVDA). NVDA only posted a +1.32% week even with the impressive numbers.

The tech-heavy NASDAQ (+0.85%) and S&P 500 (+0.49%) were both positive this week but with minimal returns in the 3rd quartile. The Mag 7 names were spread out again but with 3 in the top tier (MSFT, MET, AAPL) this time, 2 in the 2nd quartile (AMZN, NVDA), 1 in the 3rd quartile with Alphabet (GOOGL), and Tesla (TSLA) 2nd to last near the bottom at -3.89%, just ahead of Applied Materials (AMAT) in last place.

The 1-month returns for the broader group of 32 asset lines posted a score of 20-12. The E&P ETF (XOP) and Energy ETF (XLE) topped the leaderboard as upstream equities get wagged by Iran deals/non-deals and Trumpian jawboning on expectations. The monthly oil prices stacked up favorably vs. the measurement dates for the month with this latest week showing a decline.

With shooting underway again over the last 24 hours and hostilities not going anywhere anytime soon, we got a fresh oil price rise today to just under $86 from Friday’s $83. This latest flareup included comments on “mines” so that makes it more serious than just firing at ships in terms of what it means for Iran’s strategy from here. We work under the assumption that Trump has no set plan while Iran likely does.

Oil worries flow right into Warsh and FOMC handicapping as well as for investors framing UST curve steepening risk and what that means for fixed income allocations. For the trailing 1-month, bond ETFs saw 4 of the 7 we track in negative return range with the other 3 under +1.0% including 1 with a return of +0.25% (SHY, 1-3Y UST) and 1 with a return of +0.12% (EMB, EM Sovereigns).

The top quartile had some tech-heavy concentrations with the Tech ETF (XLK) at #3, the Equal Weight NASDAQ 100 (QQEW) at #4, and NASDAQ at #5. A top tier performer for the month that might surprise was the BDC ETF (BIZD) at #6 as earning season brought news that was negative but not as negative as the pricing appeared to anticipate.

The flip side of the bad bond performance was the concentration of interest rate sensitive asset lines in the bottom tier as dividend heavy names were hit with Utilities (XLU) and Consumer Staples (XLP) along with Real Estate (XLRE). Housing has been getting hit with a streak of bad news with Homebuilders (XHB) also sitting in the bottom tier (see New Home Sales July 2026 8-25-26, Housing Starts July 2026: Grim Numbers 8-18-26).

The tech check mix had a good 1-month period at 26-6 with a few notable exceptions. We see the software names come roaring back as discussed along the way in our weeklies. For the 1-month stretch, we see 7 of the 8 software related names with DELL making it into the 8^th slot in the top quartile. The Software ETF (IGV) posted +19.31% for the month vs. +3.59% generated by the Semiconductor ETF (SOXX) over the same time period.

The semiconductor and AI ecosystem bellwethers were generally on the weaker side of the monthly median with negative returns for Cisco (CSCO), Broadcom (AVGO), and Applied Materials (AMAT) in the red.

The 3-month scoresheet for the broader group of 32 asset lines posted 20-12 with a diverse base of subsector ETFs in the top quartile that included Health Care (XLV) at #1 and Financials (XLF) at #2 with Regional Banks (KRE) also making the top tier. A supportive view of asset quality and cyclical dynamics are evident in the BDC ETF (BIZD) making the top tier.

Interestingly, the Tech ETF (XLK) was down in the lower end of the 3^rd quartile with some of the highflier retrenchments during that measurement period. That same effect sent the NASDAQ down into the bottom quartile. An exception was the Equal Weight NASDAQ 100 ETF (QQEW) which made the top quartile with less issuer concentration.

The YTD return table for the broad group of 32 posted 25-7 in what is a very good year for equities by any standard. When you consider that 4 of the 7 negative returns are bond ETFs and 5 of the 8 in the bottom quartile, the fixed income allocation has been a challenge from a short-term time horizon perspective. Duration lost and dividends saw value erode, and valuations in tech can face pressure if that trend stays in place.

Where we go from here in bonds as usual is about “expansion vs. recession” and about “inflation vs. price stability.” Across history (and for those of us who came of working age during the stagflation days), the dagger for bonds can be oil prices. That includes downside risk for the consumer sector and less favorable project economics that come with the natural pressure on long rates. The secular capex boom for the AI ecosystem might save the project economics, but it also can keep fueling demand and inflation.

The trick for economic policy leadership is not being stupid enough to start a war in the Middle East or attacking Iran. Middle East disturbances have been know to bring risks like stagflation such as the Arab Oil Embargo fallout (4Q73 to 1Q75), the post-Iran crisis 1979 fallout in the 1980-1982 double dip, and the brief 1990 recession onset. Team Trump did not get the memo.

The YTD tech check mix posted a YTD score of 22-10 with the AI ecosystem ruling the top quartile and software and SaaS-based service operators dominating the bottom quartile. The 10 negative returns run from Salesforce (CRM) at -3.36% down to Intuit (INTU) at -45.95%. We see 6 of 8 names in the top quartile tied into semiconductors (MU, INTC, AMD, AMAT, SOXX, TSM) with broader AI ecosystem names such as DELL and CSCO rounding out the top 10.

Even with recent setbacks, the chart highlights the off-the-chart numbers on the leaderboard. The top quartile runs from Dell (DELL) at +262.4% to earn its #1 ranking down to Taiwan Semi (TSM) at the bottom of the top quartile with +27.39%.

The wild run for tech in this cycle is led by much healthier companies than the halfway house of origination ahead of the 1999 NASDAQ boom year (+86% return that year for NASDAQ). Valuations back in 1999 were dependent on forward valuation assumptions that would not come close to being realized.

When some people cite “tech bubble” of the late 1990s, they mean internet stocks. For those living more in the credit world, they are referring to capex-intensive media and telecom names that were borrowing to plug the gaping hole in cash flow that was tied to betting the ranch on tech rollouts (e.g. wireless broadband, etc.) or capital spending on cable/fiber and M&A.

In the current cycle, this time the “after capex bleeders” are much larger and healthier credits – even if they are getting less healthy in credit very quickly with financial debt or lease adjusted debt. The numbers are radically larger as the headlines have been covering. That is, to the point that IG mega-borrowers are rattling the UST supply-demand balance.

The LTM score of 29-3 includes only Homebuilders (XHB), BDCs (BIZD) and the long duration UST 20+Y ETF (TLT) in negative return range.

The top quartile includes 3 from energy subsectors (XOP, XLE, AMLP) with Tech ETF (XLK) and Base Metals (DBB) also in the mix of commodity supply-demand imbalances of all types flowing into products such as base metals (aluminum, copper).

It is reassuring to see Health Care (XLV), the small cap Russell 2000, and Transports (XTN) in the mix for some semblance of breadth. This is one chart where “one investor’s win is another investor’s losses” given how energy and commodity costs are undermining costs and price stability.

See also:

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Market Commentary: The Curve 8-24-26

Market Commentary: The Curve 8-30-26

Glenn Reynolds, CFA — Sun, 30 Aug 2026 20:11:17 GMT

I know where you live new guy…

Warsh gained a lot of credibility with the markets this time around just by simply locking in on the incredibly obvious reality that the country has an inflation problem where the FOMC needs to play its role. It was a low bar to clear to state inflation is a priority, but it was being questioned whether he would clear that bar given Trump’s pressure.
The market reacted with a material increase in the odds of a Sept FOMC hike rising to 59.7% as we go to print, up from 39.9% 1 week ago. For the later Dec 2026 FOMC target, the odds of no change were down to 10.9% from 28.4% 1 week ago with the probability of 1 hike at 38.3% and 2 hikes at 40.1% (vs. 22.8% a week ago). The odds of 3 hikes by Dec 2026 stand at 10.7% vs. 3.5% a week ago. That was obviously a Jackson Hole speech the market believed.
The inflation inputs this week were negative with the July 2026 PCE price index flat YoY and showing no progress. The MoM lines were not helpful. The 2Q26 GDP release last week also updated the 2Q26 PCE inflation numbers (not to be confused with the July monthly PCE inflation rate) with both revised higher for the quarter (see PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26, 2Q26 GDP: 2nd Estimate 8-26-26).
The housing sector has been feeling the pain from mortgage rates and rising costs in the building materials chain from tariffs. The week ended with the Mortgage News Daily Survey at 6.81%. Weak new home sales were reported last week that followed poor home start numbers the prior week (see New Home Sales July 2026 8-25-26, Housing Starts July 2026: Grim Numbers 8-18-26).

The comments below are a cut and paste from a weekend LinkedIn post with edits:

The chart breaks out the weekly UST deltas after a few busy days that included Warsh at Jackson Hole, a sharp drop in oil prices, and more UST curve crosscurrents with Bessent thinking he can play puppet master with the UST curve shape. We saw a mixed update on PCE inflation and income and outlays for July. The 2Q26 GDP release saw quarterly PCE inflation revised higher (by +0.2 bps) as PCE inflation rose to 5.3% headline and 3.6% core. For July alone, PCE inflation was flat at 3.7% headline and 3.3% core (see PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26, 2Q26 GDP: 2nd Estimate 8-26-26).

The 1-week UST move was a bear flattener with the 2Y at +12 bps, 5Y at +5 bps, 10Y -1 bps, and 30Y -5 bps. The Friday move after Warsh’s morning speech flowed higher along the curve. For the day, the 2Y posted +12.8 bps, 5Y +9.5 bps, the 10Y +5.8 bps and 30Y UST only +2.2 bps.

The hands-down winner on UST impact was Warsh gaining more credibility with the market on his willingness to support tightening and perhaps even swinging more FOMC votes in that direction for a September FOMC tightening.

As noted in the bullets, FedWatch shows a material increase in the odds of Sept FOMC hike rising to 59.7% as we go to print, down from 39.9% 1 week ago. For the later Dec 2026 FOMC target, the odds of no change were down to 10.9% from 28.4% 1 week ago with the probability of 1 hike at 38.3% and 2 hikes at 40.1% (vs. 22.8% a week ago). The odds of 3 hikes by Dec 2026 stand at 10.7% vs. 3.5% a week ago. That was obviously a Jackson Hole speech the market believed.

The relatively brief Warsh speech did not include much (“Here is a quick overview of what I’ll cover in my remarks this morning. You can call it an outline . . . you can call it a trail map . . . just don’t call it forward guidance.”). The focus was an assertive commentary that more had to be done to get inflation down. That sold the market (for now) after reports of regular calls from Trump to Warsh raised fears of intimidation.

As covered in past commentaries, the cyclical risks of tightening during economic peaks can lead to major market setbacks. The durability of this current cycle gets framed around whether the AI ecosystem investment boom will trump the struggles of the consumer.

Consumers have proven more resilient in 2Q26 and the summer relative to where they started out in 1Q26 with weak PCE growth. Real wage growth has been straddling zero, and that is a wildcard for FOMC policy if wages join the product and services inflation and any pressure from a new wave of tariffs is felt with Canada trade war risks as Mexico is also teed up for USMCA review.

Inflation was stubborn in July for CPI and PCE and above target, and related AI multiplier effects and capex have supported the chain from materials to finished goods and myriad services. Fixed investment in Equipment and Intellectual Property Product lines in GDP drive that home. Construction, Freight and Logistics, and Financial Services have been beneficiaries. This is an unusual cycle from many different angles even if the consumer and lower part of the “K” are feeling pain. Housing is weak and will see costs rise as well even as mortgages are a headwind. Oil will remain the least predictable.

The chart above updates the running YTD UST deltas and tells an obvious story of adverse trends on the back of stubborn inflation, fallout from the Iran War, steady jobs, and resilient demand. The bear flattener from 2Y to 10Y follows sharp moves higher in short term working capital financing. The higher cost short duration financing hits customer financing in such key areas as consumer durables and increased costs of securitization for the corporate sector.

The above chart hammers home how we got there – Iran was the driver.

The pre-Iran UST deltas remind us of the systemic cost of the Iran mistake as the market was seeing lower rates and a downward shift ahead of the late Feb 2026 start of bombing and ensuing war.

The chart above and those that follow are for memory lane purposes. This chart will be part of the regular updates since it tells a story of historical context and the migration from 2020 across the tightening cycle to the Oct 2023 peak rate on the 10Y then back across the easing cycle in 2024-2025 through current times.

The UST history can be framed against today’s curve and other notable credit market timelines during the economic and monetary cycles of bygone years. The charts offer context on absolute yields and UST curve shape. The scenario checklist to wrestle with on the direction of the curve includes “flatter via FOMC tightening with a steady long end” vs. “upward shift” or “steepening on more inflation pressure from higher oil.”

In the above chart, the move from 12-31-20 and ZIRP across the inflation and tightening cycle of 2021-2022 is clear enough in the move from 12-31-20 to 3-1-22. That came just ahead of the mid-March 2022 start of the tightening cycle and end of ZIRP. The long end is driven by the market, and that vote from the market was obvious.

We like to highlight 9-16-24 UST curve to timestamp what was unfolding immediately before the easing cycle kicked into gear in Sept 2024 through Dec 2024 (see Footnotes & Flashbacks: State of Yields 12-29-24 ). That was when the 10Y was around 3.6% and mortgage rates were near 6.0%. That was around 7 weeks before Trump won the election to take his role in Jan 2025 in a peaceful, uncontested transfer of power (i.e., light on violence and Capitol sackings).

As noted in the above chart, the bear steepening on the long end was a force during 2024, and it has been hard to resist that UST bias across time into 2026. The steady economy and inflation back on the rise from the end of Dec 2024 meant steepening was hard to resist. The 10Y and 30Y UST deltas have not been moving in the right direction even though mortgages are not back to fall 2023 levels. The 30Y mortgage rates as of today was just over 6.8% (6.81%) using the Mortgage News Daily survey.

The above chart updates the 30Y UST vs. the dollar index (DXY). That is getting back into focus again as the UST supply pressures and “other worldly” deficits are felt and national debt just keeps on rising. Combined with new milestones in debt levels (the “$40 trillion and climbing” reality), those headlines are tough to counter.

The US Treasury General Account can only buy so many long bonds, and the tendency of Trump to alienate the existing base of international investors makes the currency issue an important variable. Threats this past week on dollar clearing (SWIFT) for those countries that do not submit on Iran’s “Economic D-Day” offered a fresh reminder to the BRICS alternative payment system advocates. That will be back in focus near term as the US and Canada have a trade war, the Mideast is in chaos, and the EU sorts out how much they hate the US (or which country hates us the most). It is getting competitive.

Meanwhile, a new wrinkle has been Bessent looking to stabilize long rates through US creative buybacks. Bessent waving the “buyback flag” started out as an “Operation Twist” version (borrow short, buy long bonds) before it quickly shifted to a focus on using US Treasury balance sheet liquidity from the General Account. Both plans were widely panned.

The recurring issue of record debt and steady, dramatic budget deficits are hard to shake. The deficits emanate from massive spending and shortfalls that flow into the sovereign balance sheet. That means more borrowing. The UST market is a line of credit funding fiscal mismanagement.

Meanwhile, the wildcard of oil prices haunts the long end and can infect the inflation targets that dictate the FOMC actions. Tightening would drive interest costs higher on the short-term funding costs from higher short UST. The bear flattener of this past week offered a reminder that the market believes Warsh might be serious about higher rates.

The above chart is one we include as a memory jogger on the troubled journey from COVID and ZIRP across the tightening and easing cycles. We detail the easing and tightening actions by month and magnitude across time in the boxes.

Trade wars and tariffs will play a role, and that is getting worse. Wages have been an X factor in past inflation cycles and that has not arrived (yet). Many eyes are looking for any hint of wage pressure that has not shown up at all at this point (see Payroll Deltas July: Mixed Bag, Mediocre Numbers 8-9-26). Negative real wages in a steady economic cycle are supposed to move the needle higher on wages, and that affordability discontent can show up in politics (election year) and policy decisions. Collective bargaining also can play a role.

The above UST history revisits the shift from the Carter inversion and peak of 1978 across the stagflationary 1980-1982 double dip that kicked off after an Iranian oil crisis in 1979.

We see the 9-16-24 UST curve sitting on the bottom during the late stages of the Biden administration, but we suspect Trump, Hassett, and Bessent will not be flagging that memory. After all, the UST curve had sent mortgage rates higher again after team Trump was put in office. That does not change the fact that we are still well below the peak mortgage rates of Oct 2023.

One of the key takeaways from history is that flat curves that arrive after some FOMC tightening in a cyclical peak can lead to trouble. The question will get louder if the Fed tightens by year end.

Worries get worse if we start to see an inversion. Credit market peaks such as the transition across 1989 into 1990, the move into 2000 after a +86% NASDAQ year in 1999, and the tail end of 2006 on the way into 2007 all make for some interesting compare-and-contrast drills.

We look at some of these histories in the links at the end of this commentary.

The above offers some more granularity on the migration from 9-16-24, across the pre-Iran war period and then to the current post-Iran Friday close. We include the UST curve from the peak 10Y date (10-19-23) when the 10Y hit 5.0% intraday. The sub-4% yields on the 10Y UST (3.63%) and 30Y (3.94%) UST in Sept 2024 tend not to be a discussion point from Team Trump.

We update the long-term 2Y to 10Y slope history after this past week’s bear flattener as the 2Y UST pushed higher after the Jackson Hole speech. The current +39 bps is less than half the long-term median.

This chart shortens up the timeline for the 2Y to 10Y slope to a start date of early Jan 2021 with ZIRP. The stretch from ZIRP and across the ensuing inflation and tightening cycle into an easing made for a very wild rise. The slope peak of +159 bps in March 2021 gave way to an inversion of -107 bps (3-8-23) and -108 bps (7-3-23).

Flattening and inversion cycles have a rough history for the ensuing economic trends. The ZIRP years were somewhat of an anomaly after a bank crisis and later a pandemic.

With FOMC policy uncertain but odds leaning toward FOMC tightening, the question around the long end looms large for refinancing costs and the housing markets. Financing costs in areas such as autos and housing do not get captured in CPI, but that debt service effect undermines affordability.

Market Commentary: The Curve 8-24-26

Some UST curve histories:

Business Cycles: The Recession Dating Game 10-10-22

Bear Flattener: Today vs. 1994 and Aftermath 10-18-22

Fed Funds, CPI, and the Stairway to Where? 10-20-22

Greenspan’s First Cyclical Ride: 1987-1992 10-24-22

Greenspan’s Last Hurrah: His Wild Finish Before the Crisis 10-30-22

Yield Curve Lookbacks: UST Shifts at Cyclical Turns 10-16-23

UST Moves 1978-1982: The Inflation and Stagflation Years 10-18-23

UST Moves: The 1990-1991 Risk Factor Pig Pile 10-24-23

Market Commentary: The Curve 8-24-26

Glenn Reynolds, CFA — Mon, 24 Aug 2026 21:03:50 GMT

Will Warsh make a useful pronouncement at Jackson Hole?

With PCE inflation due this week and Warsh set to say absolutely nothing specific in a very high profile venue, the focus will be more the inflation story and framing how the consumer income vs. expenditure lines are shaping up. We also get updated 2Q26 GDP numbers for some other key data points.
There has been a lot of focus on the Bessent liability management program to push down yields (or limit increases) in the long-dated UST market. The market saw through his version of Operation Twist after one trading day. Now he is jawboning Plan B using the Treasury General Account as a potential funding source. 10Y UST is still hovering around 4.70% and 30Y UST around 5.23%.
In what we call a clash of the “revenue minus expenses school” vs. the “three card monte school” of liability management, the reality of recurring, massive deficits and incremental national debt levels needed to fund such shortfalls will keep US debt % GDP going the wrong way and the US interest expense line rising given the sheer scale of the incremental borrowing needs (even if just on the short end).
We will be curious to hear what seasoned sovereign debt analysts might say about a sovereign borrower that has chosen to drain some of its treasury to dress up quoted long rates (the coupon on the outstanding bonds do not change) without tackling the net rising debt problem. Revenue and expenses rule the shortfall and borrowing needs. The UST historically “got a pass” on traditional leverage metrics since the UST is “default risk free.” That has more of a cloud over it these days. We would feel better if Trump was not on record over the years saying it is OK for the US to default (remember “do a default” in one of the earlier shutdowns?).

The above UST deltas cover last week’s mild UST action as Bessent doing the twist did not impress the dance judges (aka the treasury market). That said, the 30Y on the long end did hold in better than the 10Y.

As we go to print on Monday, the 2Y and 5Y are essentially flat, the 10Y is down -3 bps at 4.7% and 30Y is down -4 bps at 5.23%.

The YTD deltas are still telling the same story with a bear flattener from 2Y to 10Y/30Y. That has sent 4 of the 7 bond ETFs into negative return range with the longer duration and/or higher quality benchmarks being on the losing end (see Market Commentary Asset Returns 8-23-26).

The post-Iran UST deltas are updated above, and there is little question around what drove these moves on inflation and an even worse profile for borrowing needs and UST supply. Iran was a mistake on multiple fronts both geopolitical and economic.

This is the “woulda, coulda” UST deltas that show how the UST curve deltas were positioned ahead of the Feb 28 bombing that took the US back to a fresh Mideast war.

The UST history can be framed against today’s curve and other notable credit market timelines during the economic and monetary cycles of bygone years. The charts are essentially “roll-forward” replay charts to offer context on absolute yields and UST curve shape.

The move from 12-31-20 and ZIRP across the inflation and tightening cycle is clear enough in the move from 12-31-20 to 3-1-22 just ahead of the mid-March 2022 start of the tightening cycle and end of ZIRP. The long end is driven by the market, and that vote is obvious.

We like to highlight 9-16-24 UST curve to timestamp what was unfolding immediately before the easing cycle kicked into gear in Sept 2024 through Dec 2024 (see Footnotes & Flashbacks: State of Yields 12-29-24 ). That was around 7 weeks before Trump won the election to take his role in Jan 2025 in a peaceful, uncontested transfer of power (i.e., light on violence and Capitol sackings).

As noted in the above chart, the bear steepening on the long end was a force during 2024, and it has been hard to resist across time into 2026 with the economy steady and inflation back on the rise from the end of Dec 2024. The 10Y and 30Y UST deltas have not been moving in the right direction even though mortgages are not back to fall 2023 levels. The 30Y mortgage rates as of today are just under 6.8% (6.78%) using the Mortgage News Daily survey.

The above chart updates the 30Y UST vs. the dollar index (DXY). That is getting back into focus again as the UST supply pressures and other worldly deficits are felt. Combined with new milestones in national debt levels (the $40 trillion and climbing reality), those headlines are tough to counter.

The US Treasury General Account can only buy so many long bonds, and the tendency of Trump to alienate the existing base of international investors makes the currency issue an important variable. That will be back in focus near term as the US and Canada have a trade war, the Mideast is in chaos, and the EU sorts out how much they hate the US (or which country hates us the most).

The rule of thumb is that higher yields and economic growth bring a stronger dollar, but higher rates from inflation and UST supply-demand imbalances are a separate story. With Warsh heavily biased toward easing (if truth serum was administered) and Bessent looking to stabilize long rates, the recurring issue of record debt and steady dramatic budget deficits are hard to shake. The deficits mean more borrowing, and the wildcard of oil haunts the long end and also the inflation targets for the FOMC actions.

We see the shift after March 2022 to year end 2022 on the tightening and inflation pressures. That was clearly a major move. This timeline cuts across the easing in 2024 and 2025.

The FOMC oddsmakers (CME FedWatch) are calling for fed funds tightening by year end (Dec 2026 FOMC meeting). The odds of unchanged are 25.7% as of today (8-24-26) with 45.1% odds of 1 hike and 25.0% of 2 hikes. At least the odds of 3 hikes are now back down to low single digits at 4.2% (vs. 18.5% 1 month ago).

The “steep vs. flat” outcome will be heavily influenced by views on oil and new trade clashes and tariffs. There is also the question around how successful the Bessent liability management plan on the long end of the curve will be whether it is by a “twist” with short term debt or by deployment of the US Treasury general account.

Many eyes are looking out for any hint of wage pressure that has not shown up at all at this point (see Payroll Deltas July: Mixed Bag, Mediocre Numbers 8-9-26). Negative real wages in a steady economic cycle are supposed to move the needle higher on wages, and that affordability discontent can show up in politics (election year) and policy decisions. Collective bargaining also can play a role.

The above UST history revisits the shift from the Carter inversion and peak of 1978 across the stagflationary 1980-1982 double dip that kicked off with an Iranian oil crisis in 1979.

We see the 9-16-24 UST curve sitting on the bottom during the late stages of the Biden administration, but we suspect Trump, Hassett, and Bessent will not be flagging that memory. After all, the UST curve had sent mortgage rates higher again after team Trump was put in office. We are still well below the peak mortgage rates of Oct 2023.

One of the key takeaways from history is that flat curves that arrive after some FOMC tightening in a cyclical peak can lead to trouble. The question will get louder if the Fed tightens by year end.

We look at some of these histories in the links at the end of this commentary.

We have been updating various US segment slopes each week, and the above updates the 3M to 5Y slope. The current +55 bps as of Friday close is in a very different place than the median inversion across the tightening cycle. Back during the ZIRP years and crisis, the peak slopes encouraged extension and risk taking as cash was a low return asset. The +55 bps is well below the post-1984 median of +104 bps. In theory, this is where the FOMC case for easing will need some help from inflation.

The above chart shortens up the timeline from the start of 2021 when the pent-up demand and GDP recovery was back in action and the tightening cycle soon got underway in March 2022 on the way to a -197 bps inversion in May 2023 from the May 2022 peak slope of +221 bps.

Some UST curve histories:

Business Cycles: The Recession Dating Game 10-10-22

Bear Flattener: Today vs. 1994 and Aftermath 10-18-22

Fed Funds, CPI, and the Stairway to Where? 10-20-22

Greenspan’s First Cyclical Ride: 1987-1992 10-24-22

Greenspan’s Last Hurrah: His Wild Finish Before the Crisis 10-30-22

Yield Curve Lookbacks: UST Shifts at Cyclical Turns 10-16-23

UST Moves 1978-1982: The Inflation and Stagflation Years 10-18-23

UST Moves: The 1990-1991 Risk Factor Pig Pile 10-24-23

Market Commentary Asset Returns 8-23-26

Glenn Reynolds, CFA — Sun, 23 Aug 2026 22:57:22 GMT

You know you have a goods trade surplus with Canada excluding oil, right? And a big services surplus? And they are in NATO? And we depend on them for numerous resources?

The weekly asset returns were biased toward negative, but last week is already “old news” as the weekend kicked off with a trade war crisis. The trade chaos from here is likely to escalate in directions that are very challenging to handicap with a top 3 trading partner.
UST rates were up this past week, and the “$40 trillion headline” was not helped by Bessent taking liability management action in the latest iteration of “Operation Twist.” It sent the wrong signals to markets about the root of the problem and prompted more than a few to reconsider if Bessent had his arms around the scale of the problem as geopolitics, disrespect, and trade aggression alarm allies.
Canada is the #3 export market YTD, and the export product mix is the highest value added of the major trade partners. Canada ranks as the top export market for many critical swing states in an election year.
The midterm election plot was thick enough already with the fears of Trump interfering with the voting process, and negotiations around USMCA with Mexico and trade tension with the EU also make for scenarios that might include more standing up to Trump tariffs. Having a backbone can get contagious even if Congress has been vaccinated.
A major X factor in the Canada battle is the threat of more supply-demand dislocations and upward price pressure to recover tariff costs. There is also no shortage of scenario spinning over US Canadian resource dependence even if Alberta (oil) and Saskatchewan (potash, uranium) are not inclined to support export taxes.
The disinformation campaign on the “cause” of the breakdown is already full speed ahead. Trump had more pressing issues this weekend (golf and the Freedom 250 Grand Prix in Washington DC), but the predictions for the economic side effects of a major escalation from here will be worthy of a Clubber Lang prediction – PAIN. (see US-Canada: Benches Ready to Clear 8-22-26).

The above table updates various time horizon returns for major debt and equity asset classes. We see 3 of the 4 debt asset classes in the red for the 1-month period with only HY slightly positive. Looking back 3 months and YTD, US Corporates are in the red while the UST benchmark is negative YTD but very slightly positive for 3 months.

For equities, we see the struggles in tech and growth with NASDAQ and Russell 3000 Growth benchmarks in the red for 3 months. The YTD and trailing 1-year equity numbers remain impressive except the Russell 3000 Growth returns YTD. Double-digit returns clear the bar and qualify as outperforming the long-term annual returns on equities.

The tech bellwethers had a rough week with all lines negative except Tesla (TSLA) and Apple (AAPL). We see 5 of the Mag 7 in the red for the week and also 5 of 7 negative for 3 months. We see 5 of the Mag 7 positive YTD with TSLA the worst performer at -19.31% YTD and META at -16.55%.

The chart updates the weekly returns for the 32 benchmarks and ETFs we monitor, and the score of 7-24-1 (1 at 0%) is a bad week at the office. The week saw the S&P 500 near the bottom of the 3rd quartile at -1.4% with only 3 of the 11 S&P 500 sectors positive. The S&P 500 was still the best of the 4 major benchmarks with Russell 2000 at the bottom of the 3rd quartile and the NASDAQ and Midcaps (MDY) in the upper half of the bottom quartile.

The week ahead will be no picnic with the need to handicap potential effects of an escalating trade war with Canada. The political unpredictability and human nature aspects of a betrayed ally are beyond challenging to frame. Canada is a trade partner that is much larger than China (by 2x in total trade) and YTD is #3 in exports (EU #1) and #3 in imports (EU #1). Team Trump better hope that courage and conviction is not contagious and another major trade partner piles on. The Canadian export mix is the highest value-added product line mix across the trade partners.

The UST curve noise was busy this week with an upward shift from 2Y to 10Y and the 30Y barely moving higher (+2 bps). The bond ETFs posted 5 in negative range, one at a 0% with the short duration 1-3Y ETF (SHY) and one slightly positive with the long duration 20+Y ETF (TLT). We will look at the UST deltas in a separate commentary, but the upward move in rates came despite Bessent’s ineffective UST “card tricks” exercise. Bessent tapped into a variation (imitation?) of “Operation Twist” in a throwback to the post-crisis years (2011-2012). That Twist tactic has a history back across the decades. Adding to short terms and handing off the FOMC rate decision to Warsh will get tongues wagging.

The asset line winners for the week include E&P (XOP) at #1 and Energy (XLE) at #3 with WTI moving above $87 and +$4.66 per bbl since the prior Friday. Health Care (XLV) was at #2 with Materials (XLB) and Base Metals (DBB) in the top tier also.

The bottom quartile reflects a poor broader showing with Regional Banks (KRE) in dead last joined in the bottom 5 by Tech (XLK), Industrials (XLI), Transports (XTN), and Utilities (XLU). Homebuilders (XHB) were in the bottom quartile with weak home starts posting a double-digit decline.

Retail earnings saw constructive numbers but were greeted with nervous and mixed stock market reactions even when guidance was revised higher. Walmart took a beating, but BJ’s rose. Target (TGT) rose, TJX was down, and Ross Stores (ROST) stock was off slightly. Consumer Discretionary (XLY) was slightly negative and ranked near the middle of the 2nd quartile. Consumers on balance are settling in as a mixed bag. We get the Personal Income and Outlays release this week and updated 2Q26 GDP data with revised PCE after that metric had recovered from an abysmal 1Q26.

The tech check mix of asset lines this week posted a score of 9-23 in a poor performance that mirrors the broader group of 32 benchmarks and ETFs we look at separately. The Mag 7 posted 5 in the red zone with Tesla (TSLA) and Apple (AAPL) in the top tier, Alphabet (GOOGL) and Amazon (AMZN) in the 2nd quartile, Microsoft (MSFT) in the 3rd quartile, and NVIDIA (NVDA) and Meta (META) in the bottom tier.

The Semiconductor ETF (SOXX) posted -5.52% in the bottom quartile while the Software ETF (IGV) at -0.68% was near the middle of the 2nd quartile. We see a cluster of semi equities and AI ecosystem names in the bottom tier while the top tier saw a continuation of the comeback of the software/SaaS names.

This week brings NVDA earnings and Warsh’s grand opening at Jackson Hole, where he will demonstrate that he is the smartest guy in the room (and very well could be) while saying absolutely nothing specific yet with extreme eloquence. Tech is very sensitive to long-dated UST and Oil, so the UST curve will remain a highly qualitative but critical input for tech valuations.

This week’s tech check return rankings sees Salesforce (CRM) at #1, Intuit (INTU) at #2, FactSet (FDS) at #4, Adobe (ADBE) at #5, ServiceNow (NOW) at #6, and Palantir (PLTR) at #7 steadily recovering from the AI “SaaS-pocalypse.” Of those 6 software/SaaS names in the top quartile this week, only PLTR (+1.23%) and FDS (+3.35%) are back to positive returns YTD with the other 4 (INTU, ADBE, CRM, NOW) still deeply negative YTD. We look at those YTD details separately.

In the bottom tier, we see more of the semiconductor and AI ecosystem group feeling pressure with Intel (INTC) in dead last at -12.13% joined by Dell (-9.93%), Advanced Micro (AMD) at -8.0%, Broadcom (AVGO) at -6.24%, and NVIDIA (NVDA) at -4.64%.

As a broader Teck ETF, XLK is at the top of the bottom quartile at -3.53%, which is ahead of SOXX but behind IGV.

The 1-month returns for the 32 benchmarks and ETFs post a score of 23-9 but with the major benchmarks straddling the lower end of the 2^nd quartile (S&P 500 and NASDAQ) and upper end of the 3^rd quartile (Midcaps and the Russell 2000). E&P (XOP) and Energy (XLE) are in the top 3 with the more defensive Health Care ETF (XLV). Rounding out the top 5 is the Materials ETF (XLB) and the Equal Weight NASDAQ 100 ETF (QQEW).

The BDC ETF (BIZD) may be a surprise to some by making it into the top quartile after an earnings reporting season that took some of the more extreme scenarios off the table (for now). The Equal Weight S&P 500 (RSP) and Consumer Discretionary (XLY) also made the top quartile.

The bottom tier performers include UST curve sensitive assets including 4 bond ETFs in the bottom quartile with duration heavy ETFs (TLT, LQD, EMB, AGG) with GOVT slightly in the red at the bottom of the 3^rd quartile. Real Estate (XLRE) and Regional Banks (KRE) had a rough month. We see HY (HYG), the short duration 1-3Y UST ETF (SHY) and Homebuilders (XHB) at the bottom of the 3^rd quartile with sub 1% returns for the month.

The 1-month tech check mix weighed in at 19-13 with a heavy mix of software and SaaS services in recovery mode on the left and a bad month for semiconductors on the right. The entire top quartile is software and/or SaaS services while 6 of the 8 in the bottom quartile were tied to the semiconductor chain.

It took +15.29% (ORCL) to make the top quartile and -4.67% (AVGO) to make the bottom quartile. Palantir (PLTR) generated a big comeback since its quarterly earnings report for a +35.64% 1-month return (+1.23% YTD). In contrast, Intel (INTC) has been taking a beating of late and saw a 1-month return of -14.59% (+144.1% YTD).

The 3-month return for the broader group of 32 benchmarks and ETFs shows the pharma sector blowing away the benchmarks at +18.4% for the Health Care ETF (XLV) as the outperformers were broad-based and very impressive.

In the top tier, we naturally see E&P (XOP) and Energy (XLE). Financials (XLF) and Regional Banks (KRE) were strong after a banner earnings season that also pulled the BDC ETF (BIZD) into the top tier on reassurance from earnings season and perhaps brought a less dire view of where asset quality was headed more broadly. We will see if Canada trade war setbacks reverse that sentiment.

The tech contribution to the top tier came from the Equal Weight NASDAQ 100 (QQEW) which made the top 5 and offered a broader mix of tech-related products and services. The same diversification angle applied to the Equal Weight S&P 500 (RSP).

The bottom quartile featured interest rate sensitivity with 3 bond ETFs and the dividend heavy Utilities ETF (XLU) while NASDAQ felt the sell-off in the big semi names and Communications Services (XLC) felt the weakness in Meta and Alphabet during this period.

The YTD returns for the broader group of 32 posted a score of 25-7 with 4 of the 7 in the red being bond ETFs. Communications Services (XLC) was sitting on the bottom joined by Consumer Discretionary (XLY) and the BDCs (BIZD).

The fact that YTD BIZD returns was down under -0.7% is impressive given the headlines around private credit that set off a mild panic earlier in 2026. For the Consumer Discretionary ETF (XLY), the to-and-fro around the health of the consumer sector is a key variable. Among the poor performers in XLY were Tesla, McDonald’s and Lowe’s. There were also strong performers such as Starbucks (SBUX), Ross Stores (ROST), and Marriott (MAR).

The YTD returns on the tech check mix still tells quite a story without capturing the wild swings on the names in the leaderboard from the semiconductor and AI ecosystem returns that we update each week.

The right side of the chart is dominated by the software and SaaS names that have been mounting a comeback of late as detailed in earlier charts. The bottom quartile starts at -16.1% with ServiceNow (NOW) and runs down to Intuit (INTU) at -44.6%.

The top quartile starts at +37.86% with Taiwan Semi (TSM) and runs up to #1 Dell as an AI and data center ecosystem play at +251.2%, ahead of #2 Micron (MU) as the lead semiconductor performer.

The trailing 1-year return posts a 29-3 score with BDCs in last place at -6.06% joined in the red zone by Homebuilders (XHB) at -3.61% and the long duration UST 20+Y ETF (TLT) at -0.68%.

It took 24.82% to make the top quartile (NASDAQ) and +2.80% (Communications Service, XLC) to make the bottom quartile.

The median return over the LTM period for this mix is +20.8% or over 2X the long-term return on equities.

Canada: all eyes on the next escalation…

Life could get very interesting this week. We include our background links on US-Canada trade and tariffs below. The need for details on “who said what and who did what when” will help shine some light on the behavior of those in the room. So far, the mainstream US media has been lame. The Canadian Broadcasting Corp (CBC) was very busy all weekend with a lot of information (and the Carney speech and Q&A live). We kept posting on Saturday and Sunday with links on our LinkedIn. Substack writers have been busy.

CBC stayed very active while CNBC was running its weekend infomercials. The New York Times gave an interview to Greer as trade rep, but they seemed to forget to ask questions. Greer left out quite a bit of what actually was dropped on the table at the 11^th hour that blew it all up. The NYT did not do enough due diligence to get complete color.

Canada Tariff Commentaries:

US-Canada Tariffs: Protection Racket 4-19-26

Canada-US Trade: Trump Attack N+1 1-25-26

US-Canada Trade: 35% Tariff Warning 7-11-25

Tariffs: Amazon and Canada Add to the Drama 4-29-25

Trade Exposure: US-Canada Import/Export Mix 2024 2-7-25

Aluminum and Steel Tariffs: The Target is Canada 2-10-25

US Trade with the World: Import and Export Mix 2-6-25

The Trade Picture: Facts to Respect, Topics to Ponder 2-6-25

Tariffs: Questions to Ponder, Part 1 2-2-25

US-Canada: Tariffs Now More than a Negotiating Tactic 1-9-25

Tariff: Target Updates – Canada 11-26-24

Trump, Trade, and Tariffs: Northern Exposure, Canada Risk 10-25-24

Trump at Economic Club of Chicago: Thoughts on Autos 10-17-24

US-Canada: Benches Ready to Clear

Glenn Reynolds, CFA — Sat, 22 Aug 2026 21:18:43 GMT

Flyers vs. Montreal Canadiens Pregame Brawl (1987): Business Model for Trade?

The Friday stroke of midnight came a few minutes after the headlines came out that there was no deal. The 50% tariff attack on Canada is now underway, and the crisis assessment and risk handicapping kicks into gear.
As seen in his Iran negotiations, Trump is big on “unconditional surrender” (How is that working out?), and the 11^th hour change to the US-Canada tariff talks apparently took on the same tone very late in the process. We try to summarize some of the color from Saturday morning and afternoon reports from Canadian leaders and media north of the border. Canadian Broadcasting Corp (CBC) was jammed with activity.
Team Trump’s negotiating stunts sought to destroy the economics of the GM and Ford heavy duty pickup plants in Canada. The adjustments reportedly were tied to Lutnick’s desire as the Head of Commerce to crush the auto sector in Canada and reduce the Canadian auto industry to “components only.” The last minute tariff adjustments left heavy duty pickup trucks vulnerable as peak tariff targets.
The real dagger in the deal was Team Trump’s repeated effort to gain more control over sovereign rights of Canada from minerals rights to trade partner decisions. That included US demands for Canada to target undisclosed nations for tariffs. In the end, Team Trump behavior was showing more signs of a 51^st state annexation end game.
Among the rumored provisions added late in the game was an option for Trump to gain a free tariff hand essentially any time he wanted to snap back to 338 or 301 tariffs. There will naturally be finger pointing from both sides and a wave of misinformation, but the credibility contest is a tad one-sided in this case.

Where did Trump encroach on sovereignty of Canada?

Among the items that Carney covered in his prepared statements and Q&A was that the late changes attempted and some pursued across the process that entailed material encroachments on Canadian sovereignty. Such efforts would necessarily be a deal breaker for a major NATO partner and G7 member.

The risks are not helped by the perception of Trump as a troubled mind at the helm of the largest economy in the world who has demonstrated excitement about deploying an increasingly threatening military strategy (in more than 1 hemisphere). A massive annexation genie was released to start Trump 2.0, and that empirical evidence is staring Carney in the face.

Sovereign encroachment was naturally going to get intense focus as Carney and the provincial leaders framed the behavior of someone who threatened “economic coercion” of Canada and “51^st state” ambitions. Trump used the words “arbitrary borders” between the US and Canada while discussing the use of military force in the Panama Canal and Greenland in the same conversation back in Jan 2025.

A few of the more outrageous sovereign violations pitched early and late in the process appear to include:

The US gaining first claims on Canada mineral rights and ability to step in front of other outside interests. That was a “NO!”
Proposing terms that limit or restrict future trade deals. That was a “NO!”
Derailing Canada’s cultural protections (media, labeling, contracts, languages, French, etc.). That was a “HELL NO”

The late change of terms for the heavy duty pickup tariffs was a change that was more sea level and industry based, but it was a late game maneuver and not good faith timing. The reported documentation games included a “snap back” provision on tariffs (aka “Trump can do whatever he wants any time he wants”). That obviously raised some level of distrust given that Trump has violated all the trade deals with Canada already.

We do not have the full monte on sovereign violations proposed and there likely were some that likely wanted to “put Canada in a box” in tech that could be controlled by US interests (AI choices?).

Why would Canada respond with retaliatory tariffs?

Retaliation and “dollar for dollar” tariffs is more about economics than emotion and revenge. The emotion sometimes obscures the fact that unit costs for Canadian products on the US side rise, and that gives the US sellers an intrinsic price and cost advantage. At 50%, the cost is a mismatch that is more an economic wall. Canada needs to respond on the Canadian side of the border with tariffs on US products, so the Canadian sellers have a similar advantage vs. US competitors. That is to establish a level playing field for Canada even if Trump’s shameless “trade rep mouthpiece” says otherwise. It is basic cost accounting.

The playing field cost leveling is especially important in a market such as steel and fabricated metal products with more commoditization. For aluminum, Canada has a massive low-cost power advantage, but Trump’s tariffs raise those costs for US buyers and can be used to encourage US investment in aluminum (but that won’t happen). The power cost is prohibitive and projects take years, so it just ends up as a Treasury revenue and economic damage to buyers of aluminum.

US export targets to Canada…

If you look at the historical mix of US exports to Canada, we see high value-added line items and arguably a mix that is the best of all the trade partners (see links at the bottom). Canada has a lot of targets to aim at. That could benefit other international sellers of products from the EU and Asia that could undermine US sellers even if Canada cannot compete. That is one more risk for US manufacturers. Canada can essentially seek out other substitute imports away from the US.

Can’t fight the tide and the wave of cowardice…

In the end, the anticipated trade deal tanked given the expected behavior of an unchecked wannabe trade dictator with no input from Congress. The recent use of Section 338 from the Smoot Hawley Tariff Act of 1930 gives Trump unbridled flexibility until some court decisions hopefully check that. Meanwhile, Section 301 tariffs using the “forced labor” rationale have also been in the Trump playbook.

The checks on Trump remain MIA. The Senate sheep herd just sits, and the House is not even worth mentioning. They cannot change any laws regardless since Trump would veto them and it probably could not get past filibuster in the Senate. We will see how this ugly period plays out when we see Trump full range of rage posts and tariff counters. Sept 8 is the date for the Canadian tariffs to go into effect.

Canada Tariff Commentaries:

US-Canada Tariffs: Protection Racket 4-19-26

Canada-US Trade: Trump Attack N+1 1-25-26

US-Canada Trade: 35% Tariff Warning 7-11-25

Tariffs: Amazon and Canada Add to the Drama 4-29-25

Trade Exposure: US-Canada Import/Export Mix 2024 2-7-25

Aluminum and Steel Tariffs: The Target is Canada 2-10-25

US Trade with the World: Import and Export Mix 2-6-25

The Trade Picture: Facts to Respect, Topics to Ponder 2-6-25

Tariffs: Questions to Ponder, Part 1 2-2-25

US-Canada: Tariffs Now More than a Negotiating Tactic 1-9-25

Tariff: Target Updates – Canada 11-26-24

Trump, Trade, and Tariffs: Northern Exposure, Canada Risk 10-25-24

Trump at Economic Club of Chicago: Thoughts on Autos 10-17-24

US-Canada Tariffs: Protection Racket

Glenn Reynolds, CFA — Wed, 19 Aug 2026 15:41:15 GMT

There is little choice but to sit back and watch the show and see if this is the Canada of Juno Beach and the Battle of Passchendaele who showed up.
The “DEAL” (Trump’s all caps) is hard to believe given recent experiences on alleged done deals, but the math seems unworkable given the demands for one-way tariffs and essentially a first refusal rights on some of Canada’s important natural resources.
Trump is not big on admitting who writes the check for the tariffs, and we suspect he will not take this opportunity to admit it is the US buyer. If this breaks down, supplier chain costs rise and many prices as well. The Canada retaliation doomsday scenario (resource and energy export taxes) are not ruled out explicitly (yet).
The US continues to have a goods trade surplus with Canada ex-crude, and the mainstream media (including CNBC) avoid that topic. The logic gets more twisted when the trade game plan is for higher crude oil imports that will grow the all-in trade deficit. That makes the current rumored terms even stranger. Logic and basic economics never play a role in Trump’s trade strategy, and his Cabinet and advisor bobbleheads all nod yes and fall into line.

What is so striking about the strange trade abuse of Canada by Trump is it comes after a period of praise for North Korea - an atheist country that persecutes Christians (maybe the MAGA evangelists and Christian extremists did not get the memo). That Kim gesture came with insults to South Korea, a longstanding ally since the Cold and Hot Wars of bygone years.

On a side note, I had a parent enlist in the Marines out of high school to fight in Korea, and I met more than few Korea vets at Legion and VFW events as a kid. This latest stunt with Kim Jung Un is shocking in historical context (even if not shocking for an egomaniacal draft dodger). That is after a stretch of time when Russia and Putin got an over-the-top red-carpet welcome. Meanwhile, Trump has done his best to undermine Ukraine. Upside down world.

The Canadian scoresheet

Through the most recent trade data of June 2026 (reports at a lag), the running YTD goods trade deficit was a fairly minimal -$24.2 billion that is easily erased by the oil line and becomes a surplus ex-crude. That gets broken out each month by the Census with a raft of data.

We have looked at the import/export mix and history of the product mix in the past, so we are not revisiting it here (see links at the bottom). We should also highlight that the US generates a trade surplus in Services with Canada that seldom gets cited (around +$29 billion in 2025).

One of the leaked terms of the “DEAL” that was really shocking is Trump’s efforts to lock up first claim on minerals and metals. We have no idea what that would entail without the terms, but that sounds like offering a powerful first option on the family jewels that severely limits alternatives for the future. Offshore capital options could be undermined by such a structure given the disincentive for others to bid and plan.

Trump’s war on Canadian autos is well known and his desire to support US wood products and furniture and even cabinet makers at the expense of the US consumer are not even worth debating at this point. We will just wait for the details – if a deal in fact happens.

A complicating factor could be the Canadian form of government and how the provincial leaders react. Carney does not have the luxury of a spineless, sackless Congress with no willingness to do their jobs of providing checks and balances on the King. He needs consensus and buy-in.

Canada Tariff Commentaries:

Canada-US Trade: Trump Attack N+1 1-25-26

US-Canada Trade: 35% Tariff Warning 7-11-25

Tariffs: Amazon and Canada Add to the Drama 4-29-25

Trade Exposure: US-Canada Import/Export Mix 2024 2-7-25

Aluminum and Steel Tariffs: The Target is Canada 2-10-25

US Trade with the World: Import and Export Mix 2-6-25

The Trade Picture: Facts to Respect, Topics to Ponder 2-6-25

Tariffs: Questions to Ponder, Part 1 2-2-25

US-Canada: Tariffs Now More than a Negotiating Tactic 1-9-25

Tariff: Target Updates – Canada 11-26-24

Trump, Trade, and Tariffs: Northern Exposure, Canada Risk 10-25-24

Trump at Economic Club of Chicago: Thoughts on Autos 10-17-24

Market Commentary: The Curve 8-17-26

Glenn Reynolds, CFA — Mon, 17 Aug 2026 21:04:01 GMT

More tariffs and some additional bombing should work…

The “seller pays tariff” fiction now combines with the “escalate, there is no substitute for victory” foreign policy school to assure upward pressure on the UST curve until Iran, the election, and still-justified concerns around Fed independence can get sorted out.
The most recent CPI and PPI marked a sequential improvement to levels still well above target and outside the comfort zone for those who are looking for an excuse to ignore the need for all-time high demand for UST on a global scale.
We look at the 3M to 10Y slope across the cycles with the current +82 bps well inside the long-term median from 1984 of +152 bps. The current slope is still materially steeper than the post-2020 median of +12 bps.

The 1-week UST deltas show a modest bear steepener from 5Y to 30Y as the front end drifts with the guesswork around FOMC plans and was unmoved by the CPI and PPI numbers this week. Jobs were also weak in early August and Retail Sales did not tell much of a story. This week brings a wave of major retailer earnings to help sort out the consumer picture with Walmart and BJ’s always offering a helpful view on the value consumer and the lower half of the K.

We update the YTD UST deltas which still tells the story of the Iran setbacks after the bombing closed the Strait (Feb 28 start). The bear flattener from 2Y to 30Y hit bonds across the curve.

This chart updates the post-Iran bad news for bond returns, mortgage rates, and the rising cost of record deficits that have pushed interest expense to $1.2 trillion.

This UST delta chart offers a view on the “before Iran” with the market telling you their view of the “after Iran” as noted in the earlier chart. This is the “woulda coulda” chart for geopolitical decisions with the Iran War going under the heading of “should not have.”

The chart above and those that follow are for memory lane purposes. The UST history can be framed against today’s curve and other notable credit market timelines during the economic and monetary cycles of bygone years. The charts are essentially “roll-forward” replay charts to offer context on absolute yields and UST curve shape. We will occasionally drop in new transition periods.

We like to highlight 9-16-24 UST curve to time stamp what was unfolding immediately before the easing cycle kicked into gear in Sept 2024 through Dec 2024 (see Footnotes & Flashbacks: State of Yields 12-29-24 ). That was around 7 weeks before Trump won the election to take his role in Jan 2025 in a peaceful, uncontested transfer of power (i.e., light on violence and Capitol sackings).

The above chart is one we include as a memory jogger on the troubled journey from COVID and ZIRP across the tightening and easing cycles. We detail the easing and tightening actions across time.

We see the shift after March 2022 to year end 2022 on the tightening and inflation pressures. That was a major move. This timeline cuts across the easing in 2024 and 2025.

The FOMC oddsmakers (CME FedWatch) are calling for fed funds tightening by year end with the “steep vs. flat” outcome to be heavily influenced by views on oil and new trade clashes and tariffs.

Many eyes are also looking out for any hint of wage pressure that has not shown up at all at this point (see Payroll Deltas July: Mixed Bag, Mediocre Numbers 8-9-26). Negative real wages in a steady economic cycle are supposed to move the needle higher, and that affordability discontent can show up in politics (election year) and policy decisions.

The above UST history revisits the shift from the Carter inversion and peak of 1978 across the stagflationary 1980-1982 double dip that kicked off with an Iranian oil crisis in 1979.

We see the 9-16-24 UST curve sitting on the bottom, but we suspect Trump, Hassett, and Bessent will not be flagging that memory. After all, the UST curve has sent mortgage rates higher after team Trump were put in office.

One of the key takeaways from history is that flat curves that arrive after some FOMC tightening in a cyclical peak can lead to trouble. The question will get louder if the Fed tightens by year end.

We look at some of these histories in the links at the end of this commentary.

The above chart updates the 3M to 10Y UST slope across the cycles. The current +82 bps is well below the long-term median from 1984 of +154 bps.

One big question from here is whether an FOMC tightening will send the curve flatter or whether an upward shift and even a steepener on the long end will be in play.

We have been more biased toward the steepener scenario on the combination of stubborn inflation and a UST supply that will require record global demand. We are inclined to label Trump as the worst long UST bond salesmen since the primordial soup.

That foreign demand could matter, and the EU and Canada are among the largest holders across various entities. A declaration of economic war on Canada, attacks on the EU, and a threatened invasion of Greenland are bad sales practices. As we saw today, Trump could always threaten to bomb Oman.

The above chart shortens up the time horizon to a start date of January 2021 with ZIRP and pent-up COVID demand that sent the curve steeper and higher and GDP soaring in 2021. We have covered the 2021-2022 supply-demand imbalances and Ukraine invasion nonstop over the years, so we will leave that for the links at the end.

The inversion of the tightening cycle and move back to a bear steepener leaves a lot of scenarios ahead. The current backdrop with stubborn inflation and 4% handle unemployment has little in common with past stagflation bouts. The scale of inflation and unemployment from later 1973 to early 1975 and the 1979 inflation move into the 1980-1982 double dip were in a very different zone. Even the brief oil-driven spike of late 1990 came during an unfolding recession.

The current backdrop is clearly a tricky one to frame in the context of history. The median 3M to 10Y slope from from the start of 2021 is +12 bps; that leaves a lot of room for material changes.

Some UST curve histories:

Business Cycles: The Recession Dating Game 10-10-22

Bear Flattener: Today vs. 1994 and Aftermath 10-18-22

Fed Funds, CPI, and the Stairway to Where? 10-20-22

Greenspan’s First Cyclical Ride: 1987-1992 10-24-22

Greenspan’s Last Hurrah: His Wild Finish Before the Crisis 10-30-22

Yield Curve Lookbacks: UST Shifts at Cyclical Turns 10-16-23

UST Moves 1978-1982: The Inflation and Stagflation Years 10-18-23