Quick Market Note

Heading out for a week’s vacation, but, again, I’ll stay connected enough to comment herein if I think readers could use some perspective on anything that crops up

In the meantime, here’s my note to our team after seeing this morning’s market reaction to CPI:

Oil Prices and Interest Rates

With oil at $100/barrel and producer prices not remotely letting up, fed funds futures are pricing in a 70% chance of a rate hike come next Wednesday.

While the Fed, under previous leadership, is known for not bucking market expectations, if there was ever a time for it to do so, it's now.

The Coulds That Could Happen

I said in last week's video that "the economy could help out the Fed by slowing."  Meaning, if the jobs data were to weaken, and if CPI next week were to soften, pressure to raise the fed funds rate would abate markedly, and of course risk markets would love it.

Well, Friday's jobs number -- coming in much better than expected -- indeed did not help, and markets -- albeit not terribly -- sold off accordingly.. Although I suspect the "not terribly" had to do with the fact that under the hood the jobs data really wasn't all that stellar.

Here's from the macro wrap below:

Chart of the Day

Internal log entry this morning:

9/5/2026:

I've been telling clients that China (huge oil inventory) largely explains how oil has remained contained relative to expectations given the Iran War... That may be ending:

Different Ballgame For Bessent (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

A Few Things, and Your Weekly Macro Wrap

For our lead-in to this week's macro note I'd like to share a few key highlights from our internal market log... These essentially reflect our take on the current and go-forward global investment setup.

We've had, and will continue to have, multiple discussions internally about the potential market impact of the inevitable come-down off of the extraordinary spending commitment to AI infrastructure... While there's little if any sign of a letup over the near-term, we view this as a some-day -- in the not too-distant future -- not-small market event.

Our timeline falls on the shorter end of the 1-3 year range BCA expresses in comments below:

The Elephant In the Room

Kevin Warsh just completed his highly-anticipated Jackson Hole speech, and, to no surprise, there was no mention of the elephant in the room -- which would be the treasury's financing burden going forward... 

I.e., given the enormity of the debt coming due over the next couple of years, as well as the massive current budget deficit, there's no understating the need to issue new treasury debt at rates that simply can't be allowed to rise measurably on the front-end -- despite Warsh's tough-sounding (on inflation) speech this morning.

The great irony here is that, forgive me, inflation is precisely the answer to remedying the debt problem, as it's measured -- a % of GDP.

I.e., there's no paying down the debt, that's a fantasy they're no longer willing to even insult our intelligence with... Ah, but if "we" grow the economy faster than "we" grow the debt -- a la mid-40s to early-50s, we can wake up somewhere in the future with something less than 100+% debt-to-gdp.