Mind the Macro

This week, we examine the latest labor market and inflation reports, the recent volatility in Treasury yields, and the implications for Federal Reserve policy. September's employment report revealed further signs of a deteriorating labor market. Nonfarm payrolls barely increased, with the entirety of the gains attributable to the health care and construction sectors. Downward revisions to July and August payrolls compounded the weakness, while annual growth in average hourly earnings fell to one of its lowest levels since the pandemic. Meanwhile, inflation offered little respite. Both the Consumer Price Index (CPI) and Producer Price Index (PPI) exceeded expectations, driven largely by rising gasoline prices. Particularly striking was the PPI report, which recorded its largest monthly increase since March 2022, while goods prices registered the sharpest monthly advance in the history of the series. Against this backdrop of weakening employment and resurgent inflation, yields on 10 year Treasury notes and 30 year Treasury bonds have risen sharply and become increasingly volatile.

In this episode, recorded on September 24, we discuss the worst day for Treasury yields in 18 months, the latest PMI composite, the escalating conflict with Iran, and Oracle’s dispute with lenders. Treasury note and bond yields suffered their sharpest one day rise in 18 months following a strong headline PMI reading, hawkish commentary from a Federal Reserve governor, and a weak Treasury note auction. Beneath the robust PMI headline, however, the details were less reassuring. Survey respondents reported mounting supply chain delays, while inflationary pressures climbed to their highest level since October 2022. The conflict with Iran also took a turn for the worse after President Trump threatened to “annihilate Iran,” while Iran outlined far fetched preconditions for returning to the negotiating table. Finally, in another unwelcome development for private credit, Oracle threatened to invoke a force majeure clause if construction of one of its Blue Owl backed data centers misses its 2028 completion target. The dispute highlights another potential vulnerability for private credit investors, particularly as economic growth weakens and the enormous capital requirements of the AI buildout increasingly collide with tighter financial conditions.

In this episode, recorded on September 18, we discuss the Census Bureau’s latest residential construction report, retail sales, rising Treasury yields, and developments in artificial intelligence. Housing completions fell 12 percent in August from the previous month and were 27 percent below their August 2025 level, leaving completions near levels last seen during the Global Financial Crisis. Retail sales exceeded expectations, but the headline strength was less impressive beneath the surface. Much of the increase can be attributed to higher prices and spending at gasoline stations and food services and drinking places. Meanwhile, yields on 10 year Treasury notes and 30 year Treasury bonds continued to climb as uncertainty surrounding the conflict in the Middle East intensified and concerns around the national balance sheet grew. Finally, leaders of several of the largest frontier AI labs called for a slower pace of AI development. Such restraint could weigh on AI related investment in the near term, potentially removing one of the principal supports for the recent equity market rally.

This week, we discuss the latest Employment Report, the Treasury’s $6 billion repurchase operation, the rise in Treasury yields, intervention in the Japanese yen, the war in Iran, and widening CCC credit spreads. While equity markets have remained remarkably stable, bond markets have borne much of the strain from recent macroeconomic and geopolitical developments. Many observers hailed the latest nonfarm payrolls report as evidence of a resilient labor market, but the underlying figures were considerably less reassuring. Wage growth slowed, labor force participation remained depressed, and the number of long term unemployed continued to rise. Meanwhile, Treasury Secretary Bessent’s $6 billion repurchase operation, three times the size of the most recent operations, did little to calm the bond market. The 30 year Treasury yield climbed to 5.3%, while the 10 year yield reached 4.84%. Mortgage rates followed, with the 30 year rate rising to 6.97%, adding further pressure to an already fragile housing market and, by extension, consumer spending. Geopolitical tensions provided another source of unease as Iran and the United States escalated their conflict, pushing oil above $100 a barrel and gasoline to $4.27 a gallon, its highest level in several months. Taken together, the week offered an increasingly stark contrast between the relative calm in equities and the mounting strains evident across bond and credit markets.

In this episode, we discuss the most recent PCE release and Fed Chair Kevin Warsh's speech at Jackson Hole. PCE came in higher than anticipated keeping the Federal Reserve on their toes. In addition, Warsh indicated in his Jackson Hole speech that the Fed needs to be more attentive to it's inflation mandate.

This week, we discuss the latest inflation data, the jobs report, Treasury Secretary Scott Bessent's bond buybacks, and the Federal Reserve minutes. July CPI came in below expectations, although much of the relief once again reflected energy prices. With that support likely to fade, we expect inflation to move higher in August. The labor market offered less cause for optimism. Headline payroll growth fell well short of expectations, reinforcing the weakness we have highlighted in recent months. More strikingly, the labor force participation rate continues to fall sharply as retiring Baby Boomers and discouraged workers leave the labor force. The Treasury, meanwhile, announced plans to buy back longer dated Treasury bonds in an effort to reduce long term interest rates, which have pushed up borrowing costs across the economy, from mortgages to data centers. We are skeptical that the program will have much effect. Bond yields initially fell following the announcement, only to rebound this week to near their recent highs. Finally, the Fed minutes revealed that a majority of FOMC members would favor raising rates if inflation remains elevated. They also exposed a widening divide between Chair Warsh and the rest of the Committee, raising questions about how much influence the new Chair can exert over the direction of monetary policy.

In this episode, we discuss Japan's latest efforts to stabilize the yen, the latest GDP report, and Chair Warsh's most recent press conference. After the yen fell to its weakest level against the dollar in four decades, Japanese policymakers began selling United States Treasuries, pushing the yield on the 30 year Treasury to its highest level since the Global Financial Crisis. The yen's decline reflected the wide interest rate differential between Japan and the United States, rising energy import costs, and growing concerns over Japan's substantial public debt burden. Although real GDP expanded at an annualized rate of 1.5 percent, much of the apparent strength in consumer spending came from prescription drugs, motor vehicle purchases, food services, financial services and insurance, and nonprofit activity, raising questions about the breadth and durability of household demand. Finally, Chair Warsh's press conference offered little in the way of new information, inviting the question of why it was held at all. While such events are typically cordial, this one became noticeably more confrontational as reporters pressed him on the growing gap between his forceful rhetoric on inflation and the absence of corresponding policy action.

This week, we examine housing, the labor market, rising interest rate expectations, and our broader investment thesis. The Census Bureau's latest report on new home sales modestly exceeded expectations, but sales remain historically subdued as the housing market continues to slow across much of the country. Initial unemployment claims unexpectedly declined, yet the headline figure masks several important developments, including weaker hiring, the retirement of baby boomers, and slower immigration, all of which have reduced labor force growth and complicated the interpretation of employment data. Meanwhile, the yield on the 10 year Treasury note climbed to 4.7 percent, its highest level of the year, as investors responded to concerns over an escalating conflict and the prospect of higher oil prices. The Federal Reserve remains in an increasingly difficult position, confronting a series of supply shocks that monetary policy is poorly equipped to address. Our view remains unchanged. Even if policy rates do not rise further, expectations that interest rates will remain elevated are likely to place additional pressure on households, weighing on consumer spending and broader economic activity.

This week, we examine the latest inflation, consumer, and housing data, along with the sharp increase in stock margin borrowing. While both CPI and PPI came in below expectations, much of the decline was concentrated in energy prices. Given the recent rise in oil prices, those subdued inflation readings may prove temporary. Retail sales growth also slowed in the latest month, reflecting lower gasoline prices and broader weakness in energy related spending. Housing data continued to point to a cooling market. Even housing starts, which exceeded expectations at the headline level, revealed underlying softness upon closer examination. Finally, we discuss the historic surge in stock margin borrowing during April and May and consider how the rapid buildup in leverage may be contributing to the recent sell off in semiconductor stocks.

This week, we discuss the PCE report, new home sales, GDP, and PMI. Inflation continues to run well above the Federal Reserve's target. While personal income growth appeared strong, much of the increase reflected a one time government payment. Adjusting for this temporary boost, the savings rate fell to just 2.8%, suggesting that many consumers are increasingly stretched. New home sales surprised to the downside, while the median months for sale rose to its highest level since 2021, underscoring further weakness in the housing market. Although the final estimate of first quarter GDP was revised higher, the increase was driven primarily by a decline in imports rather than stronger domestic demand. More concerning, consumption growth was revised down from 1.0% in the initial estimate to just 0.5% in the final estimate, adding to evidence of a slowing consumer sector. Meanwhile, the headline manufacturing PMI appeared robust, but much of the strength reflected firms building inventories in response to supply concerns and policy uncertainty. Manufacturers also reported layoffs amid weakening demand and elevated uncertainty. Taken together, while several headline figures suggested resilience, the underlying details painted a considerably weaker picture of the economy.