I hope everyone is enjoying the long weekend. As we sit today before markets open tomorrow, the U.S. is playing a game of deal or no deal. Trump clearly wants to move on from the war, but the deal terms floating around came with enormous concessions to Iran and was loudly condemned by MAGA and the GOP. In my opinion, Trump is risking his entire political career if he pursues this deal. The reason I think so is because the IRGC is not a rational actor and does not have the same interests as countries like the US, which are driven by capitalism. I do not see them showing any interest in giving up their nuclear program, and any deal that gives them more financial power via reduced sanctions will see them use it for nefarious means before long. All that said, this is not a personal politics column, it is a macro one, and the real consequence is the U.S. economy is even more likely to overheat given the FCI movements I see today.
In terms of the week ahead, we do have quite a bit of data. Tomorrow has Case Schiller and Dallas Fed manufacturing. Wednesday has MBS apps, Redbook and Richmond Fed. Thursday has claims, building permits and durable goods, as well as PCE and income/spending. Friday has trade balance and Chicago PMI and is also month end.
We also have Australia inflation on Tuesday night and it will be interesting as divergences are manifesting. U.S. exceptionalism is back but the rest of the world may be weakening.
If you did not have a chance to see, I put out two detailed notes this past week.
The Systemics looks at financial stability risks from private credit, VIX and equity leverage.
The Oil Conundrum looks at why the oil market has thus far not risen to catastrophic levels and how we can monitor that potential. It was obviously written before this deal optimism.
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