Good Thursday evening MacroEdge Readers & Community,
The bulk of my update this evening will be coming over at MacroEdge Oil & Gas Research, while Six is providing our latest Portfolio Strategy update below. Don’t miss either one.
You can find it at MacroEdgeEnergy.substack.com/subscribe
For those of you who did not catch the latest Weekly Macro Note or War Note you’ll know that there are some changes coming both to our organization and our offerings. Continue to follow my X (@DonMiami3) as well as these are announced and rolled out.
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MacroEdge Flagship Portfolio Strategy Update
Hot PPI today started a waterfall of selling in rates, with SOFR futures pricing in nearly a full 25 basis points of tightening between now and June 2027 going into CPI tomorrow. The waterfall was extended by credible speculation of Houthi rebels hitting the pipeline that Saudi Arabia has been using to reroute oil around the Strait of Hormuz. Treasury Secretary Scott Bessent daring the market to bet against him (albeit on Japanese Yen) may be accentuating the recent declines, as it is likely not coincidental that yields have gone nearly straight up since he declared “I am the house now”.
Since Warsh’s hawkish stance at Jackson Hole, we’ve seen a strongly above expectations payroll report, a hot PPI, and a hot CPI tomorrow looks likely to all but guarantee a September rate hike. The SOFR strip currently prices the funds rate roughly a full point higher by mid 2027, and positioning is stretched in that direction. Warsh and Bessent remain closely aligned, and Warsh is likely to look for any reason he can find not to hike. Waller echoed similar sentiment.
Equity indices are barely off their all time highs as oil, ags, and nominal and real yields soar. This could be indicative of a lack of acceptance of current conditions, or indicative of prepositioning for the next policy waffling or “TACO”.
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