Redeye Macro Note: The Keys to Summer, Crude Discussion, Multiples Mania
In this Redeye Macro Note - we briefly discuss early trends to watch as we head into summer, data next week, inflation data, oil prices, technicals, and more.
Good Friday evening MacroEdge Readers and Community,
This Friday evening we’ll talk about what’s going to matter for June and July – primarily from a macro perspective – and we’ll also add a brief overview of the technicals after the close today. Things remained pretty muted this week - though we saw a brief sell-off on Trump reconsidering tariff rates for the European Union - up to 50% from current levels - and to take effect on June 1st. Almost immediately following Scott Bessent hit the airwaves in what we call the ‘fiscal put’ - even going so far as to praise Janet Yellen - a deep red flag for those that thought this administration would be serious about taking a more ‘hawkish’ tone with fiscal policy and spending. With every passing day, it appears that we’re shifting rapidly back towards a Biden/Yellenomics fiscal policy, and we’ve described why in previous reports that you should read before continuing. The 10Y has remained in a higher for longer stance, along with long-term yields, though it’s not a certainty yet that the Senate moves forward with the ‘Tax Bill’ akin to the Inflation Reduction Act in terms of expanding the deficit and its stimulative powers.
On Sunday we’ll have more on the real estate situation - particularly in the Sunbelt - as sales data remains sour and inventory continues to rise. We’ll also dive further into June and July things to watch for - and a lot is arriving on the employment and inflation data front over the next few weeks - especially as we look out for changes to tariff policy. Overall, we’re sticking with a neutral outlook for now as things continue to churn and chew on the latest policy developments - and that will likely shift our outlook towards a clearer point of view by early to mid-June, though things have started to soften again. The Admin is more active in protecting nominal asset prices, and that means unknown risks have to materalize in a combination to overcome the short-term effects of these fiscal puts.
Note that the next Weekly Ozone Report will be available on Monday evening - not Sunday evening - due to the Memorial Day holiday and our firm will be closed half-day Monday (12pm EST onwards).
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The Inflation Discussion:
Even without a meaningful increase in the price of oil/gasoline in the last month or so, there still remains price pressures in the economy. The tariffs are likely to have some effect here in the consumer goods segments that will be passed on - in things like automobiles - and elsewhere in consumer electronics (the list goes on and on). The Trump Admin is keeping oil flowing from the Middle East while producers here at home are getting penalized for now - though rig counts continue to decline - but inflation appears to have bottomed out for now in April:
If oil prices were to accelerate from here - we’re likely to see a move higher in CPI in the second half of the year - and the Fed has been speaking much more directly to the Admin in the last few days about tariffs, impacts, and rate cuts.
