Is the Risk-On Trade in Trouble Now? w/ Andreas Steno & Mikkel Rosenvold | Macro Mondays

Kevin Warsh’s recent Jackson Hole speech signals a return to the PCE index as the primary inflation benchmark, despite market perceptions of hawkishness that exceed the actual rhetoric. While the PCE currently prints higher than the CPI, historical data from 1983 suggests this divergence often precedes a sharp decline in inflation. The ongoing tension between Fed policy and Treasury Secretary Scott Besant’s bond buyback strategy creates a volatile environment for risk assets, with potential for further curve steepening if the Fed fails to act in September. Meanwhile, geopolitical escalations near the Strait of Hormuz continue to impact energy markets, though current data suggests a short-term peak in crack spreads. Looking ahead, a robust AI-driven construction economy may drive an upside surprise in the upcoming ISM manufacturing index, while labor market fluctuations remain secondary to the Fed’s singular focus on inflation.