The market continues to demonstrate remarkable resilience. Lower oil prices, easing Treasury yields, and the relentless buildout of artificial intelligence infrastructure are still providing a favorable backdrop for risk assets.
The U.S. government’s decision to invest $2 billion directly into nine quantum-computing companies through minority equity stakes—not just grants—signals a major shift toward treating quantum as a strategic commercial industry, with potential implications for investors seeking targeted exposure through funds like the WisdomTree Quantum Computing Fund (WQTM).
Yes, we have been there before, only to be disappointed. But the market smells a real settlement to open Hormuz, and WTI oil briefly dipped below 90 for the first time in weeks. If an opening occurs, expect the market to continue its march upward, as the momentum trade gathers strength.
I still don’t think the Fed is close to a rate hike, but for the upcoming June FOMC meeting, a shift in the language of the policy statement from an easing bias to one of a ‘balanced’ outlook seems to be the most likely scenario. However, the fed funds futures market has now fully priced in a rate hike for March 2027, a remarkable shift from its pre-war status of discounting almost three rate cuts for the same timeframe.
Stocks’ rally off the March 30 lows has been nothing short of wild, with internal market dynamics showing some performance divergences that we haven’t seen for decades. For example, in the first 6 weeks of the rally, the S&P 500 Growth index beat the S&P 500 Low Volatility Index by more than any other 6-week window on record.
Markets ended last week under pressure as the optimism that had been building around a potential geopolitical breakthrough faded quickly. The China summit did not deliver the progress that had been hoped for. The Boeing aircraft order was smaller than expected; there was no meaningful movement on Iran; the Taiwan issue was brought forward in a way that unsettled markets; and the hoped-for easing of tensions around the Strait of Hormuz did not materialize.
Typically, an investor’s traditional bond portfolio begins with a cornerstone, or core holding of some sort. From either a strategic or tactical perspective, a core fixed income position provides the investor with some ballast to help anchor any other strategies that may be included.
Last week was very strong for the market narrative because the economic data continued to show resilience where it matters most: jobs, earnings, and investor confidence. The latest payroll report was not just stronger than expected; it showed broad private-sector strength, with government jobs actually declining and the prior month revised higher. That is an important distinction.
The April FOMC meeting’s four dissents and resistance to maintaining an easing bias signal a higher bar for rate cuts under incoming Chair Warsh, suggesting investors may favor Treasury floating-rate strategies to navigate a prolonged “higher-for-longer” environment.
While the Middle East war takes on the lion’s share of headlines, and rightfully so, there has been another development in bond-land that has gone relatively unnoticed. Indeed, one concern that crops up in the U.S. Treasury (UST) market is the potential for higher budget deficits from the already lofty current reading.
The Federal Reserve held rates steady as expected last week, but the real story was the shift in tone inside the Committee. Three dissents in favor of moving to a neutral bias are highly unusual, and I do not recall seeing dissents on a bias in this way before.
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The stock market would love to see nothing more than the labor market holding up. Time and again, we find monetary policy having a beautiful, lagged effect in the jobless claims series. We are of the view that the cumulative 175 basis points of Fed rate cuts that hit the market in 2024 and 2025 is exactly what the labor market needs in 2026-2027. We will soon find out if manufacturing employment continued to mend in April.
For the third consecutive policy gathering, the Federal Open Market Committee (FOMC) decided to remain ‘on hold,’ keeping the fed funds trading range at 3.50%–3.75%. This result was largely expected by the markets. Unfortunately for the Fed, the policymakers are in a challenging position of juggling incoming economic and inflation data as well as the uncertainties emanating from the Middle East war.
Markets continue to ebb and flow with every headline out of Iran and the Strait of Hormuz, but the most important message from the markets is resilience. Earnings season is off to a very strong start, with roughly a 75% beat rate, and the AI investment cycle continues to provide a powerful tailwind for equities.
Markets are being pulled in multiple directions. Geopolitical tensions, questions around Federal Reserve policy and the rapid rise of artificial intelligence are all competing for investor attention.
Clearly the path to peace is not as easy as it looked last Friday when the easing in Middle East tensions, the reopening of the Strait of Hormuz to commodity flows, and the sharp retreat in oil prices calmed fears on the most immediate macro threat to equities.
The Middle East war has replaced tariff-driven inflation concerns with fears of rising energy prices feeding through the economy. On Friday, the Bureau of Labor Statistics (BLS) released its March CPI report, when markets received their first ‘official’ glimpse of how the surge in energy prices has begun to impact the U.S. inflation setting.
The war in the Middle East has brought about an elevated uncertainty quotient when examining the U.S. macro backdrop. The resultant rise in energy prices is being looked at as both a potential ‘tax on the economy’ as well as a catalyst for a near-term elevation in inflation.
The market remains remarkably resilient, but I have expressed a more cautious outlook in the near term as rising oil prices and a renewed pickup in money growth complicate the inflation outlook.
Developments in the Middle East continue to be, without a doubt, taking center stage for the financial markets. However, it’s important to keep tabs on the U.S. macro-outlook, especially the labor market and inflation aspects.
The economy continues to show resilience, and the March jobs report reinforced that view. Payroll growth came in stronger than expected, prior months were not meaningfully revised away, and the unemployment rate edged lower. Wage growth eased, but the broader message was clear: the labor market remains too firm to support any near-term case for Fed easing.
Markets often react sharply to geopolitical developments, but just as often, they overreact. Investors today are grappling with heightened global tensions, rising oil prices and uncertainty around central bank policy. The key question is whether these risks meaningfully alter the economic outlook or simply create short-term volatility.
Given the rise in the 10-year Treasury yield and oil prices, the case for near-term Fed cuts has weakened materially. That is the key message from this market.
At the risk of leaving aside the flow-through of the crude oil price into expenses such as electricity, trucking, and so on, let’s just look at the pocketbook hit from filling up the family car specifically.
Faster productivity growth lifts earnings, improves the long-run fiscal arithmetic, and allows the economy to run stronger without recreating the inflation regime of 2022. Historically, markets are slow to recognize when the supply side of the economy has improved. This time should be no different. The productivity story is more durable than this week’s Iran developments, which is dominate trading over the near term.
In practice, many advisors use SMAs alongside ETFs, not instead of them—combining the scalability of ETFs with the customization and tax management SMAs can provide.
The FOMC held the fed funds rate at 3.50%–3.75% for a second straight meeting as policymakers weigh slowing growth, persistent inflation, with core PCE at 3.1%, and geopolitical uncertainty from the Middle East.
The market ended last week with a more cautious tone as rising oil and the widening Middle East conflict bring a fresh layer of uncertainty. I could see the markets experiencing a 10% correction from the recent highs. We are not anticipating a major decline for the S&P 500, but the mood has clearly changed.
A surprise 92k decline in February nonfarm payrolls and a rise in the unemployment rate to 4.4% signal some labor market softening, though stronger ISM manufacturing and services readings and still-low jobless claims suggest the broader U.S. growth backdrop remains intact.
Prior to the conflict in the Middle East, the U.S. financial markets were being confronted with headlines and attendant concerns surrounding the credit markets.
Markets face a complicated mix of signals. The payroll report came in dramatically weaker than expected, several standard deviations below forecasts, and prior months were revised downward. Taken together, the last two months essentially show zero payroll growth.
For over a decade, the narrative surrounding emerging market (EM) debt has been dominated by a single, overpowering force: the United States Dollar. As the greenback surged from the mid-2010s through the early 2020s, investors seeking yield in emerging markets largely sought shelter in "hard currency" debt—bonds issued by emerging nations but denominated in U.S. dollars.
The market spent the week digesting a modestly hotter PPI print, a pullback in NVIDIA after earnings, and a move in the 10-year Treasury yield below 4 percent.
As speculation builds around a Warsh-led Federal Reserve, the prospect of eliminating the ‘dot plot’ could mark a major shift in forward guidance—potentially increasing rate volatility and reshaping how fixed income markets price policy risk.
The recent report by Citrini Research paints a frightening future of massive AI- induced unemployment, crashing stock markets, rising default rates, and a general descent into economic chaos.
After peaking above 114 in September 2022, the dollar index has spent the last several years drifting lower, touching 96 a few weeks ago before stabilizing at 97.68 as we write. Much of that move has stemmed from weakness relative to the euro specifically.
Fourth-quarter GDP came in at 1.4%, a sharp markdown from early estimates that were inflated by a temporary collapse in the trade deficit.
Last week delivered exactly what the market needed on the economic data front: confirmation that inflation continues to cool while the labor market remains firmly intact. The CPI came in softer than expected, finally reflecting the long-awaited deceleration in rental costs.
Kevin Warsh’s nomination for Fed Chairman initially reassured bond markets by offering a known, crisis-tested Fed veteran with a reputation as an inflation hawk, reducing uncertainty at a critical juncture for monetary policy.
The mid-term elections are still more than eight months away, but that hasn’t stopped stories and headlines being posted about possible outcomes and what are perhaps the main drivers come voting day. Without a doubt, the number one issue appears to be the notion of affordability, and of course, what plans do the Republicans and Democrats have in store to address this issue.
Just eight years ago we were celebrating 25,000, which means equities have doubled in less than a decade. By the Rule of 72, that’s roughly a 9% annual return including dividends—nominal, yes, but still a powerful reminder that equities continue to reward patience even through extraordinary volatility, policy shocks, and repeated predictions of recession.
Last week began with a quiet Fed meeting, but markets quickly received a new catalyst with Trump announcing Kevin Warsh was Trump’s choice to be the next Federal Reserve chair. Warsh was always my first choice. I expect the Senate to confirm him.
As was widely expected, the Federal Open Market Committee decided to pause their rate cuts at the January meeting, keeping the fed funds trading range at 3.50%–3.75%. For those keeping track, the Fed had lowered ‘the funds rate’ by 75 basis points (bps) during the final three FOMC meetings of 2025.
The near-perfect timing of gold breaking through $5,000 while silver sliced through $100 has grabbed the market’s attention.
The key point is that nothing in the incoming data since December has undermined the Fed’s prior message. The economy remains strong, jobless claims are hovering near 200,000, and recession fears continue to recede.
Markets pushed to new highs again last week as investors looked past headline inflation noise and focused on improving breadth beneath the surface.
While the breaking news regarding the Fed receiving subpoenas from the Department of Justice will no doubt garner the lion’s share of Fed-related headlines in the days and weeks ahead, we wanted to roll the clock back and delve into what the markets should be looking at in terms of upcoming traditional monetary policy decisions.
Last week delivered some of the more surprising macro data I’ve seen in years: very slow job growth, but stable unemployment, and a sudden surge in output that materially lifts the outlook for earnings heading into 2026.
The market enters 2026 on a fundamentally solid footing, even if the year-end trading days were choppier than the traditional year-end rallies we often see. Economic momentum exiting 2025 was strong.
