Macro

The 30-year Treasury yield has held above 5% for 27 consecutive days, the longest stretch since 2007, reigniting a 'Sell America' debate. Two factors are driving the move: Kevin Warsh's confirmation as Fed Chair on May 13, 2026, in a historically divisive 54-45 vote, with his sparse communication style unsettling markets as core inflation sits at a 12-month high and the funds rate remains at 3.75%. Simultaneously, Treasury Secretary Scott Bessent authorized the first US-coordinated yen intervention in nearly 30 years, routed through euros to avoid dumping dollars, signaling Washington's preference for a weaker dollar. Japan holds over $1 trillion in US debt, risking forced liquidation amid the Treasury's $739 billion quarterly borrowing push.

The finance sector is deeply bearish this month, driven by the KOSPI's 41% crash wiping ₩2.5 quadrillion and the $40 trillion Treasury refinancing at multi-decade high rates, which together signal systemic stress and a funding crisis. The 30-year yield nearing its 2007 high, combined with the Fed's first three dissents since 2016 and Chair Warsh's credibility under fire after holding rates, underscores a loss of confidence in monetary policy amid slowing GDP growth and reaccelerating core inflation.

Wednesday's US May CPI release is the most consequential data point ahead of the Federal Reserve's June 17 rate decision, with money markets pricing a 98% probability of a 25 basis-point hike by December. The May jobs report, which came in well above forecasts, has extinguished rate cut expectations that had been credible before the US-Iran conflict began. Analysts say a hotter-than-expected CPI print would make it very difficult for policymakers to resist further tightening, as inflation already runs persistently above the 2% target. A key watch point is whether energy-driven inflation, amplified by the US-Iran conflict and Hormuz disruption, is bleeding into core categories. Thursday's PPI figures will add a second layer, signaling where headline inflation may head in coming months.

Consumer sentiment is deeply bearish this month as the U.S.-Iran conflict drives gas prices to $4, compounding a 1.5% GDP growth slowdown and a Fed now signaling a potential hike. The KOSPI’s 41% crash and Trump’s 2028 drug tariff announcement further pressure household spending power, while rising mortgage rates drag home sales lower. The only bright spot is Uber’s $14.8bn Delivery Hero acquisition, but it is too narrow to offset the broad demand destruction from geopolitical and policy headwinds.

Federal Reserve Bank of Kansas City President Jeff Schmid reiterated his primary concern is inflation, arguing in an Aug. 4 speech that monetary policy may not be tight enough and that returning inflation to the Fed's 2% target will require tighter policy. Schmid did not specify the timing or magnitude of potential rate increases, but the Fed held its benchmark rate at 3.5% to 3.75% at its latest meeting, with three officials voting for a hike. Meanwhile, the average 30-year fixed mortgage rate climbed for a fifth straight week to 6.69% as of Aug. 6, its highest level since July 2025, according to Freddie Mac. At that rate, principal and interest on a $400,000 loan would cost about $2,578 per month, roughly $185 more than at February's brief low of 5.98%. Mortgage rates have been influenced by the 10-year Treasury yield reaching 4.65%, up sharply from 3.97% before the U.S.-Iran conflict began in February, which also drove oil prices higher. In June, consumer prices were 3.5% higher year-over-year, with energy prices surging 15.7% and gasoline up 26.7%, though overall prices fell 0.4% month-over-month and core inflation (excluding food and energy) stood at 2.6% year-over-year. Schmid had previously cautioned against overemphasizing a single data point, noting volatile oil prices and persistent inflation excluding energy at 3.2%.

Real estate sentiment is firmly bearish this month as mortgage rates climbed to 6.55%, their highest since August 2025, while single-family homebuilding fell and permits hit a ten-month low. The July jobs miss and the Fed’s inflation forecast pushed rates higher, and a new Fed metric showing the homeownership rate at just 53% underscores the affordability squeeze. Ongoing Fed hold decisions and Williams’ warning of possible rate hikes if inflation doesn’t ease keep the sector under pressure.

Google began phasing out Google Assistant on September 4, replacing it with Gemini AI on Android phones, tablets, Wear OS watches, headphones, earbuds, and Android Auto, with the transition rolling out over several weeks. Once complete, users on affected devices cannot revert to Assistant. The move, first announced in March 2025, consolidates Google's assistant experience around Gemini, which reached 950 million monthly active users in Q2 fiscal 2026, with daily active users tripling year-over-year, according to CEO Sundar Pichai. Gemini offers conversational, multimodal capabilities for complex tasks, while Google has worked to ensure familiar Assistant functions like timers, music, and smart-home controls remain. Vehicles with Google built-in, Google Home, and Google TV retain Assistant for now, with Gemini expansion planned. The shift also impacts advertising, as brands must optimize for autonomous AI agents handling transactions and real-time content, potentially reducing ad impressions and publisher traffic. Google continues developing new models, including Gemini 3.5 Flash Cyber, testing 3.5 Pro, and pre-training Gemini 4, with the web app available in over 70 languages and 230 countries.

The sector feels cautiously neutral, with regulatory tailwinds from the FCC's ownership cap elimination and NBCUniversal's Peacock-YouTube Premium bundling offsetting competitive pressure from SpaceX's direct-to-carrier plans and Netflix's slowing growth. The FCC ruling and Amazon Leo's satellite push signal a structural shift toward consolidation and direct-to-device distribution, while the Paramount-Warner Bros. block and Google's Gemini integration keep M&A and platform transitions in flux. Macro headwinds from reaccelerating inflation and a hawkish news lean cap upside, but the sector's own events—both positive and negative—balance to a flat read.

The US-China trade war has escalated beyond tariffs into targeted restrictions on semiconductors, drones, and critical minerals like gallium and germanium, weaponizing supply chain dependencies. China dominates rare mineral refining, while the US controls advanced chip fabrication, creating a strategic standoff. These measures aim to starve rival sectors and accelerate domestic production, but decoupling is costly and slow, forcing corporations to duplicate supply chains. The conflict reflects a deeper technological arms race, pushing global tech toward parallel, incompatible systems with no compromise in sight.

Tech sentiment is cautiously positive this month, driven by massive capital commitments—Big Tech’s nearly $2.4 trillion in AI data center spending, the $500 billion Wall Street-Nvidia financing deal, and OpenAI’s $30B Georgia project—which collectively signal sustained demand. However, the mood is tempered by a sharp negative from ASML and U.S. chip stocks plunging on a reported China DUV breakthrough, underscoring competitive risk in the semiconductor supply chain.

Chinese President Xi Jinping warned in April that the international order is 'crumbling into disarray,' criticizing a U.S. naval blockade of the Strait of Hormuz as 'dangerous and irresponsible' for threatening a key oil route. His comments came amid ongoing Iran conflict impacts on global markets, despite a fragile ceasefire. Xi's warning also addressed rising U.S. tariffs and protectionism, adding uncertainty to the world economy. Oil prices have fluctuated wildly, from nearly $113 to $68 per barrel. While China's exports grew 27% in July, driven by AI demand and U.S. holiday purchasing, its Q2 GDP saw the slowest growth in three years, raising concerns about dependency on global demand. Xi's remarks signal potential fragmentation of market systems as U.S.-China tensions persist over trade, tariffs, and security.

Industrial sentiment is cautiously bullish this month, driven by the AI infrastructure boom: OpenAI’s $30B Georgia data center and Caterpillar’s raised 2026 sales forecast have pushed industrials to tech-like valuations. That momentum is tempered by the KOSPI’s 41% crash and Xi’s warning of global disarray, which underscore the sector’s exposure to geopolitical and demand risks from a slowing U.S. economy.

The United States faces a potential power deficit of 30 to 55 gigawatts by 2030, driven primarily by AI data center expansion, which McKinsey & Company projects will account for 75 percent of US power demand growth over the next decade. Data centers require nearly 30 GW of new capacity annually, with 20 GW for IT chips and 10 GW for cooling. A Bain & Company report warns US data center electricity demand could double to 409 terawatt-hours by 2030, consuming 9 percent of total electricity. Despite risks of an AI bubble, analysts argue the infrastructure investment is safe, as modernized power assets can support electrification of manufacturing and electric vehicles. This buildout is also driving tech capital toward regions with stable renewable power, like Kenya's geothermal fields.

Utilities are firmly bid this month as the AI-driven data center buildout reshapes the demand outlook, with BloombergNEF doubling its 2035 power forecast to 194 GW and OpenAI committing to a $30B Georgia mega-project. The sector is pricing in a structural growth story—data centers could consume 20% of U.S. electricity by 2035—though the BNEF warning of potential bill spikes and the macro risk of a hawkish Fed pivot on reaccelerating inflation are capping the upside.

The Federal Reserve may raise interest rates in October, with CME Group's FedWatch tool showing a 57.7% probability of a hike at the late-October FOMC meeting, following a 44.1% chance in September. Despite the potential for rising rates to hurt many stocks, three are recommended as buys: UnitedHealth Group, which has seen a 20% year-to-date gain and a 54% earnings jump in Q2 2026; JPMorgan Chase, which benefits from higher net interest income, reporting $25.6 billion in Q2; and Chevron, which gains from elevated fuel prices tied to the Iran war and resurging inflation, with shares up over 20% in 2026.

Healthcare feels cautiously bullish this month, driven by Eli Lilly's blockbuster Mounjaro sales and raised forecast, plus its $3.8 billion entry into the psychedelic drug race and the FDA's first daily LDL cholesterol pill approval. The sector's positive momentum is tempered by Trump's 100% tariff on imported generics starting 2028 and CVS's early 2027 warning, but the macro rate-hike chatter is a secondary concern to these company-specific catalysts.

The US-China trade war has escalated beyond tariffs into targeted restrictions on semiconductors, drones, and critical minerals like gallium and germanium, weaponizing supply chain dependencies. China dominates rare mineral refining, while the US controls advanced chip fabrication, creating a strategic standoff. These measures aim to starve rival sectors and accelerate domestic production, but decoupling is costly and slow, forcing corporations to duplicate supply chains. The conflict reflects a deeper technological arms race, pushing global tech toward parallel, incompatible systems with no compromise in sight.

Raw materials are broadly bid this month, driven by a U.S. government push to boost critical minerals and a $400M investment in a domestic scandium mine, which together signal a structural re-rating for strategic supply chains. The Strait of Hormuz closure has pushed crop prices to three-year highs, but that bearish shock is more than offset by gold holding above $4,300 on safe-haven demand and a hawkish inflation narrative that reinforces commodity pricing power. The sector is also supported by de-dollarization flows into crypto reserves, which indirectly lift hard-asset demand, while the China-Rio Tinto talks halt adds a bearish undercurrent for iron ore.

Tensions in the Middle East escalated as Iran threatened Strait of Hormuz closure, while the U.S. imposed sanctions on Iran's Persian Gulf Strait Authority (PGSA), stripping its website of encryption and exposing shippers' data. A sanctioned Russian tanker, the Caroline Bezengi, carrying 800,000 barrels of oil, spilled over 1,240 square miles off Oman after running aground June 30, creating a 'nightmare scenario' for salvage. Meanwhile, Israel's U.N. envoy cited new data showing child malnutrition in Gaza dropped to pre-war levels, refuting starvation claims. Separately, War Secretary Pete Hegseth stayed with President Trump during a secret plane swap in Turkey over an Iranian assassination plot, while Secretary Rubio remained on a decoy Air Force One.

Defense is very bullish this month, driven by the Iran war directly boosting stocks like Hanwha Aerospace and Lockheed Martin’s raised 2026 forecasts on Pentagon restocking, alongside beat-and-raise quarters from Lockheed and RTX. The only drag is a Pentagon war game revealing US aluminum vulnerability before the strikes, but that is outweighed by strong order flow from SpaceX’s $1.6B Space Force launches and Anduril’s $100B valuation talks.

BP and Shell both posted massive profit surges in the latest quarter, driven by the Iran-war-fueled spike in oil and gas prices. BP's profit more than doubled to $5.73 billion, beating estimates, as new CEO Meg O'Neill pushes an aggressive turnaround plan, admitting the company has 'not delivered consistently' and has 'written off too much value.' Shell posted its best quarter since 2022 with adjusted earnings of $9.84 billion, marking its 19th straight quarter of at least $3 billion in buybacks. While both benefited from the same price surge, BP is restructuring and selling assets to reduce its roughly $40 billion in liabilities, whereas Shell maintains a steady course, with CEO Wael Sawan emphasizing the company is built to 'thrive through volatility.'

Energy feels extremely bullish this month as the U.S.-Iran conflict and Houthi tanker attacks have driven Brent to $100 and U.S. gas prices to $4, with multiple +1.00 sentiment events reinforcing supply disruption fears. The oil spike to $100 has reignited inflation concerns, but the sector is pricing in sustained geopolitical risk premiums from the Strait of Hormuz crisis and Middle East airstrikes, outweighing any macro headwinds from reaccelerating CPI or hawkish news signals.