Daily Macro US
Flash PMI Mfg. May
55.3
+0.8 vs Apr.
Claims (May 16)
209K
-3K
WTI Oil
~$97
→ $80-85 if deal
CPI YoY Apr.
3.8%
Unchanged
Fed Funds Rate
3.50-3.75%
Unchanged
Unemployment Apr.
4.3%
Unchanged
Sunday edition — dominated by a single geopolitical event: an Axios exclusive reports that the US and Iran are on the verge of signing a 60-day ceasefire extension. Key terms: the Strait of Hormuz would be reopened with no tolls, Iran clears the mines it deployed, the US lifts its naval blockade and issues sanctions waivers allowing Iran to sell oil freely. The deal could be announced today. If confirmed, this is the single most important macro event for 2026: it structurally eliminates the oil supply shock that has driven inflation from 2.8% to 3.8% since January. On a deal announcement, WTI is expected to gap sharply lower — from ~$97 Friday to a potential $80-85 range. Every NO position in our portfolio benefits. Reinforcing context from Friday: PMI Manufacturing Flash May at 55.3 (strongest since May 2022), claims at 209K — the economy is solid while the key upside inflation risk is about to dissolve. Polymarket markets are already repricing: US Recession 2026 falls to 21% (from 28%), Inflation 2026 > 4.5% moving lower, CPI May markets have sharply adjusted downward.
Today's Market Moves
US Recession 2026
28%→21%-7pp
PMI 55.3 + Iran deal: recession narrative collapsing
Inflation 2026 > 4.5%
78%→65%-13pp
Iran deal: structural oil supply shock dissolving
CPI May YoY >= 4.4%
37%→22%-15pp
Iran deal: WTI trajectory now sharply lower
CPI May YoY = 4.3%
39%→24%-15pp
Same logic — both CPI May markets repricing hard
Fed Rate < 3.25%
25%→22%-3pp
Disinflation thesis reinforced: Fed has no reason to cut
Screening Table
| # | Market | Expiry | Market Price | Fair Value | Gap (pp) | Direction | Volume | Confidence |
|---|---|---|---|---|---|---|---|---|
| 1 | Inflation 2026 > 4.5% | Dec 2026 | 65% | 42% | -23pp | SELL YES | $1M | 9/10 |
| 2 | US Recession 2026 | Dec 2026 | 21% | 7% | -14pp | SELL YES | $890K | 9/10 |
| 3 | US Unemployment >= 5.0% | Dec 2026 | 36% | 15% | -21pp | SELL YES | $408K | 8/10 |
| 4 | Fed Rate < 3.25% before 2027 | Dec 2026 | 22% | 7% | -15pp | SELL YES | $1M | 9/10 |
| 5 | CPI May YoY >= 4.4% | Jun 2026 | 22% | 5% | -17pp | SELL YES | $164K | 8/10 |
| 6 | CPI May YoY = 4.3% | Jun 2026 | 24% | 6% | -18pp | SELL YES | $164K | 8/10 |
| 7 | US Unemployment >= 6.0% | Dec 2026 | 18% | 4% | -14pp | SELL YES | $408K | 7/10 |
| 8 | Fed Rate < 3.0% before 2027 | Dec 2026 | 14% | 4% | -10pp | SELL YES | $1M | 8/10 |
| 9 | CPI May MoM = 0.6% | Jun 2026 | 28% | 6% | -22pp | SELL YES | $17K | 8/10 |
| 10 | May Unemployment Rate = 4.3% | Jun 2026 | 36% | 47% | +11pp | BUY YES | $N/A | 6/10 |
Market vs Fundamentals
Market Price (red) vs Estimated Fair Value (green) — %
Top 5 Opportunities
1
Inflation 2026 > 4.5% — NO
↓ SELL YES-23pp
Market price
65%
Fair value
42%
Gap: -23pp
The Iran deal, if signed today, is the ultimate catalyst for this position. The logic is direct: inflation in 2026 was almost entirely driven by a single factor — the energy shock from the Iran war (WTI from $70 to $126, +$56/barrel). A 60-day ceasefire with the Strait of Hormuz fully reopened would reverse this shock. Iran exports approximately 1.5-2M barrels/day through Hormuz; combined with the reopening to other Gulf producers, total supply restoration could be 3-5M bpd. At WTI $80-85, the energy component of CPI inverts from strongly positive to strongly negative for the June-December period. CPI could fall from 3.8% back toward 2.5-3.0% by year-end — making 4.5% annual inflation not just unlikely, but nearly impossible. Even if the deal falls apart, we're already at 65% — a +23pp gap from our fair value of 42%. This is our strongest conviction position.
▵ Bull case
- Deal could fall apart within 60 days — oil rebounds
- Tariffs still feeding second-round inflation
- Shelter and services CPI structurally elevated
- OPEC+ may cut production to offset Hormuz reopening
▿ Bear case
- Iran deal: Hormuz reopening = 3-5M bpd restored supply
- WTI $80-85 would make energy contribution deeply negative H2 2026
- Core CPI only 2.8%: no structural inflation
- PMI 55.3 with falling input prices: demand-side disinflation
- McDonald's, Wendy's, PepsiCo still cutting prices
2
US Recession 2026 — NO
↓ SELL YES-14pp
Market price
21%
Fair value
7%
Gap: -14pp
US Recession 2026 has dropped from 28% to 21% since Thursday's PMI print. The Iran deal, if signed, removes the final credible recession vector: an oil price shock powerful enough to tip the economy into contraction. With WTI potentially falling to $80-85, the stagflationary bind dissolves — the Fed gains room to cut if needed, disposable income improves for consumers, and the manufacturing PMI at 55.3 already signals expansion. Historical precedent: PMI above 54 has never preceded a recession. The 21% pricing still implies roughly 1-in-5 odds of a recession — in an economy growing at 2% annualized, with PMI at 55.3, claims at 209K, and an oil shock reversing. 7% is our fair value.
▵ Bull case
- Philly Fed -26.4: real regional manufacturing shock
- DOGE: cumulative federal sector layoffs
- 60-day deal: oil could spike again if talks fail
- Consumer confidence fragile
▿ Bear case
- PMI Mfg. May 55.3: strongest expansion since May 2022
- Claims 209K: labor market rock solid
- Iran deal: removes the oil shock recession vector
- Q1 2026 GDP +2.0% annualized: no contraction
- Fed would cut aggressively before recession materializes
3
US Unemployment >= 5.0% — NO
↓ SELL YES-21pp
Market price
36%
Fair value
15%
Gap: -21pp
Existing position. If the Iran deal removes the primary downside risk scenario (stagflation → Fed can't cut → recession → unemployment spike), reaching 5% unemployment becomes even harder to justify. PMI at 55.3 means accelerating job creation in manufacturing and services. Claims at 209K (falling) confirm the labor market trend. The SPF still shows no institutional economist projecting 5%+ for 2026. At 36%, this market is more than 2x overpriced relative to our fair value of 15%. The May jobs report on June 5 is the next key data point — based on current PMI and claims, we expect a solid print.
▵ Bull case
- DOGE: federal workforce reduction ongoing
- Tariffs uncertainty: some manufacturing hiring freeze
- Claims slightly elevated vs January levels
▿ Bear case
- PMI 55.3: fastest job creation since June 2025
- Claims 209K: stable, no deterioration
- Iran deal: removes recession tail risk
- SPF: zero institutional consensus at 5%+
- Services PMI 51.0: 70% of US jobs in services
4
Fed Rate < 3.25% before 2027 — NO
↓ SELL YES-15pp
Market price
22%
Fair value
7%
Gap: -15pp
The Iran deal introduces a paradox for this trade: a rapid oil price decline could theoretically free the Fed to cut. But consider the math — even with WTI at $80, CPI would still be above 2.5-3.0% by year-end (services and shelter remain elevated at core 2.8%). Two cuts in 2026 (needed to reach 3.25%) still require either a declared recession or a collapse in inflation to sub-2% — neither is consistent with PMI at 55.3 and unemployment at 4.3%. Warsh has been explicit: the mandate is price stability. CME FedWatch at 68% probability of zero cuts validates this position. The deal actually reinforces our NO: lower oil = less inflation concern = no panic cut scenario for the Fed.
▵ Bull case
- Iran deal: rapid oil decline could unlock cuts
- WTI < $80 → core inflation could follow quickly
- Miran (dovish dissenter) could gain allies
- Political pressure from Trump
▿ Bear case
- Core CPI 2.8%: two cuts = abandoning inflation mandate
- PMI 55.3: economy strong, no justification to cut
- Warsh: hawkish Chair, anti-QE history
- CME FedWatch: 68% probability of 0 cuts in 2026
- Deal ≠ recession: Fed would wait to confirm disinflation trend
5
CPI May MoM = 0.6% — NO
↓ SELL YES-22pp
Market price
28%
Fair value
6%
Gap: -22pp
The Iran deal makes this the most mathematically compelling remaining CPI trade. April's +0.6% MoM was driven by energy (+3.8% MoM as WTI surged). In May, WTI averaged well below April's levels — and if the deal is announced today, the last week of May's pricing will reflect oil in the $85-90 range. Energy will contribute negatively to May MoM. Our base case for May MoM is +0.1% to +0.3% at most. 28% for exactly +0.6% remains heavily mispriced. Note: low liquidity ($17K) limits position sizing — treat as a secondary trade.
▵ Bull case
- Services and shelter CPI remain sticky
- Tariff pass-through still ongoing
- Oil fell from $126 but started May above $100
▿ Bear case
- Energy MoM in May: negative vs +3.8% in April
- WTI average May: ~$100-105 → June drop accelerates
- Deal accelerates disinflation into H2
- No demand-pull inflation (PMI input prices falling)