Daily Macro US
Flash PMI Mfg. May
55.3
Prior reading
WTI Oil
~$92
-$5 on deal news
CPI YoY Apr.
3.8%
Unchanged
Fed Funds Rate
3.50-3.75%
Unchanged
Unemployment Apr.
4.3%
Unchanged
US Markets
CLOSED
Memorial Day
Memorial Day — US markets closed, no data releases. The macro story is entirely about the Iran deal: confirmed to be in active negotiation but not yet signed. Trump stated on Saturday that the Hormuz deal is 'largely negotiated' but added he will not 'rush' into it, with senior officials noting final approval could take several more days. WTI has partially repriced from $97 to ~$92 in response to deal optimism — a -$5 move that begins but does not complete the $80-85 scenario we expect upon confirmation. Polymarket is mirroring this partial repricing: Inflation 2026 > 4.5% has moved from 65% to ~58% over the weekend, and CPI May markets have drifted lower. The portfolio is well-positioned ahead of the formal announcement. The absence of Memorial Day data is not neutral — it removes any chance of a surprise upward data shock before the deal is signed, preserving our thesis intact into the week. The first major catalysts this week: FOMC minutes on Tuesday and Eurozone HICP flash on Friday May 30, which will be the decisive pre-ECB data point.
Today's Market Moves
Inflation 2026 > 4.5%
65%→58%-7pp
Deal partially priced: WTI $92 vs $97 Friday — but no confirmation yet
CPI May YoY >= 4.4%
22%→18%-4pp
WTI trajectory lower — May average now clearly sub-$100
CPI May YoY = 4.3%
24%→20%-4pp
Same logic — May CPI path toward 3.5-3.7% reinforced
US Recession 2026
21%→19%-2pp
Deal optimism removes tail risk scenario gradually
Fed Rate < 3.25%
22%→21%-1pp
Stable — deal doesn't trigger cut scenario
Screening Table
| # | Market | Expiry | Market Price | Fair Value | Gap (pp) | Direction | Volume | Confidence |
|---|---|---|---|---|---|---|---|---|
| 1 | Inflation 2026 > 4.5% | Dec 2026 | 58% | 35% | -23pp | SELL YES | $1M | 9/10 |
| 2 | Fed Rate < 3.25% before 2027 | Dec 2026 | 21% | 7% | -14pp | SELL YES | $1M | 9/10 |
| 3 | US Recession 2026 | Dec 2026 | 19% | 7% | -12pp | SELL YES | $890K | 9/10 |
| 4 | US Unemployment >= 5.0% | Dec 2026 | 34% | 15% | -19pp | SELL YES | $408K | 8/10 |
| 5 | CPI May MoM = 0.6% | Jun 2026 | 24% | 5% | -19pp | SELL YES | $17K | 8/10 |
| 6 | CPI May YoY = 4.3% | Jun 2026 | 20% | 5% | -15pp | SELL YES | $164K | 8/10 |
| 7 | CPI May YoY >= 4.4% | Jun 2026 | 18% | 4% | -14pp | SELL YES | $164K | 8/10 |
| 8 | US Unemployment >= 6.0% | Dec 2026 | 16% | 4% | -12pp | SELL YES | $408K | 7/10 |
| 9 | Fed Rate < 3.0% before 2027 | Dec 2026 | 12% | 4% | -8pp | SELL YES | $1M | 7/10 |
| 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
58%
Fair value
35%
Gap: -23pp
The gap between market price and fair value has actually widened since Friday: 58% vs 65% (deal partial repricing), but our fair value has also improved from 42% to 35% as WTI moved to $92. Net gap holds at -23pp. The deal structure is now publicly known — 60-day ceasefire, Hormuz demined, Iran sells oil freely — and oil markets have already partially acted on it. When the signature comes, the remaining $7-12 in WTI decline will drive energy CPI deeply negative for June-December. Year-end CPI landing at 4.5%+ would require oil to rebound above $110 AND tariff pass-through to accelerate AND services inflation to re-accelerate — three simultaneous adverse developments. Our fair value of 35% reflects a ~30% probability of these combined risks materializing. Memorial Day removes any chance of adverse data today.
▵ Bull case
- Deal unsigned: 60-day window could collapse
- OPEC+ could cut production to offset Hormuz reopening
- Tariffs second-round effect still feeding through
- Shelter/services CPI structurally sticky
▿ Bear case
- WTI already at $92: deal 75% priced in
- Hormuz: 3-5M bpd restoration when confirmed
- Core CPI 2.8%: energy is the only elevated component
- May WTI average well below April — June CPI mechanically lower
- Memorial Day: no adverse data shock possible today
2
US Recession 2026 — NO
↓ SELL YES-12pp
Market price
19%
Fair value
7%
Gap: -12pp
Market has drifted from 21% to 19% since Thursday — two days of gradual convergence. With PMI at 55.3, claims at 209K, and the Iran deal removing the primary macro tail risk (oil shock → stagflation → recession), the 19% pricing still implies roughly 1-in-5 odds of a contraction in an economy that is measurably expanding. Fair value remains 7%: PMI above 54 has never preceded a recession in 40+ years of data, Q1 GDP was +2.0%, and the labor market is in a low-hire low-fire equilibrium. The deal confirmation this week would push this market below 15%.
▵ Bull case
- Philly Fed -26.4: real regional manufacturing stress
- DOGE federal layoffs cumulative impact
- 60-day deal could collapse, reinstating oil shock
- Consumer confidence fragile
▿ Bear case
- PMI Mfg. May 55.3: expansion signal at 40-year historical clean record
- Claims 209K: labor market rock solid
- Q1 GDP +2.0%: no contraction
- Iran deal removes oil shock recession vector
- Fed would cut aggressively before recession materializes
3
US Unemployment >= 5.0% — NO
↓ SELL YES-19pp
Market price
34%
Fair value
15%
Gap: -19pp
Existing position. Market has drifted from 36% to 34% since Thursday. The logic is unchanged: reaching 5% unemployment from 4.3% requires either a sudden recession (eliminated by Iran deal + PMI) or a structural labor market deterioration not visible in current data. The SPF projects peak unemployment at 4.5% for 2026 — not one institutional economist in the survey projects 5%+. The next catalyst is the May jobs report on June 5: based on PMI at 55.3 and claims at 209K, we expect a solid print around 150-180K NFP.
▵ Bull case
- DOGE: federal workforce reduction ongoing
- Tariff uncertainty: some hiring freezes
- Claims slightly elevated vs Jan levels
▿ Bear case
- PMI 55.3: fastest job creation signal since June 2025
- Claims 209K: stable and falling
- SPF: zero institutional consensus at 5%+
- Iran deal: removes recession-driven unemployment path
4
Fed Rate < 3.25% before 2027 — NO
↓ SELL YES-14pp
Market price
21%
Fair value
7%
Gap: -14pp
Existing position, unchanged thesis. Reaching 3.25% requires two cuts from 3.50-3.75%. With inflation at 3.8%, PMI at 55.3, and the Iran deal on the verge of removing the inflation tail risk (not triggering a panic cut), the Fed has every incentive to hold. Warsh has been consistent: price stability is the mandate. CME FedWatch equivalent shows 66% probability of zero cuts in 2026. The Iran deal paradox actually strengthens this NO: lower oil = less inflation concern = less urgency to cut, but also less panic. The first Warsh FOMC is June 16-17 — the minutes from the previous meeting (Tuesday) will give additional signal.
▵ Bull case
- Iran deal: WTI decline could theoretically free the Fed to cut
- Political pressure from Trump
- Miran (dovish) dissenting at every meeting
▿ Bear case
- Core CPI 2.8%: two cuts require abandoning inflation mandate
- PMI 55.3: economy strong, zero justification
- Warsh: hawkish chair, anti-QE history
- CME FedWatch: 66% probability of 0 cuts
- Deal ≠ recession: Fed will wait to confirm disinflation trend
5
CPI May YoY = 4.3% — NO
↓ SELL YES-15pp
Market price
20%
Fair value
5%
Gap: -15pp
Market has repriced from 24% to 20% over the weekend — our thesis is working. With WTI averaging well below April levels in May (peak ~$106, trending toward $92 and below), and the Iran deal about to accelerate that decline, CPI May YoY landing at exactly 4.3% (vs April's 3.8%) would require energy to spike dramatically in a single month — the opposite of what is happening. Our base case for May CPI: 3.5-3.7% YoY. 20% for a 4.3% print is still significantly overpriced. Resolution on June 10.
▵ Bull case
- April base was 3.8% — 4.3% requires only +0.5pp
- Tariff pass-through could accelerate in May
- Services and shelter sticky
▿ Bear case
- WTI average May: below April — energy contribution falls
- Deal accelerates disinflation into June
- Core only 2.8%: no demand-pull
- Market already repricing from 24% → 20%