Daily Macro US
Fed Funds Rate
3.50–3.75%
Hold at 99%
CPI YoY (Apr)
3.8%
+0.6% MoM
Core CPI (Apr)
2.8%
Unchanged
WTI Oil
$93.96
+$1.6 on deal stall
S&P 500
7,519
+0.61%
PMI Composite
55.3
Expansion
Day two post-Memorial Day and the Iran deal stalemate is hardening into a new baseline. WTI rose further to $93–94 as the 60-day ceasefire extension framework is now the working assumption — not an imminent full deal. Nuclear language remains the core sticking point, with Rubio confirming disagreements persist over 'a word, a sentence.' The Doha-mediated talks continue but a signed document is weeks away at minimum. For our portfolio, this means the energy disinflation thesis is intact but operating at a higher oil floor ($90–95) than we modeled when the deal was 'largely negotiated' on May 22. The key update today: the S&P 500 extended gains to 7,519 (+0.61%), marking a ninth consecutive weekly-gain trajectory. This further contradicts any recession pricing. Core macro fundamentals are entirely unchanged: April CPI 3.8% YoY (core 2.8%), unemployment 4.3%, GDP +2.0%, PMI 55.3, Fed at 99% probability of hold in June. The May CPI on June 10 and NFP on June 6 remain the next binary catalysts. With the 60-day framework now the expected outcome, WTI is likely to stay in the $90–95 corridor through June — enough to keep May CPI well below the 4.5% annual threshold but slightly above our most optimistic disinflation scenario.
Today's Market Moves
Inflation 2026 > 4.5%
60%→62%+2pp
WTI at $94 + deal framework (not full deal) → market repricing modest energy risk upward
US Recession 2026
21%→21%0pp
S&P +0.61% to 7,519 — 9 consecutive weekly gains; PMI 55.3 unchanged; no new recession signal
Fed Rate < 3.0% before 2027
10%→9%-1pp
99% hold probability priced at June FOMC — last vestiges of cut risk being priced out
Unemployment >= 5.0%
33%→33%0pp
Low-hire, low-fire equilibrium stable at 4.3%; NFP June 6 is next catalyst
CPI May YoY >= 4.4%
18%→18%0pp
Stable — May CPI (June 10) is the decisive binary
Screening Table
| # | Market | Expiry | Market Price | Fair Value | Gap (pp) | Direction | Volume | Confidence |
|---|---|---|---|---|---|---|---|---|
| 1 | Inflation 2026 > 4.5% | Dec 2026 | 62% | 29% | -33pp | SELL YES | $800K+ | 9/10 |
| 2 | CPI May MoM = 0.6% | Jun 2026 | 40% | 18% | -22pp | SELL YES | $17K | 8/10 |
| 3 | Unemployment >= 5.0% | Dec 2026 | 33% | 15% | -18pp | SELL YES | $220K | 8/10 |
| 4 | CPI May YoY = 4.3% | Jun 2026 | 20% | 5% | -15pp | SELL YES | $164K | 8/10 |
| 5 | CPI May YoY >= 4.4% | Jun 2026 | 18% | 4% | -14pp | SELL YES | $164K | 8/10 |
| 6 | US Recession 2026 | Dec 2026 | 21% | 7% | -14pp | SELL YES | $890K | 9/10 |
| 7 | Unemployment >= 6.0% | Dec 2026 | 16% | 4% | -12pp | SELL YES | $400K | 8/10 |
| 8 | Fed Rate < 3.25% before 2027 | Dec 2026 | 15% | 4% | -11pp | SELL YES | $1M+ | 9/10 |
| 9 | May Unemployment = 4.3% | Jun 2026 | 34% | 25% | -9pp | NEUTRAL | $35K | 5/10 |
| 10 | Fed Rate < 3.0% before 2027 | Dec 2026 | 9% | 4% | -5pp | NEUTRAL | $1M+ | 9/10 |
Market vs Fundamentals
Market Price (red) vs Estimated Fair Value (green) — %
Top 5 Opportunities
1
Inflation 2026 > 4.5% — NO
↓ SELL YES-33pp
Market price
62%
Fair value
29%
Gap: -33pp
The gap widened to 33pp today as WTI climbed to $94 and the market pushed YES to 62%. Yet the structural argument is stronger than ever: the 60-day ceasefire extension framework being negotiated implies the Strait reopens within weeks, not months. Even at $94 for the remainder of 2026, the full-year CPI average cannot reach 4.5%. April ran at 3.8% — getting to 4.5% annual average requires H2 prints averaging above 5.2% YoY, which would require WTI above $140 sustained. The deal stall is a delay in the disinflation timeline, not a reversal. Our fair value rises marginally from 28% to 29% to reflect the slightly higher oil floor — but the edge remains the widest in the portfolio at 33pp. S&P at 7,519 and PMI at 55.3 confirm demand-side conditions incompatible with runaway inflation.
▵ Bull case
- WTI $94 — higher oil floor than initial deal scenario modeled
- 60-day framework: deal is months away, not days — sustained energy contribution
- Market at 62%: reflects genuine uncertainty, not irrational pricing
- Tariff goods inflation not deflating as fast as expected
▿ Bear case
- Annual avg requires WTI >> $130 all year — 60-day framework implies Hormuz reopens
- Core CPI 2.8%: no shelter/wage-price spiral accelerating
- April 3.8% base: H2 would need to average 5.2%+ to hit 4.5% — not supported by any model
- May CPI projected 3.5–3.8%: trend firmly below threshold
- Fed on hold at 3.50–3.75%: restrictive enough to cap core
2
CPI May MoM = 0.6% — NO
↓ SELL YES-22pp
Market price
40%
Fair value
18%
Gap: -22pp
April MoM was +0.6%, driven by WTI spiking from $95 to $126 during the month. In May, WTI averaged approximately $100–105 for the first three weeks, then dropped to $90–92 on ceasefire optimism before rebounding to $94 today. The monthly average is materially lower than April, and the energy contribution to MoM is significantly reduced. Cleveland Fed nowcasting and Wall Street consensus point to May MoM in the 0.2–0.4% range. The probability of an exact 0.6% repeat is at most 18%. The market at 40% implies the same energy shock as April — which is mathematically wrong given WTI's trajectory. The only caveat remains $17K liquidity, which hard-caps position sizing.
▵ Bull case
- Services CPI sticky — shelter and transportation unlikely to deflate rapidly
- WTI May avg ~$100–105 in early weeks: energy component still elevated
- Momentum bias: April set a precedent that anchors market expectations
▿ Bear case
- WTI dropped to $90–92 in final week of May — energy drag on MoM
- Cleveland Fed nowcast: May MoM 0.2–0.4% range
- 40% implies exact April repeat — WTI trajectory makes this manifestly incorrect
- June 10 resolution: short time horizon, high binary clarity
3
Unemployment >= 5.0% — NO
↓ SELL YES-18pp
Market price
33%
Fair value
15%
Gap: -18pp
Unchanged thesis. The 33% market price for 5%+ unemployment by year-end requires net job losses of 800K–1.2M — equivalent to a severe recession. PMI at 55.3 and GDP at +2.0% make that scenario structurally implausible. The Philadelphia Fed SPF puts the peak at 4.5% for 2026. The low-hire, low-fire equilibrium has held for four months. Our no-recession thesis (93% fair value) directly implies unemployment remains below 5% with high probability. June 6 NFP is the next data point — April showed +115K jobs, consistent with soft but positive labor market conditions.
▵ Bull case
- Iran escalation → supply shock → potential hiring freeze in exposed sectors
- Tariff uncertainty still weighing on corporate capex and headcount planning
- 33% market: some trader conviction on tail risk
▿ Bear case
- PMI 55.3: expansion, historically 100% correlated with non-recession
- Low-fire environment: WARN notices and mass layoffs still at historical lows
- SPF consensus: peak 4.5% in 2026 — 5%+ requires 1.2M more job losses
- Q1 GDP +2.0%: economy is expanding, not contracting
- 4.3% for 4+ months: structural inertia is powerful
4
CPI May YoY = 4.3% — NO
↓ SELL YES-15pp
Market price
20%
Fair value
5%
Gap: -15pp
April YoY was 3.8%. Reaching exactly 4.3% in May would require a +0.5pp acceleration in a single month — historically unprecedented outside a major energy shock. The May WTI average (~$100–105 for the period) is lower than April's $115+ average, and the base effect comparison (May 2025 saw WTI near $60–65) was already favorable before the ceasefire. Our point estimate for May YoY: 3.5–3.8%. The 4.3% outcome requires an unexpected services spike on top of energy normalization — two simultaneous upside surprises. At 20%, the market is assigning 4× our fair value. June 10 resolution makes this the shortest-horizon binary in the portfolio.
▵ Bull case
- Services CPI sticky: shelter and transportation contribute independently of energy
- WTI May avg still $100+: energy component remains positive YoY vs May 2025
▿ Bear case
- April 3.8% base: jumping to 4.3% in one month requires +0.5pp shock
- WTI May avg $100–105 vs April $115+ → energy contribution moderates by 1–1.5pp
- Favorable base: May 2025 had WTI near $60–65 — base effect turns less favorable in June, not May
- Core 2.8%: no acceleration signal
5
US Recession 2026 — NO
↓ SELL YES-14pp
Market price
21%
Fair value
7%
Gap: -14pp
Market held at 21% today despite S&P rising to 7,519 and no new recessionary signals. The nine-week equity rally, PMI at 55.3, GDP at +2.0%, and a labor market holding at 4.3% are collectively incompatible with the two-quarter negative-GDP definition of a recession. NY Fed DSGE model puts the probability at sub-10%. The Iran deal stall adds tail risk but does not alter the base case: no recession in 2026. Our fair value of 7% reflects these multiple independent signals converging. The 14pp gap remains wide and the $890K liquidity makes this the most tradeable thesis in the portfolio.
▵ Bull case
- Iran escalation → supply shock → recessionary risk if oil spikes sharply
- Conference Board LEI: 6 and 12-month growth rates negative, signaling fragility
- Tariff uncertainty dampening business investment
▿ Bear case
- PMI 55.3: historically 100% correlated with expansion, not recession
- S&P 500 at 7,519: 9 consecutive weekly gains — financial conditions not tightening
- Q1 GDP +2.0%: two negative quarters would require Q2 AND Q3 contraction from here
- NY Fed DSGE: sub-10% recession probability
- Labor market: no mass layoff signal — low-fire equilibrium intact