Daily Macro US
Fed Funds Rate
3.50–3.75%
Hold 99%
CPI YoY (Apr)
3.8%
+0.6% MoM
Core CPI (Apr)
2.8%
Unchanged
WTI Oil
$90.35
-$3.6 Hormuz framework
S&P 500
7,550
+0.4%, 9th weekly gain
PMI Composite
55.3
Expansion
The single biggest development of the week: Iranian state TV published what it described as a draft framework for a memorandum of understanding with the US, under which Iran would restore commercial shipping through the Strait of Hormuz to pre-war levels within one month of a deal being signed. The White House called the report 'a complete fabrication' but the market moved sharply regardless — WTI dropped 6% intraday to $88.30 before settling near $90.35, down from $93-94 yesterday. Oil is now down more than 16% in May alone. Even if the White House denial is genuine and no formal framework exists, the underlying trajectory is unmistakable: both sides are converging on Hormuz reopening as the first deliverable, with only the nuclear language and sanctions wording remaining in dispute. For our portfolio, this is unambiguously positive across every thesis. A WTI at $88-90 for the remainder of 2026 makes the annual CPI average even more clearly incompatible with the >4.5% threshold. May CPI — which will be reported June 10 — will now likely print at the lower end of our 3.5-3.8% estimate, closer to 3.4-3.6%, given WTI averaging well below $100 in the final two weeks of May. The recession and unemployment theses are also strengthened: lower energy costs are unambiguously pro-growth and reduce the supply-shock risk that has been the primary bear case against our positions. S&P 500 rose further to 7,550, continuing its ninth consecutive weekly gain trajectory.
Today's Market Moves
Inflation 2026 > 4.5%
62%→58%-4pp
WTI dropped to $90 on Hormuz framework report — YES market repricing downward, disinflation path accelerating
US Recession 2026
21%→19%-2pp
Oil drop removes supply-shock recession scenario — pro-growth signal, PMI 55.3 intact
CPI May YoY >= 4.4%
18%→16%-2pp
WTI final 2 weeks of May now averaging ~$90 — May CPI trending to lower end of 3.4-3.6% range
Unemployment >= 5.0%
33%→32%-1pp
Lower energy costs reduce supply-shock hiring freeze risk slightly
Fed Rate < 3.0% before 2027
9%→9%0pp
Stable — cuts require both inflation collapse AND recession, neither materializing
Screening Table
| # | Market | Expiry | Market Price | Fair Value | Gap (pp) | Direction | Volume | Confidence |
|---|---|---|---|---|---|---|---|---|
| 1 | Inflation 2026 > 4.5% | Dec 2026 | 58% | 27% | -31pp | SELL YES | $800K+ | 9/10 |
| 2 | CPI May MoM = 0.6% | Jun 2026 | 38% | 15% | -23pp | SELL YES | $17K | 8/10 |
| 3 | Unemployment >= 5.0% | Dec 2026 | 32% | 15% | -17pp | SELL YES | $220K | 8/10 |
| 4 | CPI May YoY = 4.3% | Jun 2026 | 18% | 4% | -14pp | SELL YES | $164K | 8/10 |
| 5 | US Recession 2026 | Dec 2026 | 19% | 6% | -13pp | SELL YES | $890K | 9/10 |
| 6 | CPI May YoY >= 4.4% | Jun 2026 | 16% | 3% | -13pp | SELL YES | $164K | 8/10 |
| 7 | Unemployment >= 6.0% | Dec 2026 | 15% | 4% | -11pp | 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-31pp
Market price
58%
Fair value
27%
Gap: -31pp
Today's WTI drop to $90 on the Iranian state TV Hormuz framework report is the strongest validation of our thesis in nine days of trading. Even dismissing the White House's denial as tactical positioning, the underlying dynamic is unambiguous: both sides are negotiating the same framework — Hormuz reopens within one month, Iran sells oil freely, nuclear talks continue for 60 days. At $90 WTI today and declining, the annual CPI average for 2026 simply cannot reach 4.5%. April was 3.8%. May will likely print 3.4-3.6%. H2 averages would need to be above 5.2% YoY to get the annual average above 4.5% — which would require WTI sustaining above $140 for six consecutive months while core CPI simultaneously breaks above 3.5%. Neither is remotely on the table. The YES market dropped from 62% to 58% as oil fell — exactly the price action our thesis predicts. Our fair value also falls slightly from 29% to 27% as the Hormuz trajectory becomes clearer.
▵ Bull case
- White House denies framework — deal may collapse again raising oil
- Israel unhappy with deal: could destabilize agreement
- Even at $90 WTI, energy contribution to H2 CPI remains elevated vs 2025 base
- Market at 58%: still reflects genuine uncertainty among traders
▿ Bear case
- WTI at $90 and falling: annual avg >4.5% requires $140+ for 6 months — impossible in deal framework
- Core CPI 2.8%: shelter-driven, no wage-price spiral
- April 3.8% base confirmed: H2 would need 5.2%+ average — no model supports this
- May CPI trending to 3.4-3.6%: disinflation firmly intact
- Deal or no deal: Hormuz reopening trajectory is one-directional
2
CPI May MoM = 0.6% — NO
↓ SELL YES-23pp
Market price
38%
Fair value
15%
Gap: -23pp
This thesis just got stronger. April MoM was +0.6%, driven by WTI spiking from $95 to $126. In May, WTI averaged ~$100-105 for the first three weeks then dropped sharply to $88-90 in the final week. The monthly average is now well below April's, and the energy drag in the last two weeks is significant. Cleveland Fed nowcast and Wall Street consensus already pointed to 0.2-0.4% MoM — that range likely shifts toward the lower end given today's drop. The 38% market price implies the same energy shock as April. With WTI at $90 today, that is demonstrably false. Still capped at $25 by $17K liquidity.
▵ Bull case
- Services CPI structural — shelter and transportation sticky regardless of oil
- Month-average WTI still elevated vs pre-war levels
▿ Bear case
- WTI final week of May: $88-90 — energy drag pulls MoM sharply below April
- Cleveland Fed nowcast: 0.2-0.4% range, likely now 0.2-0.3% after today's drop
- 38% implies exact April repeat — manifestly wrong given oil trajectory
- June 10 resolution: 13 days, clear binary
3
Unemployment >= 5.0% — NO
↓ SELL YES-17pp
Market price
32%
Fair value
15%
Gap: -17pp
The oil drop today directly weakens the primary bear case against this position: an energy-driven supply shock causing a corporate hiring freeze. At $88-90 WTI and trending lower, the supply-shock recession scenario that could push unemployment to 5%+ becomes even less likely. PMI 55.3 remains firmly in expansion. GDP +2.0%. The 32% market price requires 800K-1.2M net job losses — structurally impossible in today's PMI environment. Our fair value holds at 15%. NFP on June 6 is the next data point — April showed +115K which is consistent with slow-but-positive hiring.
▵ Bull case
- Even with oil falling, tariff uncertainty still weighing on corporate hiring
- Unemployment can rise in a 'slow growth' scenario without full recession
▿ Bear case
- PMI 55.3: 100% correlated with non-recession historically
- Oil drop removes supply-shock hiring-freeze risk
- SPF: peak 4.5% — 5%+ requires 1.2M net job losses
- Low-fire environment unchanged: WARN notices at historical lows
4
CPI May YoY = 4.3% — NO
↓ SELL YES-14pp
Market price
18%
Fair value
4%
Gap: -14pp
April was 3.8% YoY. Reaching 4.3% in May requires a +0.5pp jump. With WTI now at $88-90 in the final week of May, the energy component actually turns into a mild drag rather than the neutral-to-positive we assumed yesterday. Our point estimate for May YoY has tightened to 3.4-3.6%. The 4.3% outcome is now a 4× tail scenario. At 18% market, the gap remains wide and resolution is 13 days away.
▵ Bull case
- Services CPI sticky — shelter contributes independently of energy
- WTI monthly average still above pre-war May 2025 levels
▿ Bear case
- WTI final week now $88-90 — energy contribution turns neutral to negative for MoM
- April 3.8% base: +0.5pp in one month requires simultaneous energy AND services shock
- May YoY now trending to 3.4-3.6% — 4.3% requires two standard deviation upside surprise
5
US Recession 2026 — NO
↓ SELL YES-13pp
Market price
19%
Fair value
6%
Gap: -13pp
Market fell to 19% from 21% as the oil drop removed the supply-shock risk premium that had been building. PMI 55.3, GDP +2.0%, S&P 500 at 7,550 — all pointing in the same direction. A 19% recession probability in an economy with PMI above 55 and falling energy prices is still a significant overpricing. Our fair value drops slightly to 6% as the energy supply-shock risk diminishes. The $890K liquidity makes this the most deployable position in the portfolio.
▵ Bull case
- Tariff uncertainty still dampening business investment across sectors
- Conference Board LEI 6/12-month trends still negative
- 19% market: residual trader conviction on macro tail risk
▿ Bear case
- PMI 55.3: expansion, 100% correlated with non-recession
- Oil at $90 and falling: anti-recessionary, not inflationary
- S&P 500 at 7,550: financial conditions loosening, not tightening
- Q1 GDP +2.0%: two consecutive negative quarters would require collapse starting now
- NY Fed DSGE: sub-10% recession probability