Daily Macro US
NFP June (corrected)
+57K
Actual BLS print vs ~113K consensus — yesterday's ~110K flash was wrong. Revisions -74K
Unemployment
4.2%
Down from 4.3% — but participation -0.3pp to 61.5%: mechanical, not strength
Dow (Jul 2 close)
52,900
+1.14% record close — rate-relief rally; Nasdaq -0.8% on chips
Gold
~$4,195
Extending toward $4,200 as hike bets unwind; July $4,200 bracket at 94%
2Y / 10Y Treasury
4.11 / 4.49%
2Y -5bp+ on the miss; July 29 hike odds 34% → 22% (FedWatch)
Zero Fed Cuts 2026 (pos-013)
77.6%
-13pp from 91c — biggest repricing on the board; we read it as overshoot, FV 88
CORRECTION FIRST: yesterday's note cited NFP June at ~110K, in-line. The actual BLS print, released Jul 2 at 8:30 ET, was +57,000 — less than half the ~113K consensus. We publish every miss, including our own: yesterday's flash was anchored to the ADP pre-signal and stale wire copy, and the correction changes the rate picture materially. The detail is soft too: unemployment 'improved' to 4.2% from 4.3%, but only because participation fell 0.3pp to 61.5% — people leaving the labor force, not finding jobs. Revisions cut April to +148K (-31K) and May to +129K (-43K): 74K jobs erased. Three-month average momentum is now clearly rolling over. Rate consequences: CME FedWatch July 29 hike odds collapsed from ~34% to ~22% (hold 78%); the 2Y fell 5bp+ to 4.108%; the 10Y closed at 4.49%. BMO: 'difficult to envision a path toward a July Fed hike even if there is upside in the inflation data.' Equities read it as rate relief — the Dow closed at a record 52,900 (+1.14%) ahead of the holiday while the Nasdaq fell 0.8% on continued chip weakness. Gold extended toward $4,200. Polymarket repriced hard: Zero Fed Cuts 2026 cracked from 91c to 77.6c (-13pp, the biggest single-day move in our coverage of this market — a 25bp cut is now priced at 15.5%), Fed Rate Hike 2026 slipped 50→46.5. Our fair value on the hike comes down from 68 to 56: the July window is closed, but Sep/Oct stay live with core CPI at 4.2%, PCE 4.0% and a Warsh Fed — CPI June (Jul 14) is now decisive in both directions. Meanwhile the zero-cuts repricing looks like an overshoot: cutting rates this year with core inflation 200bp above target would be extraordinary; we put fair value at 88, a +10pp gap and today's top-ranked opportunity. US markets are closed today (July 4 observed) and the Polymarket book is thin — no capital deployed; we reassess entries at Monday liquidity. Hormuz (pos-012): 20 tankers transited Thursday, the highest count since June 2 per Kpler, but still far below the ~60 transit-calls/day resolution bar; VP Vance is in Switzerland clarifying end-of-war terms under the 60-day toll-free MOU. July 19 compliance checkpoint remains the binary.
Today's Market Moves
Zero Fed Cuts 2026 (pos-013)
91%→77.6%-13pp
CRACKED on the 57K print — a 25bp 2026 cut is now priced at 15.5%. We think this overshoots: core CPI 4.2%, PCE 4.0%, and a Warsh Fed cutting this year would be extraordinary. FV 88 → +10pp gap, today's #1 ranked opportunity. Book is holiday-thin — no add today, reassess at Monday liquidity. Position pos-013 ($7 at 77c) sits at 77.6c, flat. Keyword fix shipped: live price now tracks the '0 (0 bps)' outcome.
Fed Rate Hike 2026 (pos-010)
50%→46.5%-4pp
SLIDING to 46.5c as July hike odds collapse to ~22%. FV cut 68 → 56: July window closed, Sep (35%) / Oct (40%) windows stay live only if inflation re-accelerates. CPI June (Jul 14) is now decisive BOTH ways: MoM ≥0.4% → deploy the reserved $100-125; a soft print on top of 57K jobs → tighten exit discipline below 40c. MTM: 363.6 shares × $0.465 = $169.1 vs $200 cost = -$30.9.
Strait of Hormuz Jul 31 (pos-012)
29%→25.5%-4pp
DRIFTING to 25.5c despite genuine physical progress: 20 tanker transits Thursday, highest since June 2 (Kpler), Vance-Iran talks in Switzerland under the 60-day toll-free MOU. The bar is ~60 transit CALLS/day by Jul 31 — 20 tankers is recovery, not resolution. FV trimmed 40 → 33. HOLD through the Jul 19 MOU checkpoint; exit trigger unchanged: <20c before Jul 19 without confirmed transit-call recovery. MTM: 136.4 shares × $0.255 = $34.8 vs $75 = -$40.2.
Fed Rate End 2026 = 4.0% (pos-011)
26%→25.4%-1pp
Barely moved at 25.4c — the single-hike scenario still hinges on CPI Jul 14. FV trimmed 32 → 28. Small stake, HOLD.
Screening Table
| # | Market | Expiry | Market Price | Fair Value | Gap (pp) | Direction | Volume | Confidence |
|---|---|---|---|---|---|---|---|---|
| 1 | Zero Fed Cuts 2026 | Dec 31 | 77.6% | 88% | +10pp | BUY YES | $$34M | 8/10 |
| 2 | Fed Rate Hike 2026 | Dec 2026 | 46.5% | 56% | +10pp | HOLD YES — CPI Jul 14 decisive; deploy $100-125 only if MoM ≥0.4% | $$3.1M | 6/10 |
| 3 | BoJ 25bp Hike at Sep Meeting | Sep 2026 | 11% | 25% | +14pp | WATCH — re-based to the Polymarket Sep decision market (prior sessions tracked a different derivative at ~53) | $Low | 5/10 |
| 4 | Strait of Hormuz Jul 31 | Jul 31 | 25.5% | 33% | +8pp | HOLD YES — Jul 19 MOU checkpoint binary; 20 tankers/day vs 60-call bar | $$10.8M | 4/10 |
| 5 | Fed Funds Rate End 2026 = 4.0% | Dec 31 | 25.4% | 28% | +3pp | HOLD YES | $$8.2M | 6/10 |
| 6 | US Recession by End of 2026 | Dec 31 | 11.5% | 15% | +4pp | WATCH — labor rolling over but no recession signal yet; below entry threshold | $$2.4M | 5/10 |
Market vs Fundamentals
Market Price (red) vs Estimated Fair Value (green) — %
Top 5 Opportunities
1
Zero Fed Cuts 2026 — YES
↑ BUY YES+10pp
Market price
77.6%
Fair value
88%
Gap: +10pp
The 57K jobs print knocked this market from 91c to 77.6c in a day — the single largest repricing in our coverage of it. But a market now pricing a 15.5% chance of a 2026 cut has to believe the Fed eases with core CPI at 4.2% and PCE at 4.0%, 200bp above target, under a hawkish Warsh Fed that was debating a HIKE two days ago. One soft jobs report doesn't bridge that gap. FV 88.
▵ Bull case
- Core CPI 4.2%, PCE 4.0% — cutting 200bp above target would be unprecedented outside a crisis
- Warsh Fed was 34% priced to HIKE in July before the print; the distance from hike-debate to actual cuts is enormous
- U/E fell to 4.2% (even if participation-driven) — no unemployment emergency to justify easing
- Existing position pos-013 already validated at 77c entry
▿ Bear case
- Labor momentum genuinely rolling: 57K + revisions -74K; two more misses put cuts on the table for Dec
- Participation drop can reverse and spike the unemployment rate mechanically
- Holiday-thin book — the 77.6c price may partially rebound before Monday, shrinking the entry
2
Fed Rate Hike 2026 — YES
↑ BUY YES+10pp
Market price
46.5%
Fair value
56%
Gap: +10pp
The July window is dead (FedWatch 22%) but the 2026 window is not: Sep and Oct meetings remain live if CPI June re-accelerates. Market at 46.5c vs our 56 FV — the gap persists but conviction drops from 8 to 6 after the labor miss. This is now a CPI trade, not a labor trade.
▵ Bull case
- Core CPI 4.2% and services sticky — one hot CPI print reopens Sep pricing instantly
- Warsh has repeatedly framed policy as inflation-first
- Position pos-010 carries $200 at 55c — the reserved $100-125 deploys only on CPI confirmation
▿ Bear case
- 57K jobs + -74K revisions is exactly the cover a reluctant committee needs to stay on hold all year
- 2Y yield falling 5bp+ says the bond market is fading the hike
- BMO: 'difficult to envision a path toward a July hike even with inflation upside'
3
BoJ 25bp Hike at September Meeting — YES
↑ BUY YES+14pp
Market price
11%
Fair value
25%
Gap: +14pp
RE-BASED: prior notes tracked a 'BoJ second hike' derivative near 53c; the actual Polymarket September DECISION market prices a 25bp hike at just 11% (July: 3%). With Tankan at +22, the yen at four-decade lows (161.18, intervention warnings from FM Katayama), and board member Nagahama signaling another hike by year-end, 11% for September looks too low. FV 25.
▵ Bull case
- Tankan +22 smashed forecasts — corporate Japan is running hot
- Yen at 161-162 = imported inflation pressure + political heat; a hike is the cleanest response
- Nagahama explicitly flagged another hike by year-end
▿ Bear case
- BoJ gradualism is structural — it has never hiked twice in four months in the modern era
- Market may be right that intervention (not policy) handles the yen first
- Thin volume on this market — entry sizing must respect the ×0.2 low-liquidity multiplier
4
Strait of Hormuz Normal by Jul 31 — YES
↑ BUY YES+8pp
Market price
25.5%
Fair value
33%
Gap: +8pp
Physical recovery is real — 20 tanker transits Thursday, the best day since June 2, and Vance is in Switzerland finalizing end-of-war terms under the 60-day toll-free MOU. But the resolution bar is ~60 transit calls/day by July 31 and the ramp from 20 to 60 in four weeks is the entire bet. FV trimmed to 33. Existing position held; no add.
▵ Bull case
- Highest transit count in a month; insurance costs falling as talks progress
- MOU is toll-free for 60 days — economic incentive for rapid normalization
- A formal peace declaration before Jul 19 snaps this to 40-50c
▿ Bear case
- 20/day vs 60/day bar with 4 weeks left — the slope required is steep
- Crisis-pressure trackers still read 'extreme'; deviation routing persists
- Our worst position (-$40 MTM) — thesis discipline, not hope, drives the hold
5
Fed Funds Rate End 2026 = 4.0% — YES
↑ BUY YES+3pp
Market price
25.4%
Fair value
28%
Gap: +3pp
The single-hike-to-4.0% scenario survives the jobs miss but narrows with it: FV trimmed 32 → 28 as the hike path thins. Position pos-011 is a $25 satellite to pos-010 — same catalyst, same gate.
▵ Bull case
- One 25bp hike resolves YES — still the modal outcome if CPI re-accelerates
- Complementary payoff to pos-010 keeps portfolio convexity cheap
▿ Bear case
- No hike = worthless; the 57K print raised that probability materially
- Gap +2.6pp is below the 8-10pp action threshold — hold-only