This week has been a wild ride in the markets, with a distinct stagflation smell in the air. Oil prices have surged by 7%, long-term interest rates remain near record highs, gold is up around 3.5% on the week, and the dollar has weakened. To make matters more interesting, Treasury officials have signaled that they are prepared to lean against the back end of the yield curve, raising concerns about how markets can absorb both sovereign issuance and an unprecedented amount of corporate financing for AI buildout. Political tensions around data centers are building, with a growing bipartisan consensus that could constrain capital expenditure. At Jackson Hole, it’s hard to discern what kind of guidance from Warsh would be considered “good,” as any move towards dovishness risks inflation expectations, while a hawkish stance could tighten conditions for an already slowing consumer.

While AI demand and capex are still growing at a clip of $1-1.5 trillion for next year, memory, emerging markets, and copper prices are all trading well. However, the macro setup is less favorable, with oil, rates, and Treasury intervention mattering more. Additionally, Walmart’s recent moves have added a layer of complexity to the micro picture. As such, it’s important to respect the risks and maintain a long-term view, focusing on nominal assets such as equities and gold, while avoiding duration. Flash PMIs are also worth keeping an eye on (GS, Privorotsky).