QI PRO HOLY GRAIL DASHBOARD

1)     Higher Unemployment Expectations

2)     S&P Global Monthly Bankruptcy Count

3)     U.S. CEO Confidence Index

4)     ISM Manufacturing & Services Aggregate Backlog Breadth

5)     JPM/S&P Global PMI Manufacturing Export/SK Exports average

6)     Global Financial Conditions (Gomez Global Curve?)

7)     Market-based core PCE w/Cleveland Fed NTRI latest print

8)     FreightWaves Outbound Tender Rejection Rate

9)     State Initial Jobless Claims Breadth per Nationwide Population

10)  BofA on USA Weekly Online Retail Sales

11)  Conference Board Vacation Intentions

12)  Zelman Weekly Western Absorption Rate

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Quill Intelligence

LONG MACRO

Recession probability to rise into 2025’s second half as private demand underperforms. The tariff shock should generate greater risks for a downshift in business investment and a more challenging environment for consumer cyclicals vis-à-vis consumer non-branded noncyclicals.

Manic shifts in U.S. politics harken first a deflationary gully to cross followed by the threat of impeachment and ultimately, a fourth change in administrations in as many U.S. presidential elections, a first in sequential terms since the precipice of the U.S. Civil War. The subsequent pendulum swing will manifest as Universal Basic Income/Modern Monetary Theory, and with it, the secular rise in inflation being prematurely predicted today by those positioned to profit from being short Treasuries.

Saturday Intelligence Briefing— 9.13.25

This past week was always going to be difficult to navigate. Many have moved on from 9/11. That’s an impossibility for us at QI. For the reopening of the wound to have salt thrown into it by a fresh and equally politically motivated act of violence was too much to bear. The difference between now and 24 years ago is the worst part. 9/11 united a country, and even for a moment, a world. The assassination of Charlie Kirk stands as testament to how divided the country has become since.

The fear induced by this event is palpable. QI Pro’s chat this week was filled with it as the investors we are were reminded of our mortality and morality. A generation of a leadership vacuum has fomented a generation of haters, too many of whom are ready to kill one another given barbarity is the only example leaders have given them to emulate. Few want to acknowledge how open the country’s youth would be to taking up arms against each other. Heartbreakingly, Kirk was the antithesis of most U.S. politicians, a First Amendment hero and Constitutional archetype. As leaders should be, he was courageous. On Tuesday, September 9th, the day before he was murdered, he devoted the entirety of his show to advocating for the full, unredacted release of the Epstein Files. Kirk dared to demand accountability.

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TACTICAL

USD:

A sidelined Fed contrasting with most global central banks easing catalyzed a selloff in the greenback. A Fed forced to play catchup could easily thin the massively crowded trade, especially as global trade weakness impairs an open global economy vs. its closed U.S. counterpart.

RATES:

Short-end and Belly best opportunities for total return. Rally keys off weaker macro. Challenged private demand, higher unemployment and lower core inflation raise Fed rate cut probabilities.

Long-end holds at elevated levels with de facto caps at 4.5% for the 10-year & 5% for the long bond with the term premium supported by fiscal malfeasance exacerbated by falling sovereign revenues and despite diminishing stimulus to the U.S. consumer.

Curve view – Bull steepener in 2025’s second half.

CREDIT:

•  Underweight HY, overweight strong cash-flow IG

•  Lower-rated buckets at risk of dispersion with Fed Higher for Longer

•  Jobless claims deterioration makes a cautious Street rethink already-wider-spreads 2025 expectations, i.e., up default estimates as bankruptcy cycle speeds up and size

•  Fitch’s acknowledgement of cyclical consumer sector “deteriorating” fits this view

EQUITIES:

OW     Utilities
OW     Fossil Fuel Energy
OW     Senior Living

UW     Consumer Staples
UW     Consumer Discretionary
UW     Large & Midsize Banks

OTHER ASSETS:

•  USD view supports UW commodities & EM

•  Oil is a different story with geopolitical risk ramping (Israel v Iran)

•  Long MOVE to capitalize on runaway lending to Nondepository Financial Institutions triggering a credit event