QI PRO HOLY GRAIL DASHBOARD

Please LOG IN to view this protected content.

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 — 2.28.26

We Italians, that is Jonathan and I, like to think we’ve cornered the market on superstition. We do it so well. Upon a wee bit of reflection, however, we think we’ve got lots of company in knocking on wood until our knuckles are bruised. Upon yet another ho-hum initial jobless claims print, I was inspired to ask those roaming the platform formerly known as Twitter what they would do if they found themselves out of a J.O.B. Would they apply for unemployment benefits or pick up a side hustle driving for a ride share or delivery company?

In subsequent posts, I highlighted the benefits’ coverage ratio halving in the space of 50 years as well as eBay’s layoffs, announced earlier this week, to provide a tangible reference framework. Based in San Jose, California, a pink-slipped employee could collect maximum benefits of $1,800 a month with which to offset the monthly average cost of living in the Golden State of $5,403. Alternatively, they could make 114% more by driving for Uber, raking in $3,860 a month on average. Note that neither option comes close to covering the requisite budgetary nut. That fills in the gap on near record numbers of U.S. labor force participants holding down multiple jobs.

Continue Reading

TACTICAL

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.

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.

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