Deer Point Macro

Rate expectations (orange) are backing up again, while earnings revisions (purple) are rolling over (mislabeled by accident) Translation: fewer cuts + higher-for-longer… just as growth expectations soften. That’s a tough mix:
 rates up = tighter financial conditions
revisions down = weaker earnings outlook This is how late-cycle cracks form. Markets were priced for easing + resilient growth now getting neither cleanly. Not panic, but the cushion is gone.

Markets aren’t pricing a full cut for 2026. Given inflation+growth. PPI hot tends to flow through to consumers with lag. This PPI didn’t capture any of the geopolitical price pressure, but going forward that will feed through to producers which will pass it onto consumers (CPI) Long-end should continue to sell off.

Cross currency basis: Longer-term xccy has turned around multi-year tightening. EUR xccy has been twist flattening along with AUD.

Turkeys external imbalance= FX adjustment. When the current account deficit widens (purple down, inverted axis), the lira gets overvalued. Imports surge, external financing builds, and the REER rises. When the deficit shrinks, it’s usually via a currency slump the lira cheapens, imports collapse, and the REER falls.

Geopolitical risk affects Gulf sovereign credit markets primarily during crisis periods. When spreads are already elevated, geopolitical shocks: 1. Increase perceived sovereign risk 2. Widen CDS spreads further amplify stress in credit markets But during calm periods, markets largely ignore GPR shocks. GPR rising with worries already implied in CDS should further increase perceived sovereign risk.

Strait of Hormuz Disruptions Impact: Oil-driven trade disruptions propagate with delay. A negative transit shock produces the sharpest decline in global supply-chain elasticity after 4–5 months as inventories deplete and logistics tighten. Inflation rises earlier and remains elevated, indicating a sequential transmission: supply rigidity amplifies the inflationary impulse.

@KiwiPMI Have a few next too me, 80 degrees today perfect day just to sit out 🫡

@deerpointmacro Where’s the beverage?

Perfection

@Dcpcooks Have a great weekend sir 🫡

@deerpointmacro Cheers

EM currencies continue to outperform the USD as the EM cutting cycle appears to be ending, as markets begin pricing a shift to hikes amid geopolitics-driven inflation and stronger commodity prices.

Discussing with @TheMaineWonk tonight inflation, oil, consumer, and the impacts from current geopolitical tensions.

RT @TheMaineWonk: ‼️‼️ SPACE TONIGHT WITH @deerpointmacro War, Markets & Geopolitics. 8PM ET. twitter.com/i/spaces/1RKZz…