Macro Memo: Running Hot

The Upshot

In this piece, we will cover:

US Macro Reacceleration:

AI productivity outweighs job cuts

Pro-growth policy and fiscal impulse ahead of midterms

Liquidity injections alleviate funding pressures

Powell claps back

Global Instability Breeds Opportunity:

Long oil & tankers

Don-roe Doctrine winners

China’s long march towards recovery

And of course… Our New Macro Trades

US Macro: Running Hot

We find few reasons to be bearish on the US economy. The two biggest concerns of 2025 (tariffs and job creation) haven’t led to a broader slowdown. Rather, consumption and overall GDP data is accelerating, and while the labor market is stagnant, the floor remains intact. Productivity gains, in part driven by AI, are likely to increase.

Meanwhile, the political pressure of midterm elections is already apparent in the White House, as Trump refocuses his attention towards everyday consumer concerns – inflation (oil supply), housing affordability (MBS buying), consumer credit (interest rate caps)-- even teasing direct stimulus checks.

With 16 months passing since the first rate cut of this cycle in August 2024, perhaps we are beginning to see the “long-and-lagging” effects of bullish monetary policy beginning to materialize. Credit spreads remain tight, overall borrowing costs have decreased, and cyclical sectors like housing are beginning to show signs of life.

The only real sand in the financial gears – increasingly stretched liquidity in funding markets which began to show up in late 2025 – has been cleaned out by the Fed’s new liquidity program. Whatever you want to call it, the Fed has officially crossed from base-money destruction to base-money creation and balance sheet expansion.

The Year of AI Productivity

While the U.S. labor market has significantly weakened in the past year, broader economic indicators tell a very different story.

By nearly all measures, the US job market appears to have considerable slack, even if signs of stabilization are emer…