Speaker 1Happy Tuesday out there, Team 42. It's your skipper here, Darius Dell, to present our Macro Minute for Tuesday, November 10th, 2026. Hope everyone's having a great week. So as always, we'll start with the executive summary from today's lead-off morning note, so let's dive right in. What did we learn today that will likely have the greatest impact on your portfolio? It's the October CPI data supported the durability and severity of the current risk-off inflation market regime. What key macro data or policy signals supported our active themes or consensus expectations? The October headline CPI, food CPI, energy CPI, core CPI, core goods CPI, core services CPI, super core CPI, and shelter CPI data supported our sticky inflation and play-action passes at the run themes. Play-action passing being the Fed is tightening on a transitory basis to back off the linebackers and safeties, i.e. the bond market, in order to establish the run game, which is structural easing and supporting of the Treasury from a Fed-Treasury core 2.0 standpoint later next year. So the data, obviously incredibly hawkish, supporting our sticky inflation theme and the fact that the Fed needs to continue play-action passing, i.e. tightening on a transitory basis. The October New York Fed survey of consumer expectations data strongly supported our sticky inflation and play-action passes at the run themes. The October NFIB small business optimism survey data supported our sticky inflation and play-action passes at the run themes. So just a litany of hawkish data today from an inflation signaling standpoint. The October New York Fed survey of consumer expectations data supported our resilient U.S. economy, job recovery, and cooling housing and labor themes. So part of our expectation that the Fed's not going to run away with tightening and truncate the business cycle is the fact that we continue to see reasonable evidence of job recovery and cooling housing and labor, albeit not in last Friday's job support. What key macro data of policy signals challenged our active themes or consensus expectations? The October CPI data challenged the consensus forecast of peaking inflation. The October New York Fed survey of consumer expectations and NFIB small business optimism data challenged the consensus forecast of peaking inflation. The October New York Fed survey of consumer expectations and NFIB small business optimism survey data challenged the consensus forecast of firming growth. The October New York Fed survey of consumer expectations data challenged our paradigm C, aka run-it-hot theme. The October NFIB small business optimism survey data challenged our resilient U.S. economy, paradigm C, aka run-it-hot, jobless recovery, and cooling housing and labor themes. What other key macro data or policy signals do we analyze in today's lit off morning note that may have a significant impact on asset markets? Number one, after meeting with Qatar's prime minister, the main mediator between the U.S. and Iran, President Trump signaled he wants to be able to get rid of the U.S. economy, and the U.S. economy will not be able to do that. Number two, the U.S. and Iran, President Trump signaled he wants diplomacy with Iran and an end to the war. The shift in tone follows the historic bloodbath in the November 3 midterm elections in which the Democrats captured the largest vote share in 50 years. All told, while the winding down of the Iran war is at least a week too late for the current administration and its Republican party, it is not too late for investors. Prior to September 22 lit off morning note, if POTUS develops the humility required to acknowledge defeat in Iran and reopen the Strait of Hormuz, the current headwinds to global dollar recycling flows that are driving up neutral rates in R-star in key economies around the world will dissipate and prevent global liquidity from breaking down. This would also reverse the hawkish medium-term outlooks priced into most major economy central banks and truncate the Fed, BOJs, and ECBs tightening cycles, as well as abort the Bank of England and Swiss National Bank's tightening cycles before they begin. Refer to our September 19th Around the Horn webcast for more details. No change to these robustly researched views, except for the fact that the S&B did seek a rate hike there. And finally, number two, Anthropic is targeting a fully diluted IPO valuation of $1.4 trillion. The Anthropic IPO details are dropping amid developing news of NVIDIA CEO Jensen Wang's affair. President Trump said the FBI is investigating NVIDIA CEO Jensen Wang's affair with a suspected Chinese spy. President Trump spoke with Wang, calling him, quote, "a very honorable man." Interesting choice of words, President. And he said he believed Wang did not know the woman was a spy. All told, the last thing the AI team needed was a scandal with NVIDIA, which has earned the nickname "the central banker of AI." The fact that AI stocks are not following through on last week's carnage amid the news signals growing investor fatigue in the bear case. Amid relatively light positioning, the upside risk is that the Anthropic IPO is oversubscribed and gaps higher in the secondary market, signaling renewed enthusiasm for the trade. As always, we'll wrap up with a question from our community. This one's titled "Treasury Fed Accord 2.0." It says, "DD, you've been saying that you anticipate a Fed Treasury Accord 2.0 to start halfway through 2027 as your base case. I wanted to ask if you can unpack that more on why you think that timeframe, what data or trends lead you to that conclusion?" So on the data side of things, when you look at our grid model, that's the Q2 of 2027 is the highest probability outcome to see a trough in the year-over-year rate of change inflation cycle. Based on our modeling, it's not clear that we're going to see a significant deceleration in the sequential rates of change, i.e. three-month annual highs, six-month annual highs. But on a year-over-year rate of change basis, you're probably going to see the lows in inflation in Q2. So that will give them air cover to start to, you know, kind of step away from the play-action passing, i.e. the tightening of cyclically, to start thinking about where the next, what would Kevin Moore say, the next policy conjuncture. And as it relates to the next policy conjuncture, there's another thing that's going to happen, which is the next policy conjunction. There's another reason that's more anecdotal why we think mid-2027 is when we'll start to see more of a codified, you know, kind of codified, more codification of this kind of Fed-Treasury accord, you know, this integration with the Fed and the Treasury, and ultimately in the support of the Fed's, you know, congressionally mandated third mandate, which is moderate long-term interest rates. You know, the reason we think that we'll start to see that kind of in mid-2027 is David Zervos from Jefferies, who many may not know kind of became famous early post-crisis, kind of in '09, 2010, really keeping a lot of numbers on the buy side on the right side of market risk with this, quote unquote, spooze and chartreuse view, which is basically a view that you need to block out all the bear porn associated with, you know, the financial crisis and the housing market and the labor market not recovering and just everything that everyone was concerned about on zero hedge and elsewhere early in my career. He nailed it in terms of saying, hey, as long as they're doing QE, you got to buy stocks. And so this is the guy who's on a temporary post with the Treasury right now. David Zervos: I certainly believe that, you know, I think, you know, I think, you know, I think, I surmise based on that experience that he's probably working on something that will, you know, could join the Fed and Treasury in a way that can put some support to the long end of the Treasury curve. And again, as I've remarked several times, we don't think they need to come out and actually implement a large scale asset purchase program. What they need to do is give Bess an unlimited firepower in the form of the threat, the mere threat of unlimited reserve management purchases that will allow him to buy through mid-pricing for these longer term debt securities and kind of take a lot of pressure off the bond market in terms of supporting this kind of AI capex bubble and this kind of Cold War 2.0 dynamic between the U.S. and China. So we think that's all coming next year. This is why we're not, we do not believe the current risk off market regime is the end of this market cycle. We ultimately think this market cycle peaks sometime in the second half of 2027 or the first half of 2028. We're on record here in other programs saying that we don't think the market cycle survives contact with the 2028 general election. And we think we got a tremendous signal from the perspective of why we have that view, last Tuesday, obviously, I was a total blue wave 50, the highest Democrat, highest share of votes captured by any party in 50 years. That's a real clear signal that people are fed up with this affordability nonsense. And ultimately, we're going to start to see the invisible hand, the growing invisible hand of redistributive policy, such as wealth taxes, higher graduated income taxes, trust busting, closing of critical loopholes that will actually effectively cause asset sales and ultimately so the pace of top end of the K consumption. We think that's all coming on the other side of the 2028. election. And so ultimately, the 2028 election cycle will feature a lot of that rhetoric in ways that could be spooking markets from the perspective of starting to price in a smaller pot of gold at the end of the AI capex bubble rainbow. So wrap it up there. Darius Dettler here presenting on Mac. I'm in it for Tuesday, November 10 2026. Best of luck out there today. We'll catch you back here tomorrow. Cheers.
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