<![CDATA[Exact Macro Market Monitor]]>https://exactmacro.substack.comhttps://substackcdn.com/image/fetch/$s_!w5_2!,w_256,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Ff96f5435-3828-497e-a753-be9b207a7f0c_1280x1280.pngExact Macro Market Monitorhttps://exactmacro.substack.comSubstackFri, 04 Sep 2026 13:10:32 GMT<![CDATA[Stock and GDP Outlook, for Week Ending 09/04/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-68bhttps://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-68bMon, 31 Aug 2026 04:01:56 GMT

Stock prices rose last week along with the mean expected NGDP growth rate as volatility eased, with most other weekly indicators barely changed. While there are always other economic numbers to report, many rarely represent much more than mere partial signals already reflected in broader market indicators. Hence, the week was uneventful on net with regard to the market and economic outlook, despite yet another trade war with Canada. Or is that just another battle in an endless war?

That said, YoY core PCE inflation was flat for July versus June at 3.34% and the 2nd quarter NGDI figure came in at a hot rate of over 6.6%, which was close to the reaffirmed 6.5% NGDP estimate.

Kevin Warsh did issue comments suggesting inflation is still a concern, yet also commented about keeping an eye on the effects of the AI boom. I don’t like central bankers to focus on disinflationary forces due to real shocks in the context of monetary policy. We saw the effects of such a focus while adhering to a flat inflation rate target during the dot-com boom. Core inflation is sticky, so by the time it rears its head, it’s too late. Trend NGDP growth is what matters

So, the outlook is still for mild stagflation during an economic boom with headwinds almost entirely due to erratic real shocks from the White House.

PS: I soft-launched the Exact Macro website Friday, which is a portfolio stress-testing and risk conversation tool for financial advisors to use during client-facing meetings. The site is found at https://exactmacro.com.

Disclaimer: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links & Economic Data Sources

]]><![CDATA[Stock and GDP Outlook, for Week Ending 08/28/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-66dhttps://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-66dMon, 24 Aug 2026 04:01:11 GMT

Stock prices fell again last week as the mean expected NGDP growth rate rosem with the latter due to rising inflation expectations. The 5-year, 5-year forward inflation expectation rate is now essentially at the Fed’s target in core PCE terms, meaning there’s likely not much more room for stock price rises sans a positive real shock, if the Fed is serious about controlling inflation.

This helped lead to higher interest rates, which are increasingly a common topic of conversation lately, despite them not looking so scary in the context of recent years.

Implied default risk is not very high in US CDS spreads and the aforementioned inflation expectations are still near the Fed’s target, so it’s hard to see much to be concerned about. Sure, the current rate of US borrowing is unsustainable, but markets aren’t worried yet. In fact, at least some of the increase in nominal rates may be due to boom-related rising real growth expectations. It’s not implausible that increased real growth will help alleviate the debt and deficit issues. Perhaps most voters don’t seem concerned because they heard so many cries of wolf over the past 4 decades.

Unsurprisingly, Trump was responsible for more negative real shocks this week such as seemingly doubling down on new plans to depend on economic pressure to open the Strait of Hormuz and the failure to reach a new trade agreement with Canada. However, the effects were slight, with much uncertainty likely already priced in.

The Fed funds yield curve confirms that little changed this week concerning the economic outlook. The outlook continues to be one of mild stagflation in the midst of an AI boom and increasingly loose monetary policy that continues to prop up an economy hit with an ever changing series of small negative real shocks due to erratic trade, immigration, and foreign policies. The long-term outlook remains bright with the usual caution necessary concerning tail risks.

PS: The Q2 output gap estimate and Q4 estimated S&P 500 earnings yield were again not updated as the data source FactSet won’t update these numbers until next week.

Disclaimer: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links & Economic Data Sources

]]><![CDATA[Stock and GDP Outlook, for Week Ending 08/21/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-bdehttps://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-bdeMon, 17 Aug 2026 04:01:26 GMT

Stock prices and the mean expected NGDP growth rate rose again last week as the VIX continued to decline amidst increased tension in the Persian Gulf which pushed up oil and other commodity prices.

Long-term Treasury rates continued to rise, likely reflecting increasing inflation expectations as the implied default probability in 5-year CDS spreads continued a recent pattern of decline.

And while YoY core CPI inflation was down for the secondmonth in a row in July, the 5-Year, 5-Year forward inflation rate remains elevated as part of a one month upward trend, finishing close to the Fed’s target in core PCE terms.

As mentioned in recent weeks, if the history of pre-Warsh Fed behavior is any indication, the S&P 500 can only rise about another 2% before the Fed may take action to tighten policy, sans a positive real shock. This is in the context of a long-running positive NGDP output gap that suggests that inflation could spike due to loose montary policy within the next few years, which would require a drawdown of roughly 15% as it currently stands.

Looking ahead, the period for expected rate lowering after 2-to-3 increases over the next year continues to be extended further into 2028, going from the beginning of the year just weeks ago, to April or May. The relatively high predicted rates in 2031 presumably reflect expectations for NGDP growth of at least roughly 5%, suggesting the boom in productivity may be expected to continue to more than offset drags due to demography.

It’s hard not to be an optmist looking at the data. This assumes that the next admnistration will back off of the stagflationary policies to a degree. But I keep reminding myself that there’s still more than 2 years to go with a very unstable administration in the White House which could produce negative real shocks that could fundamentally change this outlook at any time.

PS: Most of the charts in this post come from my new website which is nearly completed and will launch within days. It is a portfolio stress-testing website that features many of the metrics shared on this blog, including the NGDP output rate gap, inflation expectations, the VIX, and US Treasury default spreads to help financial advisors manage liqudity risk and explain how they’re being managed in client-facing meetings. It has more features than most advisors likely need for most meetings, but that will occasionally be needed for those detail-oriented clients who tend to have large portfolios. I will post updates as warranted. Those who wish to find out more can email me at mike@exactmacro.com.

Disclaimer: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links & Economic Data Sources

]]><![CDATA[Stock and GDP Outlook, for Week Ending 08/14/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-d1ahttps://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-d1aMon, 10 Aug 2026 04:00:51 GMT

Stock prices and the mean expected NGDP growth rate rose sharply last week with the S&P 500 reaching a new all time high. Volatility also continued a downward trend toward normalcy as oil and other commodity prices fell in response to further de-escalated combat in the Persion Gulf.

It’s still unclear whether Trump will completely concede his defeat to Iran in this conflict soon, despite having done so in numerous implicit ways. Examples include the signing of the MOU and the rhetoric about the Strait of Hormuz becoming “irrelevant” over time due to the eventual development of alternative means of transporting petroleum. Of oourse, this ignores not only the needless increased cost of moving petroleum, but also those resources other than petroleum that cannot be moved through pipelines, such as fertilizer. It also ignores container shipping. But then analyses undergirding US policy need not be comprehensive nor even coherent to meet current expectations.

The biggest economic news of the week was the unexpectedly weak jobs report for July, which featured over 23k lost jobs with downward revisions to the May and June job gains. There was also a drop in the laborforce participation rate that helped lead to a slight decline in the unemployment rate. This eased Treasury yields and inflation expectations a bit, despite the job loss likely not reflecting a trend. Guy Berger demonstrates his usual excellence with his analysis of this report, while Marcus Nunes has a compelling analysis in the broader context of interest rates and the stance of monetary policy. For those who want an informative podcast on the recent developments in the labor market, Berger teams up with fellow labor economist Kathryn Anne Edwards.

My take on the current cross currents in the labor market and broader economy is that we’re increasingly inching toward a longer period of stagflation, despite being in an AI boom. Current high inflation is largely due to the many negative supply shocks via trade and immigration restrictions and the wars in Ukraine and Iran. The higher longer run inflation will be due to increasingly loose monetary policy as reflected in rising NGDP growth figures and the increasingly positive NGDP output gap.

In the comments section of this post, Scott Sumner points out that the high recent NGDP figures may be somewhat misleading due to the nature of recent trade shocks and other factors, which is a good point. However, the last three YoY GDI figures have averaged over 5.6%, which is above any reasonably established trend, and likely above a sustainable rate.

He agreed that the economy is likely running a bit hot, but thinks the YoY NGDP growth figures are overstating it. I point out that the positive output rate gap was never closed, meaning the economy never really landed during the engineered slowdown after the pandemic overshoot, though it came close (within 41 basis points).

As things stand now, a sudden return to equilibrium by the Fed would represent a nearly 15% loss in the S&P 500, whereas if the Q2 output gap is maintained at or above the current estimate for a year that potential loss increases to nearly 25%, as pointed out last week. Even without a return to equilibrium, at this point nearly 15% of the gain in the S&P 500 price is nominal at best, which means the bit over 13% YTD gain thus far isn’t “real”.

So, real GDP growth is slowing as NGDP growth rises along with inflation expectations and the NGDP output gap. Current US policy is shoing how to turn a boom into an episode of stagflation.

PS: I should have stated last week that the new output gap estimate for Q2 only indicated a nearly 25% loss in stock prices if maintained at that level for a year. I sometimes falsely assume this is understood.

Disclaimer: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links & Economic Data Sources

]]><![CDATA[Stock and GDP Outlook, for Week Ending 08/07/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-316https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-316Mon, 03 Aug 2026 04:00:43 GMT

Stock prices and the mean NGDP growth rate rose last week while the VIX declined substantially, as tensions were somewhat lowered in the Gulf. Inflation expectations rose slightly, inching closer to the Fed’s target in core PCE terms, leaving little additional room for stock prices to rise, unless the Fed further loosens policy.

Consistent with this narrative of an economy increasingly overheating, the first YoY NGDP figure for Q2 was released last week (6.53%), and coupled with S&P 500 earnings estimates indicate a positive NGDP output gap of over 1.5%, meaning a sudden return to equilibrium would bring about a nearly 25% drop in the S&P 500. To the degree the return is not sudden, the gains above equilibrium will be merely nominal. Of course, even the rate of 6.5%+ itself is way above any reasonably estimated trend rate.

Yet, the Fed kept rates constant at the FOMC meeting, though there were dissenting votes. Only 3 FOMC members were willing to raise rates under these circumstances? Granted, that’s a large number of dissenters for this body, but what are the others thinking? Was Warsh just jawboning about getting inflation back to target, or is he unwilling to vote in the minority? Borrom line, they’re delivering exactly what one would expect with a flat inflation target, which is procyclical policy. Booms get enhanced until sticky wages and prices eventually cause inflation spikes.

The Fed funds futures market does expect rate increases to start in September, but those are priced in. Warsh said he wants to decrease forward guidance, so we might not see a serious opportunity for tightening policy until the next FOMC meeting. Will they raise rates at least 50 basis points? Probably not, unless something dramatic happens in the meantime.

Note by the way how much interest rates are expected to rise by 2031. It suggests that NGDP growth around 5% could be the norm. I won’t be surprised if sustained mean real GDP growth approaches 3% for the foreseeable future. This would be quite something in the context of slowing labor market demographics.

Incidentally, YoY core PCE inflation was down a bit last month, but this is likely just a blip. The trend has been pretty steadily upward.

So, those who are liquidity constrained may want to consider their options to avoid a drawdown in stock prices. There are guarantees, as this output gap metric is similar to the yield curve in that respect. It’s only guarantees that returns above equilibrium will be nominal at best, but can’t guarantee a stock crash.

PS: I just noticed the weekly change figures for the S&P 500 earnings yields are off, but the quoted yields are correct. I’ll fix that before next week.

Disclaimer: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links & Economic Data Sources

]]><![CDATA[Stock and GDP Outlook, for Week Ending 07/31/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-ba0https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-ba0Mon, 27 Jul 2026 04:01:37 GMT

Stock prices and the mean expected NGDP growth rate fell last week as oil prices spiked due to further escalation of hostilities in the Middle East that included a widening group of actors and a spread to the Red Sea. To call this a world war right now would be to exaggerate the scope and depth of the current fighting compared to the global wars of the 20th century, but there do seem to be sides forming with multiple nations, even if not in such tight alliances with common war aims. There seem to be growing dangers of further escalation, including in the number of actors, given reckless behavior on the part of the US, Russia vis-a-vis nearby NATO countries, and Iran regarding its neighbors. Tail risks seem to be clearly growing, likely helping to explain rising S&P 500 earnings yields estimates, perhaps reflecting growing risk premia. Other real shocks included the imposition of new tariffs by the US, based on the latest set of US fraudulent legal claims.

Despite this chaos, the labor market continues to hold firm. Also, there was a strong July Flash PMI report from S&P Global, housing starts sharply rebounded to trend, and consumer sentiment improved via the University of Michigan. This is likely due to the combination of the AI boom and somewhat loose monetary policy, the latter recent high NGDP growth rates and positive NGDP output rate gap. As the 5-year, 5-year inflation expectation rate approaches 2% in core PCE terms however, the economy will have less room to run.

So, while markets are down recently, they are not panicking despite the afore-mentioned chaos that reflects the reckless decision making of many important global actors. While the world seems to be becoming increasingly perilous, I suppose it’s difficult for such still limited global conflicts to affect US corporate earnings much. We don’t have the targeting of ships in the Atlantic or Pacific Oceans, for example. These are still minor wars in scale, even if the strategic ramifications loom larger.

Disclaimer: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links & Economic Data Sources

]]><![CDATA[Stock and GDP Outlook, for Week Ending 07/24/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-c76https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-c76Mon, 20 Jul 2026 04:01:06 GMT

Stock prices fell last week along with the mean expected NGDP growth rate, as oil prices spiked due to an escalation of hostilities in the Persian Gulf. Despite the sharp rise in oil prices, they are still much lower than the wartime high. This indicates markets do not expect the battles to represent a disruption with the intensity and duration of those prior, at least in the short run. That may be partly due to markets adjusting since, but oil prices are now projected to remain higher in the long run than was the case before the memorandum that served to de-escalate the combat.

Interestingly, long-term inflation expectations have remained subdued and last week’s inflation reports surprised on the downside, even as NGDP growth expectations appear to be rising in recent quarters. This is due in part to evidence that real growth expectations are rising. One supporting example is that the S&P 500 earnings yield (same quarter earnings) is rising alongside NGDP growth over a multi-quarter horizon.

Yes, this multi-quarter trend could be due at least in part to an increasing risk premium, but given that we’re in an AI boom and stocks have been outperforming, the real growth story likely prevails. (Admittedly, last week’s sudden price drop gave the yield a minor, mechanical denominator boost, but this is minor noise in a larger structural shift.)

That said, there is a positive NGDP output rate gap as I’ve been pointing out, so the economy is overheating nonetheless. Hence, some of the rise in recent real growth is probably ephemeral, as will be likely shown as wages adjust. Stay tuned to see the latest output rate gap estimate when the first GDP estimate is released at the end of the month.

I never want to become ho-hum about the kind of needless chaos we’re seeing in the world due to terrible nationalistic leaders, but so far markets seem quite confident we’ll thrive even if the ride is bumpier than we like. I hope they’re right. For now, the outlook remains net positive, despite the dangers.

A Note on the New Dashboard and Forecasts

PS: I will likely continue using this new dashboard going forward. It’s going to be available on my new website soon, so I’d rather not maintain two dashboards and this one looks nicer to me. Let me know what you think.

I have stopped offering the market-based NGDP forecasts as messages I continue to receive indicate these are misunderstood. Every forecast is conditional, and NGDP growth depends upon unpredictable FOMC actions under unpredictable future conditions. Also, the semi-strong Efficient Market Hypothesis (EMH) tells us that we shouldn’t expect such forecasts to offer any unique advantages for returns, and these certainly don’t. I was using them for the perspective they offer on the economy and monetary policy, but if they’re going to mislead so many, it’s better to eschew them. Let me know if you disagree.

Disclaimer: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links & Economic Data Sources

]]><![CDATA[Stock and GDP Outlook, for Week Ending 07/17/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-ec6https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-ec6Mon, 13 Jul 2026 04:01:05 GMT

Stock prices rose last week as the mean expected NGDP growth rate fell amid the rekindling of combat between the US and Iran. The concept of a framework for a peace deal hasn’t held so far, yet the notably calm markets seem to trust that Trump will gradually accept his strategic defeat over the next several months.

While every week with the current US administration is eventful, markets increasingly seem to take it all in stride. Perhaps the rather extreme policy inconsistency means that much of its activity is simply interpreted as noise, with the understanding that tail risks are elevated. This is supported by the slight change in the Fed Funds curve last week.

As it stands, the outlook was hence little changed, with the economy still running somewhat hot and an eventual sloweown expected that is now forcasted to bottom after the beginning of 2028. There is still no recession on the horizon, as the AI boom continues to help prop up the economic growth.

Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links to Data:

Economic Data Sources:

https://fred.stlouisfed.org/series/SP500

https://www.wsj.com/market-data/stocks/peyields

https://www.barchart.com/futures/quotes/ES*0/futures-prices

https://ycharts.com/indicators/sp_500_earnings_per_share_forward_estimate#:~:text=Basic%20Info-,S&P%20500%20Earnings%20Per%20Share%20Forward%20Estimate%20is%20at%20a,28.27%25%20from%20one%20year%20ago.

https://www.cnbc.com/quotes/.VIX

https://fred.stlouisfed.org/series/DTWEXBGS

https://fred.stlouisfed.org/graph/?g=Ee9i

https://fred.stlouisfed.org/series/T10Y3M#0

https://fred.stlouisfed.org/series/DGS10

https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

https://tradingeconomics.com/commodity/crb?user=nunote

https://www.cnbc.com/quotes/@CL.1

https://www.cmegroup.com/trading/en

https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx

https://www.cmegroup.com/markets/interest-rates/stirs/30-day-f

]]><![CDATA[Stock and GDP Outlook, for Week Ending 07/10/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-370https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-370Mon, 06 Jul 2026 04:00:59 GMT

Stock prices rose sharply last week with no change in the mean expected NGDP growth rate. The most significant news was that of the June jobs report, in which job growth at about 57k was only roughly half of that expected, with downward revisions for some prior months. Labor market economist Guy Berger helps put these numbers in perspective.

This means labor market support for the notion that the economy is running hot is now less solid, and longer-run inflation expectations are below the Fed’s target in core PCE terms. This could persuade some that monetary policy could even be a bit tight. That’s where the value in the equilibrium relationship between the S&P 500 earnings yield (same quarter earnings) and NGDP growth proves so valuable.

The first quarter gap was substantial from the perspective of effects on stock prices, which could lead to a 14% drop in the event of a Fed-induced sudden return to equilibrium, or even worse if it undershoots. And as you can see, there’s been an upward trend in the output gap since last year and the gap never closed after turning positive during the Covid recovery. Wages and other sticky prices adjust within roughly 5 years, so there’s fading of the gap backward in time. A bit over a month ago, Marcus Nunes pointed to other metrics that indicated the economy was running hot, including recent above long-run trend NGDP growth.

Of course, it’s impossible to predict what the Fed will do, no matter the metrics, but right now market expectations regarding rates are lower across the board than those of two weeks ago.

The NGDP output rate gap currently points to the potential for a stock price correction, but not a prediction. If the Fed issues a positive nominal shock as wage adjustment weakens the labor market, the loss in stock market value could be solely in real terms.

As it stands, a more hawkish-than-expected sounding new Fed Chairman Warsh, makes me think a correction is perhaps a bit more likely than I thought a month ago.

PS: I’m considering developing a website with a macroeconomic dashboard and interactive charts and other tools for use by economists and policymakers who want to use and/or explore this model. Please email me at michael.sandifer@exactmacro.com if you would like to be considered as a beta tester.

Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links to Data:

Economic Data Sources:

https://fred.stlouisfed.org/series/SP500

https://www.wsj.com/market-data/stocks/peyields

https://www.barchart.com/futures/quotes/ES*0/futures-prices

https://ycharts.com/indicators/sp_500_earnings_per_share_forward_estimate#:~:text=Basic%20Info-,S&P%20500%20Earnings%20Per%20Share%20Forward%20Estimate%20is%20at%20a,28.27%25%20from%20one%20year%20ago.

https://www.cnbc.com/quotes/.VIX

https://fred.stlouisfed.org/series/DTWEXBGS

https://fred.stlouisfed.org/graph/?g=Ee9i

https://fred.stlouisfed.org/series/T10Y3M#0

https://fred.stlouisfed.org/series/DGS10

https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

https://tradingeconomics.com/commodity/crb?user=nunote

https://www.cnbc.com/quotes/@CL.1

https://www.cmegroup.com/trading/en

https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx

https://www.cmegroup.com/markets/interest-rates/stirs/30-day-f

]]><![CDATA[Stock and GDP Outlook, for Week Ending 07/03/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-4c4https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-4c4Mon, 29 Jun 2026 04:09:09 GMT

Stock prices fell for only the second time in 13 weeks along with with near-term market-based NGDP forecasts as the mean expected NGDP growth rate rose. May core PCE inflation continued its heating trend that began in December, though long-term inflation expectations fell.

Oil prices continued to fall as markets continue to gain confidence in the ultimate robustness of the framework for a deal to end the standoff in the Strait of Hormuz. This is despite some flare-ups in terms of military action on both sides.

The Fed Funds futures market continues to predict interest rate increases into next Spring, despite tame long-term inflation expectations. While long-term inflation expected inflation doesn’t support the full extent of such increases, the labor market is still slightly heating up and monetary policy has been loose recently, as I’ve stated weekly.

The outlook for stocks and the economy remain pretty strong overall, still driven by the AI boom despite some softening in the valuations of some AI-related equities this week. However, the White House is increasingly erratic and now publicly in conflict with many of the same party in Congress, so even more caution may be warranted for those with short-term liquidity concerns.

PS: I shared the wrong email address last week for those who may want to beta test my portfolio stress-testing website. It is michael.sandifer@exactmacro.com.

Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links to Data:

Economic Data Sources:

https://fred.stlouisfed.org/series/SP500

https://www.wsj.com/market-data/stocks/peyields

https://www.barchart.com/futures/quotes/ES*0/futures-prices

https://ycharts.com/indicators/sp_500_earnings_per_share_forward_estimate#:~:text=Basic%20Info-,S&P%20500%20Earnings%20Per%20Share%20Forward%20Estimate%20is%20at%20a,28.27%25%20from%20one%20year%20ago.

https://www.cnbc.com/quotes/.VIX

https://fred.stlouisfed.org/series/DTWEXBGS

https://fred.stlouisfed.org/graph/?g=Ee9i

https://fred.stlouisfed.org/series/T10Y3M#0

https://fred.stlouisfed.org/series/DGS10

https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

https://tradingeconomics.com/commodity/crb?user=nunote

https://www.cnbc.com/quotes/@CL.1

https://www.cmegroup.com/trading/en

https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx

https://www.cmegroup.com/markets/interest-rates/stirs/30-day-f

]]><![CDATA[Stock and GDP Outlook, for Week Ending 06/26/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-e05https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-e05Mon, 22 Jun 2026 04:01:18 GMT

Stock prices rose last week, likely with the mean expected NGDP growth rate, as a memorandum of understanding was signed to purportedly end the war and shipping blockades in the Strait of Hormuz. That agreement seemed to fall apart over the weekend as Iran announced that the Strait was again closed. However, news late this evening claims additional progress toward a more robust resolution. Whatever agreements are reached, how long will they hold?

Markets are gradually being sold on such a resolution, but notice how the backwardation in the latest oil futures data is less steep now. Is that due to expectations for permanent tolls charged for transversing the strait?

Meanwhile, expectations for interest rate increases continue to rise, though inflation expectations 5 years out remain tame. Recent rising inflation and a slightly tightening labor market are likely behind what some see as the Fed’s increasingly hawkish signals. However, as stated in previous recent outlooks, the most up-to-date data indicates the economy is running hot.

Also, via that same story linked to above, new FOMC chairman Warsh announced to begin changing some of the ways the committee operates. I offered my views on possible coming changes in early May. They ostensibly would lead to higher average inflation and more macroeconomic instability. Given that they represent an about-face for Warsh as he used to be more hawkish, who knows how serious he is about promoting looser monetary policy, and how influential will he be on other FOMC members?

So, the outlook for the economy is a bit rosier now than a week ago, but uncertainty and tail risks continue to cast unusually heavy shadows.

Data Note: Data required for forward-looking NGDP growth data was unavailable this week. I will continue to search for an alternative data source.

PS: I’m nearing completion of a client-facing, portfolio stress-testing website for a micro SaaS that will employ my approach market monetarism.

It seeks to take market monetarism to its logical conclusion, offering market signals of absolute and relative portfolio liquidity risks for three timeframes, including Now (using implied volatility), Near-Term (using 5Y, 5y inflation expectations), and the medium term (using the NGDP output rate gap metric). The conditionally predicted effects related to these signals are displayed on the top chart in the above image, with a comparison to the S&P 500 index with the click of a button. There are also custom scenarios based upon changes to the S&P 500 and/or to the expected or actual economic growth rates. There’s also a revealable backtesting graph to show the prediction fit-to-data over prior years.

It also features a macro dashboard with AI-generated commentary and each data tile clickable to reveal a chart.

And, there’s a micro dashboard that features each holding with a sentiment rating and news article TLDRs with numbers that are put into context to give advisors quick and easy ways to answer questions about portfolio holdings during client meetings. Note that the view below is not one of a functional page, but just a preview placeholder. It should be completed soon. The data there is fictitious.

There is also a portfolio summary screen with many useful features, such as the ability to swap portfolio holdings in real time to witness how they change risk metrics.

I was a stockbroker and advisor roughly 10 years ago and the most common question I was asked was whether a market crash was coming and if so, how would it affect the client’s portfolio. While this software can’t offer unconditional predictions, it can allow for realistic stress-testing with a rigor I’ve not seen offered in other such offerings. It seeks to balance rigor and transparency with simplicity and clarity of presentation. This is the tool I wish I’d had for client meetings years ago.

If any readers are interested in becoming beta testers, please contact me through Substack or at michael.sandifer@exactmacro.com.

Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links to Data:

Economic Data Sources:

https://fred.stlouisfed.org/series/SP500

https://www.wsj.com/market-data/stocks/peyields

https://www.barchart.com/futures/quotes/ES*0/futures-prices

https://ycharts.com/indicators/sp_500_earnings_per_share_forward_estimate#:~:text=Basic%20Info-,S&P%20500%20Earnings%20Per%20Share%20Forward%20Estimate%20is%20at%20a,28.27%25%20from%20one%20year%20ago.

https://www.cnbc.com/quotes/.VIX

https://fred.stlouisfed.org/series/DTWEXBGS

https://fred.stlouisfed.org/graph/?g=Ee9i

https://fred.stlouisfed.org/series/T10Y3M#0

https://fred.stlouisfed.org/series/DGS10

https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

https://tradingeconomics.com/commodity/crb?user=nunote

https://www.cnbc.com/quotes/@CL.1

https://www.cmegroup.com/trading/en

https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx

https://www.cmegroup.com/markets/interest-rates/stirs/30-day-f

]]><![CDATA[Stock and GDP Outlook, for Week Ending 06/18/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-244https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-244Mon, 15 Jun 2026 04:01:03 GMT

Stock prices rose last week along with the mean expected NGDP growth rate as Q3 and Q4 NGDP growth expectations fell. Oil prices fell sharply today after news that a supposed deal to end the Iran war was signed.

I know this is now a busy chart, but the bright light blue line shows the rather dramatic drop in near-term oil futures prices.

The expected Fed funds yield curve also fell, but with longer-term yields falling more than more immediate rates.

And inflation expectations were steady as the CPI for June increased for the third straight month.

Taken together, near-term optimism regarding NGDP growth is down a bit, despite lower short-run expected oil prices, but long-term optimism increased. Considering the Fed is expected to raise rates for the next 12 months or so, this isn’t surprising. The economy is still running hot given the positive NGDP rate output gap and unexpectedly strong job growth. The Fed is expected to overcorrect, but not by much relative to its history. Thanks to the AI boom, the economy is in decent shape for one buffeted with so many negative supply shocks. It remains a good time to be in stocks for long-term holders, with the caveat that vigilance is needed in preparing for more potential real shocks.

Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links to Data:

Economic Data Sources:

https://fred.stlouisfed.org/series/SP500

https://www.wsj.com/market-data/stocks/peyields

https://www.barchart.com/futures/quotes/ES*0/futures-prices

https://ycharts.com/indicators/sp_500_earnings_per_share_forward_estimate#:~:text=Basic%20Info-,S&P%20500%20Earnings%20Per%20Share%20Forward%20Estimate%20is%20at%20a,28.27%25%20from%20one%20year%20ago.

https://www.cnbc.com/quotes/.VIX

https://fred.stlouisfed.org/series/DTWEXBGS

https://fred.stlouisfed.org/graph/?g=Ee9i

https://fred.stlouisfed.org/series/T10Y3M#0

https://fred.stlouisfed.org/series/DGS10

https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

https://tradingeconomics.com/commodity/crb?user=nunote

https://www.cnbc.com/quotes/@CL.1

https://www.cmegroup.com/trading/en

https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx

https://www.cmegroup.com/markets/interest-rates/stirs/30-day-f

]]><![CDATA[Correction to Dashboard for this Week]]>https://exactmacro.substack.com/p/correction-to-dashboard-for-thishttps://exactmacro.substack.com/p/correction-to-dashboard-for-thisMon, 08 Jun 2026 05:12:12 GMT

I just noticed that the dashboard for this week’s market and economic outlook update had some stale values, including for the S&P 500, the Treasury yield curve, and the 10-Year Treasury yield. This is because it relied on the FRED API and those values were not updated on Friday for some reason.

Hence, I offer this new dashboard view which comes from the website I’m developing to offer a micro SaaS service to providers. It has dates explicitly listed for each quote. I also updated the post on the Substack website, which can be viewed by clicking here.

I apologize for the error.

]]><![CDATA[Stock and GDP Outlook, for Week Ending 06/12/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-8a8https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-8a8Mon, 08 Jun 2026 04:01:41 GMTNote: This was slightly edited due to some incorrect quotes on the dashboard in the original post that I did not notice. Some of the FRED data did not update for Friday, which is unusual. Hence, I’m debuting a new dashboard I developed for a website I’m working on that will be a micro SaaS product for use by financial advisors in client-facing meetings. It uses different data sources. I apologize for the error.

Stock prices fell sharply and the mean expected NGDP growth rate was flat last week, as the Q3 NGDP forecasts also dropped precipitously. Stock market volatility spiked with inflation expectations unchanged.

Notice how the path of expected Fed funds rates were pushed up starting in early 2027, but then dips below the expectations from last week around the end of the first quarter of 2028. This is consistent with the metrics just discussed.

The biggest factor moving the metrics last week seems to have been the much better-than-expected jobs report that included upward revisions for prior months. This sent stock prices sharply lower Friday, and caused the VIX to spike. Guy Berger has a great in-depth analysis on the jobs report, as does Marcus Nunes who adds a useful monetary perspective.

This report is consistent with my claims based on the evidence that suggest the economy is overheating. It’s one more data point to add to the positive NGDP growth rate output gap and the well-above 5% recent NGDP growth. Much like with the internet boom, we must be careful not to read relatively tame longer-term inflation expectations as evidence against loose monetary policy. It’s NGDP that matters.

Given this output gap, the stock market could see a correction of nearly 20% at some point in the next few years, ceteris paribus. That would be just to bring the economy back into equilibrium and assumes the Fed won’t overtighten or keep high NGDP growth going with additional positive nominal shocks.

I haven’t been addressing the standoff in the Strait of Hormuz much in the past couple of weeks, because updates seem to be noise until we see a permanent reopening for the unrestricted passage of ships. The markets are more optimistic than a week ago, but optimism started fading this weekend as oil prices began to creep back up and stock futures prices weakened as of early Sunday evening, EST.

The economy and stock market continue to be fueled by a strengthening AI boom and some monetary overstimulation, helping blunt the impact of many misguided supply-side policies. There’s still every indication that now is a great time to be a stock investor, so long as the higher-than-usual risks are properly taken into account and/or you’re holding for the long-term. The tail risks have certaintly proven to be evident already however, despite seemingly muted effects on real growth so far.

Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links to Data:

Economic Data Sources:

https://fred.stlouisfed.org/series/SP500

https://www.wsj.com/market-data/stocks/peyields

https://www.barchart.com/futures/quotes/ES*0/futures-prices

https://ycharts.com/indicators/sp_500_earnings_per_share_forward_estimate#:~:text=Basic%20Info-,S&P%20500%20Earnings%20Per%20Share%20Forward%20Estimate%20is%20at%20a,28.27%25%20from%20one%20year%20ago.

https://www.cnbc.com/quotes/.VIX

https://fred.stlouisfed.org/series/DTWEXBGS

https://fred.stlouisfed.org/graph/?g=Ee9i

https://fred.stlouisfed.org/series/T10Y3M#0

https://fred.stlouisfed.org/series/DGS10

https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

https://tradingeconomics.com/commodity/crb?user=nunote

https://www.cnbc.com/quotes/@CL.1

https://www.cmegroup.com/trading/en

https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx

https://www.cmegroup.com/markets/interest-rates/stirs/30-day-f

]]><![CDATA[Stock and GDP Outlook, for Week Ending 06/05/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-d4ahttps://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-d4aMon, 01 Jun 2026 04:02:08 GMT

Stock prices rose for the ninth straight week as oil and other commodity prices fell sharply due to increased expectations for an agreement to end the dual blockades in the Strait of Hormuz. The S&P 500 is now up over 19% since the end of March, with the VIX reaching its lowest point since January.

Short-term expected NGDP growth declined however. Core PCE inflation came in as expected for April at 3.29% YoY, continuing an upward trend that’s been going on since this time last year. Inflation expectations beyond 5 years remain relatively tame however.

Hence, not much changed for the outlook since last week, which still has a coming slowdown in NGDP growth according to markets, but less extreme than expected earlier in the month. This is reflected in the Fed funds yield curve.

Oil futures prices moved, but are still well-within the range of recent values.

The economy continues to overheat, given that recent NGDP growth has been well-above long-term trend, averaging over 5.5%. This is versus the estimated S&P 500 earnings yields for Q1 at 4.96% and Q2 at 4.26%, leaving a climbing positive NGDP growth rate output gap.

This suggests that more than the recent the 19% gain in the S&P 500 is due to expectations of overheating and will not be sustainable, sans new additional positive nominal shocks down the road as wages adjust to help boost inflation and lower employment.

The economy is still holding up remarkably well given the numerous negative supply shocks thanks again to the AI boom and now increasingly loose monetary policy. While the former may be sustainable in ways no other positive supply shocks were, the US continues to challenge its own prospects with policies that threaten to undermine the very foundations of economic development. Heightened caution continues to be warranted.

Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links to Data:

Economic Data Sources:

https://fred.stlouisfed.org/series/SP500

https://www.wsj.com/market-data/stocks/peyields

https://www.barchart.com/futures/quotes/ES*0/futures-prices

https://ycharts.com/indicators/sp_500_earnings_per_share_forward_estimate#:~:text=Basic%20Info-,S&P%20500%20Earnings%20Per%20Share%20Forward%20Estimate%20is%20at%20a,28.27%25%20from%20one%20year%20ago.

https://www.cnbc.com/quotes/.VIX

https://fred.stlouisfed.org/series/DTWEXBGS

https://fred.stlouisfed.org/graph/?g=Ee9i

https://fred.stlouisfed.org/series/T10Y3M#0

https://fred.stlouisfed.org/series/DGS10

https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

https://tradingeconomics.com/commodity/crb?user=nunote

https://www.cnbc.com/quotes/@CL.1

https://www.cmegroup.com/trading/en

https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx

https://www.cmegroup.com/markets/interest-rates/stirs/30-day-f

]]><![CDATA[Stock and GDP Outlook, for Week Ending 05/29/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-4d6https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-4d6Tue, 26 May 2026 04:01:38 GMT

Stock prices rose for the 8th straight week as the mean expected NGDP growth rate fell again, along with the expected Q3 growth rate. The VIX fell precipitously as part of a continuing trend since late March.

Also, oil prices fell as a bit more hope appeared regarding a possible settlement of the war with Iran. Not much change there, in context.

Fed funds futures continued to rise, but were little changed from the prior week.

Hence, not much changed regarding the outlook for stocks and the economy during the past week. As stated over the past two weeks, he stock market doesn’t have much more to run, sans a positive supply shock, and the economy is expected to slow, starting in next quarter due to Fed tightening to try to avoid overheating. There is no expected recession on the horizon as the AI boom continues to provide the economy with resilience.

Thank you to all veterans for your sacrifices.

Note: I used FactSet as more reliable source for the S&P 500 earnings estimates for Q3 and Q4 this week. Also, I began using the Yahoo! API for the CRB commodity index quote.

Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links to Data:

Economic Data Sources:

https://fred.stlouisfed.org/series/SP500

https://www.wsj.com/market-data/stocks/peyields

https://www.barchart.com/futures/quotes/ES*0/futures-prices

https://ycharts.com/indicators/sp_500_earnings_per_share_forward_estimate#:~:text=Basic%20Info-,S&P%20500%20Earnings%20Per%20Share%20Forward%20Estimate%20is%20at%20a,28.27%25%20from%20one%20year%20ago.

https://www.cnbc.com/quotes/.VIX

https://fred.stlouisfed.org/series/DTWEXBGS

https://fred.stlouisfed.org/graph/?g=Ee9i

https://fred.stlouisfed.org/series/T10Y3M#0

https://fred.stlouisfed.org/series/DGS10

https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

https://tradingeconomics.com/commodity/crb?user=nunote

https://www.cnbc.com/quotes/@CL.1

https://www.cmegroup.com/trading/en

https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx

https://www.cmegroup.com/markets/interest-rates/stirs/30-day-f

]]><![CDATA[Stock and GDP Outlook, for Week Ending 05/22/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-548https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-548Mon, 18 May 2026 04:01:47 GMT

Stock prices rose slightly last week in volatile trading as the mean expected NGDP growth rate fell amid worse-than-expected inflation reports and rising oil and other commodity prices.

YoY core CPI came in at 2.74%, having risen two consecutive months since the start of the Iran war. The context of recent years provides better perspective though.

Likewise for YoY core PPI for all commodities, which came in at 9.82%, though this rise does not appear quite as benign.

More importantly, longer run inflation expectations reflected in the 5-Year, 5-Year rate were unchanged for the week. Amd while there was much talk about rising Treasury yields, note that this rise is also not so scary in context. This same is true of the 30-Year rate.

And not much changed in the credit default swap market for US Tresuuries, as the 30 year example illustrates.

Scary is the wrong interpretation, even recent historical context aside. This is illustrated in the latest Fed funds futures prices.

Yes, inflation is too high now and monetary policy is somewhat too loose, but the relatively tame longer-term inflation expectations indicate that the longer run higher expected interest rates are due to higher growth expectations, consistent with stock price appreciation and the AI boom. Hence, the falling mean NGDP growth expectations are likely due to front-loaded short-term slower expected growth.

That said, as I pointed out last week, there’s not much room left to run for stocks over the short-term if the Fed respects its inflation target. We’re only about 3% below it (2.35% / 2.28% - 1) in core PCE terms now, leaving little room for additional appreciation sans a positive real shock. Such shocks have been common in recent years however, largely due to the AI boom.

Add to the concerns about overheating the recent and expected NGDP growth output gaps, and there’s still good reason to believe there’s a short-term NGDP growth slowdown, though not recession, on the horizon. The continuing stalemate in the Strait of Hormuz won’t help, but oil price futures still show significant backwardation.

So the tug-of-war between supply shocks and the AI boom continues, with monetary policy adding complications. The tail risks will remain significant with this administration in office. Caution is warranted in the short-term, and optimism in the long-term.

Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links to Data:

Economic Data Sources:

https://fred.stlouisfed.org/series/SP500

https://www.wsj.com/market-data/stocks/peyields

https://www.barchart.com/futures/quotes/ES*0/futures-prices

https://ycharts.com/indicators/sp_500_earnings_per_share_forward_estimate#:~:text=Basic%20Info-,S&P%20500%20Earnings%20Per%20Share%20Forward%20Estimate%20is%20at%20a,28.27%25%20from%20one%20year%20ago.

https://www.cnbc.com/quotes/.VIX

https://fred.stlouisfed.org/series/DTWEXBGS

https://fred.stlouisfed.org/graph/?g=Ee9i

https://fred.stlouisfed.org/series/T10Y3M#0

https://fred.stlouisfed.org/series/DGS10

https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

https://tradingeconomics.com/commodity/crb?user=nunote

https://www.cnbc.com/quotes/@CL.1

https://www.cmegroup.com/trading/en

https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx

https://www.cmegroup.com/markets/interest-rates/stirs/30-day-f

]]><![CDATA[Stock and GDP Outlook, for Week Ending 05/15/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-151https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-151Mon, 11 May 2026 04:01:24 GMT

Stock prices rose sharply last week, as the mean expected NGDP growth rate fell slightly. The VIX rose as did long-run inflation expectations. Hence the growth the S&P 500 signaled is mostly unsustainable nominal growth. The mean expected NGDP growth rate at 4.82% is above any reasonable trend baseline for YoY NGDP growth. There is a growing positive nominal output gap, confirmed by the 5-year, 5-year inflation expectations approaching the Fed’s 2% target in core PCE terms. This would make the Fed reconsider it’s plans to lower interest rates later this year, if it level-targeted NGDP. I pointed out last week that these higher inflation expectations are not due to higher commodity price expectation.

Interestingly, there’s been a big shift up in expected Fed funds rates in the past two weeks.

The low has shifted up nearly 60 basis points. This is obviously consistent with an economy that is quickly heating up. Despite this, the expectations for the next few Fed funds rate decisions have barely changed.

As labor market economist Guy Berger points out, the labor market is also slighly heating up, despite a series of negative supply shocks including tariffs, immigration restrictions, and the oil and other commodity shocks due to the war with Iran.

So now, the Fed’s increasingly misaligned policy is becoming more important than these various supply shocks. We can still see a roughly 3% gain in the S&P 500 before the Fed can be expected to begin tighter monetary policy in the near future. That assumes that political pressure doesn’t interfere with the Fed’s otherwise usual tendency.

Don’t be surprised for some more short-term gains in stock prices, with larger evnetual losses due to Fed correction or over-correction a bit further over the horizon.

Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links to Data:

Economic Data Sources:

https://fred.stlouisfed.org/series/SP500

https://www.wsj.com/market-data/stocks/peyields

https://www.barchart.com/futures/quotes/ES*0/futures-prices

https://ycharts.com/indicators/sp_500_earnings_per_share_forward_estimate#:~:text=Basic%20Info-,S&P%20500%20Earnings%20Per%20Share%20Forward%20Estimate%20is%20at%20a,28.27%25%20from%20one%20year%20ago.

https://www.cnbc.com/quotes/.VIX

https://fred.stlouisfed.org/series/DTWEXBGS

https://fred.stlouisfed.org/graph/?g=Ee9i

https://fred.stlouisfed.org/series/T10Y3M#0

https://fred.stlouisfed.org/series/DGS10

https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

https://tradingeconomics.com/commodity/crb?user=nunote

https://www.cnbc.com/quotes/@CL.1

https://www.cmegroup.com/trading/en

https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx

https://www.cmegroup.com/markets/interest-rates/stirs/30-day-f

]]><![CDATA[Stock and GDP Outlook, for Week Ending 05/08/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-dfehttps://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-dfeMon, 04 May 2026 04:01:09 GMT

Stock prices and the mean expected NGDP growth rate rose last week, as did long-run inflation expectations and the yield curve. The US economy continued to improve despite oil prices rising in response to somewhat diminished optimism regarding a near-term resolution to the Strait of Hormuz standoff. Though WTI oil prices have not reached the highs of those during the opening weeks of the 2020 Russian invasion of Ukraine, the CRB index reveals that commodity prices are nearly 16% higher.

This helped result in a 3.2% core PCE inflation rate in March, and a 5-Year, 5-Year forward inflation expectation rate that is now only trivially below the Fed’s 2% target in core PCE terms.

It’s still not oil prices pushing up those longer-run inflation expectations though, as prices 5 years out are not much different than they were pre-war. Monetary policy really has been loosening lately.

Nonetheless, the AI boom continues to intensify with AI-related stocks leading the way. For example, AI-heavy ETFs such as AIQ and WTAI are up nearly 27% and 36% respectively since reaching 2026 lows on March 30, representing rapidly rising earnings expectations. This is compared to more conventional SaaS and cloud services ETFs such as IGV and CLOU, which are up roughly 13% and 15% respectively over the same period. Their year-to-date lows though fell on April 10, so their recoveries since then are more impressive than stated, but still illustrate the continuing bifurcation. About 10% of the rise in the S&P 500 is due to rising inflation expectations, with the rest of the over 13% rise due to rising earnings expecations.

Meanwhile, the Fed had an interesting meeting last week in which the decision was made to hold rates steady, but there were 4 dissenting votes. That was the most since the Greenspan era. 3 were in favor of somewhat tighter policy due to inflation concerns and one, Miran, was more dovish.

Powell is expected to soon be replaced as FOMC Chairman by Kevin Warsh, but plans to remain on the FOMC. I laid out my concerns about Warsh a bit in last week’s post. Hopefully, he won’t be influential enough to destabilize economic growth with more pro-cyclical monetary policy.

So, who will win the tug of war between policy chaos and AI investment and productivity gains? Markets are increasingly giving the edge to AI. However, obviously this is a very risky investment environment due to the potential for more harmful policy changes. I would not bet against US technology in the long-run.

Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links to Data:

Economic Data Sources:

https://fred.stlouisfed.org/series/SP500

https://www.wsj.com/market-data/stocks/peyields

https://www.barchart.com/futures/quotes/ES*0/futures-prices

https://ycharts.com/indicators/sp_500_earnings_per_share_forward_estimate#:~:text=Basic%20Info-,S&P%20500%20Earnings%20Per%20Share%20Forward%20Estimate%20is%20at%20a,28.27%25%20from%20one%20year%20ago.

https://www.cnbc.com/quotes/.VIX

https://fred.stlouisfed.org/series/DTWEXBGS

https://fred.stlouisfed.org/graph/?g=Ee9i

https://fred.stlouisfed.org/series/T10Y3M#0

https://fred.stlouisfed.org/series/DGS10

https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

https://tradingeconomics.com/commodity/crb?user=nunote

https://www.cnbc.com/quotes/@CL.1

https://www.cmegroup.com/trading/en

https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx

https://www.cmegroup.com/markets/interest-rates/stirs/30-day-f

]]><![CDATA[Stock and GDP Outlook, for Week Ending 05/01/2026]]>https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-fd3https://exactmacro.substack.com/p/stock-and-gdp-outlook-for-week-ending-fd3Mon, 27 Apr 2026 04:01:34 GMT

Stock prices and the mean expected NGDP growth rate rose again last week, along with inflation expectations, oil prices, and market volatility. This continues to underline the stock and oil futures market perception that this standoff with Iran will be relatively short-lived. In fact, the S&P 500 has hit new all-time highs two weeks in a row, now up more than 13% since late March. Oil futures prices continue to suggest that the oil shock will improve quickly through the end of this year. Possible resolution does seem more likely to me now than prior to the imposition of the US blockade of Iranian shipping in the Persian Gulf.

Meanwhile, the US labor market continues to hold up well, though labor economist Guy Berger warns that the effects of higher oil prices are yet to come. There’s every indication that the economy is still fundamentally strong, though growth expectations continue to be expected to fall for the remainder of Trump’s term. S&P 500 earnings expectations support this narrative.

On that point, I’ve changed two indicators of NGDP growth expectations in the blog’s weekly dashboard. The next two quarters of NGDP growth expectations are now quoted, along with expectations for the next year. These are all based upon S&P 500 earnings estimates reported by FactSet. How these earnings estimates are translated into NGDP growth expectations is explained in this blog’s User Guide.

One piece of good news last week was the announcement of the dropping of the criminal investigation of Fed Chairman Jerome Powell. This helps clear the way for the nomination of his replacement as Chairman, Kevin Warsh. Warsh has laid out some details of a broad monetary policy reform agenda, including the following items (see links here, here, and here, for example):

1. Reform of the Inflation Metric

Warsh argues that traditional Core PCE is a lagging and “imperfect” signal that fails to capture underlying trends in a high-productivity economy. He prefers metrics like the Dallas Fed’s Trimmed Mean PCE, which strips out extreme price outliers (both high and low) to find “generalized” price changes. This metric generally shows inflation rates lower than those of core PCE.

He has also proposed a partnership with government statisticians to implement a real-time, high-frequency survey of a billion prices to capture the digital and AI-driven economy more accurately. This could be like the Billion Prices Project.

2. A Rules-Based Nominal Anchor

Warsh aims to end the era of “pure discretion” and “central planning” by tethering the Fed to a predictable framework. He rejects the Fed’s reliance on subjective two-year forecasts, arguing instead for a framework where the central bank takes absolute responsibility for the nominal path of the economy.

While this might initially sound good to a market monetarist’s ears, he’s not proposing an NGDP target, but instead is emphasizing inflation targeting with the kind of flexibility that caused the excesses of dot-com boom and subsequent crash. More on this below.

3. Shrinking the Balance Sheet

Warsh views the $6.5+ trillion balance sheet as a distortion of market signals and a form of “fiscal policy” by the back door. He advocates for shrinking the balance sheet with “unprecedented speed” to restore the dollar’s scarcity value. He proposes an unconventional trade-off here: reducing the balance sheet in exchange for lower policy rates. He believes removing balance-sheet distortions allows for lower interest rates without fueling inflation.

While I like the idea of shrinking the balance sheet and returning to a corridor system, his rationale is very dubious, even apart from the focus on interest rates, which are dependent not independent variables.

4. The “New Productivity Cycle” Thesis

Warsh views the current era as a “1990s Redux,” where AI and technological diffusion are driving a structural supply-side boom. He argues that if productivity is rising, the Fed should “look through” high growth and potentially even cut rates, as supply-side gains keep prices naturally subdued. He rejects the “dogma” that high wages or strong growth are inherently inflationary, focusing instead on whether money is being “over-printed” relative to productivity.

Of course, what he misses is that if NGDP growth rises above expectations, which may be associated with some long-run baseline mean, inflation will rise with a lag. This very procyclical inflation target mentality is what caused the Fed to over-stimulate the economy during the dot-com boom, leading to a bust after inflation finally showed up. This was a far broader boom than tech, as the S&P 500 boomed and then fell more than 46% during the bust.

5. Institutional & Communication Overhaul

To reduce what he calls “market manipulation” via rhetoric, Warsh seeks a more disciplined Fed. He wants to move away from telling the market exactly what the Fed will do months in advance, preferring a more “opaque” but data-driven approach that restores market-driven price discovery.

He has also pledged to return the Fed to its “core remit” (price stability and employment), explicitly removing it from climate change and social policy discussions. However, the climate change discussions was only with respect to managing bank balance sheet risk over time, which is well within the Fed’s mandates.

Overall, this does not bode well for monetary policy going forward, to the degree he’s successful in implementing these “reforms”. While some details are still vague, there’s a real danger that such changes will lead to less stable economic growth. However, for now, the AI boom continues slow the decline in economic growth due to multiple supply-side challenges and there’s still no recession on the horizon. It still appears to be a good time for the stock market, with the understanding that the tails of the risk distribution continue to gain weight.

Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.

Links to Data:

Economic Data Sources:

https://fred.stlouisfed.org/series/SP500

https://www.wsj.com/market-data/stocks/peyields

https://www.barchart.com/futures/quotes/ES*0/futures-prices

https://ycharts.com/indicators/sp_500_earnings_per_share_forward_estimate#:~:text=Basic%20Info-,S&P%20500%20Earnings%20Per%20Share%20Forward%20Estimate%20is%20at%20a,28.27%25%20from%20one%20year%20ago.

https://www.cnbc.com/quotes/.VIX

https://fred.stlouisfed.org/series/DTWEXBGS

https://fred.stlouisfed.org/graph/?g=Ee9i

https://fred.stlouisfed.org/series/T10Y3M#0

https://fred.stlouisfed.org/series/DGS10

https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

https://tradingeconomics.com/commodity/crb?user=nunote

https://www.cnbc.com/quotes/@CL.1

https://www.cmegroup.com/trading/en

https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx

https://www.cmegroup.com/markets/interest-rates/stirs/30-day-f

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