Happy Friday

I am finally semi-back on my feet after a nasty few weeks of illness and look forward to a weekend of US Open golf from Oakmont before making my way back to real life.

Real life has plenty to offer—at least if you’re working full-time as a geopolitical analyst or macro trader. The ongoing attack on Iran, following their overshooting of Trump’s 60-day deadline, suggests that Trump wants to be seen as a meaningful “deadline setter” in geopolitics again (are you watching Russia and Ukraine?).

We typically find good evidence of “dip buying” after the first wave of geopolitical unrest. And given that Iran is not on a harakiri mission, we also struggle to see how they could truly escalate this conflict beyond what we’re already witnessing.

Meanwhile, the response in oil markets is a friendly reminder that this week’s stream of soft inflation data is likely marking the “bottom” in actual inflation for the next 6–12 months. We’ve probably been among the very few analysts/traders globally who loudly predicted that April–June would bring lower price inflation—thanks to a cocktail of import frontloading ahead of tariffs and weak demand leading to high inventories at old prices.

Everyone—from investment banks to survey institutes to media outlets—kept screaming “tariff-flation,” and here we are with price inflation lower than when the tariffs were installed.

But this again reminds us of the stop-and-go policy chaos of 2020. With the “restart” of the global economy now that trade is flowing again, supply/trade volumes are rising—and supply bottlenecks like the one we’re seeing in oil this week will start to matter again, and dry bulk freight rates are also on the move now, mimicking the trends seen after the pandemic. 

Based on this simple Covid analogy, there might be a lot more to chase in commodities once we get going on this reflationary theme, even without the QE we saw in 2020, while bonds are more of a mixed bag of goodies.

From disinflation to re-flation is the theme you need to be on top of now. And we’ll show how it will impact you across three themes this week.

Chart of the week 1: Commodities is THE bet in a reflationary environment