Framework

Everything starts from leading indicators (PMI, permits, new orders, the curve) rather than the payrolls print the market watches. They matter because they transmit in a known order, and that order is set by interest-rate sensitivity: Housing → Orders → Profits → Employment. The further up the chain, the stronger the lead; employment is the last domino.

1. HHousingREPLACED BY AI CAPEXThe most rate-sensitive link, so it moves first. It never recovered after the pandemic; permits are still languishing below 2021 levels.
2. OOrdersELECTRONICS AND POWER GEARPMI new orders. This cycle they are driven by data-center build-out (chips, servers, transformers, cooling), not residential construction.
3. PProfitsALREADY TRANSMITTEDThe order surge has reached the suppliers: record earnings across compute and the power-bottleneck names.
4. EEmploymentTHIN TRANSMISSIONThe last domino, and thinner than usual. A finished data center needs little operating labor and the jobs are high-skill only.

The 2026 amendment is the first link. Housing never recovered, yet PMIs are in expansion because data-center capital expenditure has taken over as the engine that starts the chain. That substitution is what most of my current work is about, and it is why a rate decision now lands on the AI build-out instead of on mortgages.

The market prices the path with real money every day. My job is not to guess against it but to find where it disagrees with the Fed, and to know which part of a yield move I am actually looking at.

1. 01Weight the midpointsProbability-weight each target range midpoint, meeting by meeting, to get the market-implied path. It is priced with real money in fed funds futures, not with opinion.Example: Sep 2026: 3.88% today, 4.21% by year-end.
2. 02Difference it against the dotsWhere the implied path and the SEP median agree there is no trade. Where they split, that gap is the position, and the disagreement is usually about duration, not direction.Example: 2026 agrees within 11bp; 2027 splits by 53bp.
3. 03Split the long endA long yield is expected short rates plus term premium. If the 30-year moves less than the 10-year, the driver is expectations, not risk compensation, which tells you which story you are actually in.Example: 10-year +90bp, 30-year only +49bp year to date.

A war is never an isolated act, and following the daily cycle of strikes, sanctions and oil prints means being led by the news. Any conflict decomposes into three layers, and they transmit in one direction: interests → motivations → behaviors. Analysis runs the other way: you observe the behavior that already happened, infer the motivation, recover the interest, then use it to anticipate the next move. Sun Tzu calls the exercise miào suàn.

1. 01InterestsThe fundamental drivers: what a party cannot give up without ceasing to be itself. They change slowly and are usually stated in public only in disguise.Example: Iran: regime survival, which it reframes as reconstruction capacity.
2. 02MotivationsThe plans formed around those interests. Where two sides’ motivations are mirror images, the contradiction is structural rather than negotiable.Example: Iran wants economic recovery; the US–Israel aim is to prevent it.
3. 03BehaviorsWhat actually shows up: strikes, sanctions, shipping, pricing. The only layer you can observe directly, so it is where the analysis starts even though it is last in the chain.Example: Hormuz used as leverage to trade, not a passage to close.

The payoff is a test for deadlock. When the balance of force is even, the interests leave neither side room to retreat, and both sides can read each other’s motivations clearly, you have a stalemate rather than a contest, and the break, when it comes, arrives from outside the two combatants.

A 5% nominal target is readily achievable today with high-quality fixed income, at roughly one-fifth the volatility of a conventional balanced portfolio. A 5% real target, net of fees, sits at or beyond the edge of what the full investable universe can reasonably support.

Constrained efficient frontiers under three client liquidity regimes; ten-year annualized basis, data as of July 16, 2026. Not investment advice; see the note’s limitations section.

If the supply gap is the thesis, the question becomes which balance sheets survive the downcycle that comes first. The screen is deliberately boring.