Market Update Preview
Two weeks since the last update, and the market did what we thought it would — no risk-off moment, just an overextended grind that's now losing steam. We're near the same levels we were at, momentum has exhausted itself, and flows are noticeably less supportive than they were. I'm not risk-off yet, but I'm about as weakly risk-on as you can get.
Oil has finally cooled below $100 a barrel, which helps real flows in the near term — though I don't think the longer-term oil story is over. And the deficit impulse in real terms continues its slow march toward the zero line, with inflation now the dominant headwind.
The most interesting piece this week: bank credit took a dive after the Iran conflict and is now re-accelerating — and this is playing out almost exactly as our DeepMinsky simulation predicted when we modeled the oil shock. I'll walk through the theory of why an oil shock hits credit the way it does, what it means for the late cycle, and a scenario I've been chewing on where the new Fed chair keeping rates flat could actually be the thing that tips us into recession. Full breakdown below.
(Note: Below is a summary of the Market Update Video for 05/27/2026, click here to watch the video update)