Employment Friday delivered one of the strongest jobs reports in recent memory. Non-farm payrolls came in at 172,000, blowing past the 88,000 expectation. Upward revisions added another 93,000. Wages grew at ~0.3%.
The market sold off anyway.
@CathieDWood thinks investors have the story backwards. Productivity is running near 3%. Unit labor costs are near half a percent. She says that is not an inflationary setup but a boom with contained costs.
The yield curve is flattening despite a ~55% surge in oil prices over three months. The bond market is not buying the inflation narrative. Neither are we. If the Iran war resolves and oil pulls back, inflation could go negative this year.
Capital spending has broken out of a 30-year range. The AI infrastructure buildout is creating a ripple effect across manufacturing. SpaceXAI built Colossus for roughly $30 billion and Anthropic is paying $15 billion a year to use it. We believe the returns on this infrastructure are unlike anything in prior technology cycles.
On the dollar, gold, and the inflation trade: prediction markets are pricing in a US Dollar Index reversal toward 101.9, gold peaked the day Kevin Warsh was appointed, and Cathie Wood believes the inflation trade may already be over.
From where we sit, the economy is healthier than the headlines suggest, inflation is lower than people fear, and the AI infrastructure cycle is just getting started.