US – Strong jobs, soft inflation: the sweet spot
A fresh round of US data last week reinforced the view that the labour market remains resilient. Communication from Hassett and Navarro in the days leading up to the Non-Farm Payrolls release had lowered market expectations for job creation, but the actual print surprised on the upside, with indicators continuing to point to solid underlying labour demand. At the same time, inflation data did not materially challenge the ongoing disinflation narrative, with CPI at 2.4% YoY and core CPI at 2.5%. This combination keeps the bar for cuts relatively low as Kevin Warsh is expected to take office in the coming months; however, if the strength of the economy remains the main concern within the board, the new Chair may need to provide a convincing rationale to build consensus within the FOMC.
US – When crowded trades unwind
Technology equities came under pressure during the week as investors reassessed valuations across parts of the AI-related complex. After a prolonged period of strong performance and increasingly crowded positioning, concerns around the pace of monetisation, the capex cycle, and the longer-term implications of AI substitution triggered profit-taking across several high-beta names. The move appeared more technical than fundamentally driven: the S&P 500 declined by less than 2% on the week, while some AI- and tech-related baskets fell by more than 20%, amplifying dispersion across equity performance. In this environment, duration performed well, with the US 30-year yield declining by around 15 basis points.
Algebris Investments’ Global Credit Team
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