It’s Only Money
Market Highlights
To say a lot has been going on in the world would be an understatement. If I’ve read correctly, war broke out, peace broke out, and assassination attempts suddenly surged, all under the growing shadow of AI, which is enveloping the earth and forever altering life as we’ve known it. Yet, despite the chaos, the market continues to shake off bad news like a dusting of snow.
Oil appears to have found a holding pattern around $100 a barrel, though it still experiences manic swings depending on the severity of the headlines. At the same time, tariffs have largely been absorbed by companies, while AI-driven productivity gains and lower costs have helped fuel strong earnings and renewed confidence about the future.
The Iran situation, meanwhile, has turned into a game of chicken between Iran’s oil-holding capacity and Trump’s looming midterms. Economically and politically, I wouldn’t even place those two “risks” in the same category, though they certainly make for compelling headlines.
Interest rates, however, will always tell the truth. With inflation still coming in well above the Fed’s arbitrary 2% target, the real question is whether rates will be lowered or held steady. As Warsh steps in on the heels of the highest wholesale inflation reading since 2022, his next move may reveal whether he intends to be aggressive or simply more of the same as the incoming Fed chair.
At the end of the day, government spending causes inflation, not merely a squeeze between supply and demand — though, of course, your wallet doesn’t particularly care about the distinction.
On My Mind
“Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
Milton Friedman
Speaking of Inflation…
Inflation has made the cost of goods and services rise. What used to cost $1,000 in 1926 now costs $18,500 in 2026.
By contrast, $1,000 dollars invested in 1926, prior to the great Depression, would be worth $7,500,000 in 2026.