Essentials

We do not expect the oil shock to have a lasting effect on inflation. Looking further out, a variety of structural forces will influence inflation, including fiscal policy, globalization, demographics, and AI.

Bank Credit Analyst

In Section II, Jonathan examines the humanoid robot segment of the emerging physical AI landscape, concluding that humanoid robots are a potential but not yet imminent investment theme.

Higher oil prices threaten the global economy, warranting an underweight stance on equities. Over the long haul, industrial metals will fare better than crude.

Bank Credit Analyst

Overnight, the Israeli military reported that it managed to kill two high-profile Iranian leaders: the Secretary of the Supreme National Security Council and the leader of the internal paramilitary group, the Basij. Meanwhile, the Gulf States reported more interceptions of drones and missiles from Iran.

Bank Credit Analyst

The conflict in the Middle East persists as the US and Israel continue their strikes, and so does Iran’s retaliation with drones and ballistic missiles against the Gulf States. The Strait of Hormuz is still essentially closed, despite some ships being allowed to traverse.

Bank Credit Analyst

The conflict in the Middle East persists as the US and Israel keep striking at Iranian military and internal security sites, and Iran has responded with its own missiles and drones against the Gulf States. Although the pace of Iranian retaliation has declined, it appears to have stabilized, as evidenced by attacks against the UAE.

Bank Credit Analyst

In Section II, Jesse ranks middle economic powers across hard and soft power dimensions and recommends investing in their defense and industrial sectors.

Special Report

Tech companies have historically generated profits from three main sources: 1) economies of scale; 2) network effects; and 3) proprietary technologies. AI threatens to undercut all three sources.

The neutral rate in the US is being propped up by a variety of forces that are at risk of reversing. These include the AI capex boom, large budget deficits, and the extraordinarily high level of household wealth. As such, interest rates are likely to surprise to the downside over the next few years.

Special Report

If humanoid robots were to become substitutable for workers, the AI age could lead to rapid growth in the size of the effective global labor force. The result could be a larger version of the “China shock,” which followed China’s entry into the global economy.