# Breakevens Crash, the Labor Force Quietly Shrinks - US Macro Recap - Week of July 10, 2026

> US macro recap for the week of July 10, 2026. The bond market's inflation gauge fell faster than oil as breakevens priced demand destruction, the labor force shrank by 720,000 to a 50-year-low participation rate, and a split Fed still worried about reflation even as core PCE drifted up.

## US Macro Recap

### Week of July 10, 2026: Breakevens Crash, the Labor Force Quietly Shrinks

---

Last week the argument was about growth cracking. This week it moved into two quieter, more important places: the bond market's own inflation gauge fell apart, and the number of Americans actually in the workforce hit a 50-year low. Both point the same way, softer not hotter, and yet the Fed's freshly released minutes show a committee split right down the middle, with reflation still on its worry list. Underneath it, the podcasts kept poking at the one story holding the whole thing up: the AI build-out, which several economists this week argued is doing far less for real growth than the headlines suggest, and is increasingly being paid for with borrowed money.

## TL;DR

- The market's inflation expectations are falling faster than oil: the 5-year TIPS breakeven dropped about 40 basis points in recent weeks, which analysts read as the bond market pricing *demand destruction*, not an oil-driven inflation scare.
- The unemployment rate fell to 4.2% for the wrong reason: the labor force shrank by 720,000 people in a single month, pushing participation to its lowest since 1976, with immigration policy a big part of the "why."
- The Fed minutes landed split 19 officials down the middle (half see cuts, half see hikes), even as core PCE at 3.4% drifts *up*, the highest reading since summer 2024.

## What's New

**1. The bond market's inflation gauge cracked, and it's screaming disinflation.** *(analyst/commentator)* A "breakeven" is simply the inflation rate the bond market is pricing in, the gap between a normal Treasury yield and an inflation-protected (TIPS) one. On *Eurodollar University* (July 7), Jeff Snider flagged that these breakevens are "crashing more than oil prices have," with the "five-year breakeven rate... down 40 basis points over recent weeks" and the 10-year "down substantially too." His point: when oil first spiked on the Middle East, everyone feared an inflation shock; now that breakevens are falling *faster* than crude, the market is telling you the real story is weak demand: "not only is it not creating durable inflation, it is now exposing the downside, the weak demand side, demand destruction." He tied it to China, where retail sales just posted their first annual decline since the zero-COVID lockdowns, auto sales fell 16%, and real-estate investment dropped 16% in five months. In a companion episode on Walmart cutting prices (July 8), he put it bluntly: breakevens have "utterly crashed" and are "aggressively pricing disinflation." [Eurodollar University](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhjTxriL1p3as3jrYuPv31ebmPeRBbYEdRvhMLPAMC-2BQLsDdDMuzVskzj6XVoXllWsf1NB09ImoMFwI7VgcEF-2F6ExWVhcC1m8VT7st4OR4hkw-3D-3D_e8h_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICG7UG1MB7aOqLDKcP2UPJQZ7VzHhBAAUoBzhNgj-2BnriLdfa7hmxROXfeDSwAH3E1y2prLtMWYBbFqJq55Av8Zg4x12GW56x0wu81HcmRvQ9dYbzAboObO-2F1nRdfeoai4e9IQK4ZrMt23TTNpNQJF1vE-3D) · [Eurodollar University](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhpmHuO-2F4GQQKlW1DrrMUZuA0SDw95pvBdbYktMbI6bYcDL3rO210qFuK42sSiC6Fw8bzkDp0G3lYSolxDewCvBtUgu5GA4awqx-2FBY5SQn2DQ-3D-3DPQZH_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICDCLbFUSLOOQnlGdbzB-2BEsaT1hcdlMp7yIhdetYk53M9VjK7hGET6ipubtlOgUCtcv3WaenJvx8vHGPkR1GSAme6oJkcNW-2BZjXxnMWFRr7gcfkSOg-2FCPnv57y-2FkGIh-2BFY-2FXsQiBaPMHlKxHH5lZ-2BWfA-3D)

**2. The labor force is shrinking, and immigration is the quiet reason.** *(pundit + operators)* The June jobs report showed a weak 57,000 new jobs (versus ~110,000 expected) with April and May revised down a combined 74,000. But the twist is *why* unemployment still fell to 4.2%. On *The Julia La Roche Show* (July 9), independent labor analyst Danielle DiMartino Booth said the participation rate, the share of adults in the workforce, hit "the lowest level since 1976... a 50-year low," and the unemployment rate only fell "because 720,000 Americans in one month gave up looking for work. That is a muscle atrophying." She added a striking household stat: "49% of adults under the age of 30 are living with at least one parent." On *DHUnplugged* (July 8), the hosts pinned much of that same 720,000 labor-force drop on a concrete policy change, work authorization ending for long-tenured green-card holders and non-citizens as of June 30 ("after 15 years working as a dishwasher, they were sent away"). This is the immigration-as-a-macro-variable story made real: fewer available workers means the economy needs *fewer* new jobs each month to keep unemployment flat. Nobody this week put an exact "break-even payrolls" number on it, but the mechanism is now visible in the data. [The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiWjf-2ByIforCoQWDv3lsTrAvQ-2Bxluks3S0i-2Fk2Fee1WxdNUZoVYojeQzIaIYn4fnAHuRvENX6FY6zBXwMOvUPVdV0qPq7e5sKEDimCHH45FDA-3D-3DAnUA_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICIURp4Ev8c-2FbmIAC2OJ-2B-2FUvzR8XtHxTzzFZCEXyz-2F6zxXKTWZQwCKYUDAxXcIID5SNMVN2P-2B-2B56zal5Gdq4fpZXEbP6mZl6XPar9eqL9pQ7bOtM-2F9WkXjMhs2SzX0mdnBeQFERgenpFyXMbCt223Sj0-3D) · [DHUnplugged Podcast](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOim775gRjUE1HFbi8WgV3q25BAquG0o0fGCIZ-2BuXjqqSOjZwy5YZnWPMqVsHaXWiGKXJl9vF3KWahtI2mpsNdbnnxEf0kFEDNQmt6AvH0k2kA-3D-3DIHjB_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICOTWtwbO3uiyfFNxAhAtlZOkwOO7hF2jVppZM-2Fny1BfyuAeNTx1vrItfum9DqaAXqLu9IoUHCiY4dO-2BskuPEwABeL8z66xqynv3dmoCasOifz9QERMY8bSLYveO2bHb-2BFQZCgyaaLxGw9WpAEIb-2B-2FGs-3D)

**3. The Fed minutes came out split down the middle, with reflation still on the table.** *(analyst/commentator)* On *Market Maker* (July 9), the host walked through the just-released Fed minutes: headline PCE inflation is "sitting pretty hot at 4.1%," double the 2% target, and core PCE (which strips out food and energy) is running 3.4%, "the highest since the summer of 2024," after being roughly flat near 2.8% for two years and now drifting the wrong way. The 19 officials were "split down the middle," and "almost all participants agreed that if AI-driven demand, tariffs and Middle East oil shocks keep price pressures high, some policy firming would likely be warranted." In plain terms: half the committee is thinking about *hiking*. The episode also described new Chair Kevin Warsh's plan to strip back Fed communication (no dot plot, minutes down to "one side of A4") to wean markets off their dependence on his every word. [Market Maker](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgV3h26SZXwcsYB9EiNOQUb7UMegDXsTwQbMxySu25nJMge79EIuyZb6kjBShXTjQVT4tnIuRxuv3qEF3enXExQFrsSS0iO7IBnleHK9csRUg-3D-3DyQdc_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICPsq7GaLpRKlVGpbJc3-2BhTj0-2BogxXdzwSOFvkkMkkFAAroGXa-2B5MGE7nGxpsxnZcPdxSVbB3CPRMuUZ0jHYy8d3SLtP3Tg3CHxjw5L-2BXKTgmoOvEz2tRxEXcfmvOUSROloiLBE7wEYlX-2BEL0EbD21tE-3D)

**4. "AI is the economy" got a reality check, and it's now running on debt.** *(economist/strategist)* Last week the framing was that AI capex is basically *all* of US growth. This week, on *The Money Puzzle* (July 9), the strategist pushed back on the math: hyperscaler capex plans of about "$940 billion" next year are "almost 3% of US GDP," but because most of that gear is *imported*, once you net off the imports the way a statistician measures growth, "it's adding around about 0.3% to economic growth rather than the idea that it's adding significantly." The bigger warning was the funding shift: the build-out used to be paid from company cash flow, but the US raised "about $650 billion in debt" for it in late 2025 ("up 100% over the prior year"), heading toward "close to a trillion dollars" this year. His line: "if you think it's a bubble, it's no longer just an equity bubble. It's now spreading into other asset classes." [The Money Puzzle](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhdig2buq9XJYLDHqhaG2w4LCsIbLJlhQjrlP5gvOnKKaCcdeKDq-2FNnFMZSFsS38B-2FiPQF5bRUNYbeWigq-2F1tTurFzM38cR93hqc1WDjciVfA-3D-3Dmv5n_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICLmsF4kIp1DtmX0vUgQ1W05-2FXzUlg1nOQyfsdFANfhD5BoUAPvHKmOP5aOAvWTlZ9-2ByxyrK049cEm5VfNrg4XAceol-2Ftp9EnM7tPhtEO6WdzPVOpKolQLGY379uPZH1hlavIANqJGXTEbBsCSfXFYc4-3D)

**5. The bottom of the "K" is where the stress keeps showing up.** *(economists/commentators)* The "K-shaped" economy, where the top half thrives while the bottom half struggles, got fresh, concrete color. On *Take-Away with Sam Oches* (July 7), a restaurant-industry chief economist estimated that higher gas prices are pulling roughly "$125 billion" a year in extra spending out of lower-income households, with about "$10 billion" of that hitting restaurants (a 0.6% drag on the sector), even as the overall economy grows near 2%. The Walmart episode on *Eurodollar University* (July 8) framed the retailer cutting prices as evidence consumers are "out of money," and DiMartino Booth's under-30-living-at-home stat is the same squeeze from another angle. Hard delinquency prints were lighter in this week's audio than last, but every consumer signal that did surface pointed down for the bottom cohorts. [Take-Away with Sam Oches](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgZFTkfrzCFNCw-2BrVI0MNM24rJf3zQXp-2BbhA1t-2BzeMG02S6EB0ZP8-2BjPdMedCUcHAOa6cV9qfPLy31RE-2F8fvXK0C3NpfFDMOAoH3-2BRhP0COQA-3D-3DlS5W_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICPuhDTWFmMxPezdIu5J6vm6kAnlwGRiHK-2BdelcrQdIFMLBzBGK0aPFezAdgr3XxegI5wTAscyY781D59nnezLReFTZBtcnSUK79dHwdL3TaGOKwi1qV61OYShMNEulbuinq08EAYf9xFDT2lEQyqXPI-3D) · [Eurodollar University](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhpmHuO-2F4GQQKlW1DrrMUZuA0SDw95pvBdbYktMbI6bYcDL3rO210qFuK42sSiC6Fz49-2FK9qpt3yI12bNzMpt9VXSYSBJdful8RGrLAklMrmQ-3D-3D3czz_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICGFlfA8S8gaXcwBe3gjp1ywnN3SLuOQoOiAZ-2BCvzvfitrqucbbKR2NltTvlmq2GHSjdycEae3082wVfeTOIZj5obHj35motNvaN4ec3Pan7chxjBi2LdP9gCpgcn-2BjtnyhNu8kpyaCN4n2McGSvx1Rs-3D)

## The Debate

All three camps got real airtime this week, so here's each, steel-manned from the episodes that actually carried it.

**Disinflation / cuts are coming (economists and analysts).** The cleanest case came on *The Walker Webcast* (July 9) from Wharton economist Peter Linneman, who argued the Fed should simply ignore energy ("monetary policy has no impact on the straight-up or moves. None. Zero") and that once you strip out energy and housing, "you still have 2.3% annual year-over-year inflation... and it's been there for two and a half years now." With the short rate near 3.65%, he called that "too big a premium" and expects "50 bps yet this year" (he'd argued for 75), noting "gasoline prices fell 25% last month," so the next inflation print should soften. Snider's crashing breakevens (above) are the market-priced version of the same view. This is the camp that says the recent hot prints are an oil head-fake that's already reversing. [The Walker Webcast](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOidlh347fkxW0w8nd5ERxzN8CQ1SV9R1QAldF4HD7diekJuRAs-2FCohrkGNGjTMG6iEKTdw1uxglGWXkRSIJQ97-2F-2F3mx7vXmC8gX9-2BGAAY2rSw-3D-3D-foU_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICObyoeoYzml6rUCanBJusCYpcBjJ1oqhOpJJml-2FQqUbSXRKiE60Kj3Komfn-2BbOB2-2Ft3XSCyVAO2Rw82nUJ1GaHWe2TIEebmjLrpX2Abf581yuaFnxyv-2BzRK5bHy-2FgS2c3r9BnTlykWXkS0fWGsuiZ44-3D)

**Sticky / reflation, no need to cut, maybe even hike (Fed itself, plus sell-side).** The counter is now coming from the Fed's own minutes: core PCE at 3.4% and *rising*, half the committee eyeing hikes, and explicit worry that AI demand, tariffs, and oil could keep prices high (*Market Maker*, July 9). On *CFA Society Chicago* (July 7), strategists noted PCE came in hotter than expected with services inflation still sticky on labor costs, and companies like Apple passing semiconductor costs through to consumers. And J.P. Morgan's FX strategists on *At Any Rate* (July 3), while acknowledging the weak jobs print, held their house view that the labor market is "on a strengthening path" that "will force a reasonably serious conversation on Fed hikes at some point later in the year." [CFA Society Chicago](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhF6WTBSyr80N-2BUGNKsNcZyziN92d08mFcj4tPfy-2BOzHhQmo24ndtRkSrq72ahrs5wgV-2FFBPhfQ1F0AGfQWf2W8hXxDCM-2FKZFt2YeVnUEC62Q-3D-3D86zH_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICBni3W4S8OMZ4cY5C0Hvu-2BRHgSkQd4gORCnCzBMlHiuCuOVw6UzkaFM3l7DepkgVTIz73BmL4-2BM21NRkd2-2F8l89dpzM8L7Tka0xmMEfLVJ8g5O-2BI7kArXF7LKAydyq8HXhSZg9I9T1jBr-2B-2F8YzcEmGY-3D) · [At Any Rate](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOikU9EeOWEjQ-2F6RMNupr-2B7rbAS0HPHsN61SQjb5KeNsJlF-2BhE7jvd4LBga7uFrTAq0se7mBrj86zp1P73DGUDggNPKudbAqNcjg8nHDQA2jWw-3D-3DqPCj_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICLDG8Qpb-2BgDSH9DTJjWBXGjgRgE6zGhm-2FRLSGAP6ynDTYowddmEoHSmCW2R9vwlLSqCwxFlBYoEoX4xnIBRQSns7ex8mRS-2BPvThYk6VI2wqOJkL-2FJb6SMuz2hGS-2Bxpr4lO41r254EMpCDZbbpMDRe-2Fc-3D)

**Stall speed (labor and consumer data).** The minority-but-loudest case rests on the labor force shrinking and the consumer's bottom half fraying: DiMartino Booth's 50-year-low participation and "muscle atrophying" framing, the immigration-driven 720,000 drop on *DHUnplugged*, and the demand-destruction reading of collapsing breakevens and China's retrenchment on *Eurodollar University*. The through-line: the top-line unemployment rate looks fine only because the workforce is getting smaller, not because hiring is strong.

Worth flagging the tension for readers: the same 720,000 one-month drop in the labor force gets two different explanations: DiMartino Booth calls it discouraged workers giving up, while *DHUnplugged* attributes much of it to the June 30 immigration cutoff. Both can be partly true, and both point to a smaller labor supply.

## The Trades in Play

Plenty of instrument-level positioning this week, and it clustered on real yields, duration, the dollar, and rotation away from crowded AI winners.

- **Buy 5-year TIPS outright (strategist).** On *Bloomberg Surveillance* (July 7), HSBC's Stephen Major called it "the cleanest way to express what's happened with real yields: just buy the tips... in the 5-year part of the curve. Those yields have been moving towards 2%. That's double most measures of Fed neutrality." He also floated a curve steepener (sell the 30-year, buy the 5-year), calling it "quite a big change, because I generally don't like steepeners." [Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiyKbqgvylTFufd3TkF2m0o71cXSqmD9MgmMUwD4yUZ-2BWLhiCYWSZtQFv1UmBwOOQGNwKCCTj6zEnbDIBadbm1MP4Zjz-2B0-2F4oa4B6xYdW-2BSAA-3D-3DKw-G_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICKvFQzjTau8fhu4R-2B8RmX44qWss3izw8BbqYZKMQnMqJ4T71eL3zDt9pMOsNzjOUWhDw54ol8ytvByokFau9z1oni3ys-2B6h-2BQiLXLCbJE-2F8ysMEX-2B-2BGA-2F2TGrbJRRGDJvX0Kj7jGIOKyIU-2BliVOL9n0-3D)
- **Trim the AI winners, rotate broader (operator).** On *Bloomberg Surveillance* (July 9), J.P. Morgan Asset Management's David Lebowitz, actually positioning a portfolio, noted hyperscaler free cash flow "has effectively gone to zero" as the AI build-out shifts from cash-funded to capital-markets-funded, and said "you are a better investor if you trim your winners and maybe add to some of your losers." He favors cheaper emerging-market (especially China) AI exposure, high-yield bonds (BB/single-B) yielding ~7% backed by hyperscaler debt, and international real estate. [Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgCQeP5cqHa3ShoowG9Eo1oLT5JQPPl05rD4kGfIg9YfxXxtiGplZUTkY4XYpRXZp7CskCaxaTVipwGTGq6HdcgzdN6ONkGp0u-2FxArxyf3Tjw-3D-3DqoUo_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICLZgI4ohcnPHgP0xhCky7lAtZq12oymkTrSQCbYnIF4w0oFyFXqR8GnEcYGjNlgimytRXycdUsaMsAGJMkP3vACfvrby7qpWqmVZmKtLYplZQ6b5pTgNsmWcfm1GU4YHvkdAwwE5l82WalqvqcIk-2FB8-3D)
- **The "debasement trade" has capitulated; dollar back in charge (operator).** On *Forward Guidance* (July 8), FX trader Brent Donnelly said the long-gold / weak-dollar "debasement trade... got oversubscribed" and has now capitulated ("nobody's trading GLD anymore on WallStreetBets") with the dollar breaking out on rate differentials. He flagged dollar-yen as effectively "pegged" near 162 with huge "jump risk," and would short it tactically into any Japanese intervention (which he thinks authorities will time to "a weak non-farm payrolls on a holiday"). [Forward Guidance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh1rRn93pW195gToI7ao9Po7Noaxy8TayF2CZl80gmlN7Xnn3fuu-2BkqdZZLgdE-2FLwpG-2FFZnshufy79HPmPwpUmyLCxj4cDtc2Dr7ZKlkfyA9g-3D-3DAUUK_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICOISkMnq6GKX9tXXvzdTMlr8VKgXSuIu-2FucyqoKtsL1bJCtjLc7Mrx50RWHS7W5sj7FGKsYdBRu3hPVjWINT-2BIwK2IapZnpWzsm4ZiCNH4Pt7vitNOjNINKtA42jpxMtgH-2F8fwLGcRQQhr5LdRzXB-2F8-3D)
- **Dollar-yen range and intervention line (strategist).** On *Bloomberg Surveillance* (July 8), BMO's Mark McCormick pegged dollar-yen at 160-165 with a possible intervention "red line" at 165, driven by a hawkish Fed against a behind-the-curve Bank of Japan. [Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhlgxZp8AOM-2Fq1E1ohZutZpu9suf-2Fk31X9UAJ7knq7KNmOwZdwvc-2B5jtIuPCJ61VG17wjeIUszefo-2B-2B7D6D5RG6wKyGJIYDIVfNQjjRW8CTTA-3D-3DGF7m_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICOgp2NZr929rHf42N-2FI2j-2FiahZet58us8GqnbUJ77ocwnY074ia8TF1DvJYEEJBt0drDEd-2FuUV4Shlb4ldxjiXt9uyVv1Q6y9cX6SZQGi-2F0fSND2v3IxVtdhIe8quwH0C5UDI8nsy5jfq92-2B-2FMyU-2BHY-3D)
- **Allocation tilts: TIPS, industrials/energy over tech (strategists).** On *LPL Research* (July 7), the midyear-outlook strategists flagged TIPS as attractive versus regular Treasuries on lower breakevens, and moved to overweight industrials and energy while downgrading tech to neutral on stretched valuations. On *Excess Returns* (July 9), technician Katie Stockton described a trend-following rotation ETF (TAC) shifting toward Treasury and gold exposure when fewer sectors look bullish, and using an inverse-Nasdaq hedge (PSQ) against pullbacks. [LPL Research](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiUKwbVr4qNlA7gNm63X0Hhe6O6mzNtGkS6eJQk9f40E-2BwH8kcEScPZ7-2F2LHeTwHLOEXbePqlYhT8HXXgQGpnIe-2Bi91lw-2FVVwrEyP807URzUg-3D-3DlWiS_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICPOjUD-2FGbyQ1zG7N-2F-2B2nL4Iwbjzz-2BQ7L8qMDa67a53LiMQetN3NQ41E9-2FGW1i0NvrtJA21qh1G5RGVYHykdUajk50yIR17soy6c5afMFVAdTKiwk3zrsPbWL20XIlKUbwb2js-2FlOPWPt7pssspyiBZk-3D) · [Excess Returns](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhnrelsy2bNSY-2BAmqeVUxFmlrapGCHvaszvcPd6WFpRlQXxQUoHM7ojlnRb87CDcRzvcGQdEup2WLAQIzk4UfSPCbJaOiC2SxCTsmW9YDGksA-3D-3Dh6Si_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICN3YCgOns6GS8sbxoSP4-2F13UwoWz5jCnbCLoyt1YwOgQtQtos9qN573fWjHBE-2BXbBoliFR8m5jI7FEcig4VX10-2FBmTfNJZOnTRYQ2874Bz92iyvPnGP3YncQhgpnwNng-2BInFiMZEcfOUuJou-2BG3bE6g-3D)

## Read-throughs

- **The AI trade is now a credit trade.** If hyperscaler free cash flow has gone to zero (Lebowitz) and the build-out is increasingly debt-funded (*The Money Puzzle*: ~$650B in 2025, heading toward $1T), then the risk migrates from stock prices to bond spreads. That showed up this week on *Bloomberg Intelligence* (July 8), where Nvidia's roughly $1 trillion valuation slide took it back to "pre-AI-boom levels," SpaceX bonds widened 20-25 basis points before settling, and Oracle spreads moved 30-40 wider, early tremors in the paper, not just the equity. [Bloomberg Intelligence](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgf1t6RznzFLqLX-2FA3-2F6o-2FSrDEPWJpha-2B0DukeZ5NnC45ZlogvKHub-2FV5Efauq92uOWFlZLQ1sdex-2FljA88bX9XtKGHe36tinysxPep5hsVHQ-3D-3DkL0Q_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXg3eLNQTp4lDuuMizCyp0bJAghH-2FlzchgRfY8X4SxICOb0iHEJ-2BXPvDg6Amq1mb99HgcpY0Uji1U5ezGntR2wvuygSsf2zTr-2BDQOvm2T-2BmDyWsU5jgEA6scHRbSV6Laf9LSQ61weE3WoWK-2F4-2BmON-2Fb4-2Fka9Hw3rN2rGT9e8bdkQ-2FVgrkE8eX9P8B4urQ7hVmg-3D)
- **The Fed is deliberately hard to read, on purpose.** Warsh stripping out the dot plot and shrinking the minutes (*Market Maker*) means markets get *less* guidance into a moment when the committee itself is split 19 down the middle. Expect every data point, especially the mid-July CPI, to swing rate expectations harder, because there's less official signal to anchor them.
- **A weak jobs number is now a green light, not a red one.** Because the labor force is shrinking, a soft payroll print (like June's 57k) lets the Fed keep *not* hiking without looking like it's easing into inflation. The same math also gives Japan its cover to intervene in the yen (Donnelly): a weak US jobs day is when a dollar-yen sell-off is easiest to trigger.

## What Changed

Last week the headline was GDPNow collapsing to 1.2% and a hardening call for outright negative monthly inflation. This week the evidence moved from the growth tracker to two new places. First, the *bond market itself* joined the disinflation call: the 5-year breakeven down ~40 bps is a harder, market-priced signal than any pundit forecast, and it reframes the oil round-trip as demand destruction rather than a one-off energy unwind. Second, the *labor-force* story finally got its number: participation at a 50-year low and a 720,000 one-month drop, with immigration policy (the June 30 work-authorization cutoff) named as a concrete driver, which is the closest this week's audio came to the immigration-and-payrolls question that's been thin for weeks. Cutting the other way, the newly released Fed minutes put the reflation camp back on firmer ground than last week's "negative CPI" consensus implied: core PCE at 3.4% and rising, with half the committee openly weighing hikes. And the "AI is the economy" narrative got its first real pushback: from ~3% of GDP down to ~0.3% once imports are netted out, and now visibly debt-funded.

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