Friday, September 25, 2026

Macro Musings · Daily Briefing · Friday, September 25, 2026

The economy can't decide if it's thriving or doomed so it's doing both at once

median sales price of new homes down 5.8% from a year earlier. A mixed batch of US economic data showed durable goods orders flat, capital goods orders beating estimates, continuing jobless claims falling, and equity market internals remaining broadly resilient despite weak consumer sentiment.

Personal Stakes · Est. read time 4 min

In 30 seconds: A mixed batch of US economic data showed durable goods orders flat, capital goods orders beating estimates, continuing jobless claims falling, and equity market internals remaining broadly resilient despite weak consumer sentiment. University of Michigan consumer sentiment fell to a 4-month low of 48.1 in September as one-year inflation expectations surged to 4.6%, prompting debate over Fed rate hike policy and White House criticism of the central bank. A broad surge in Treasury yields to multi-decade highs is roiling bond markets, crushing dividend stocks, driving bond volatility (MOVE Index) sharply higher, and sparking debate over duration, CTD mechanics, and the impact of heavy Treasury issuance. Oil continues to flow through the Strait of Hormuz but at very high cost, while US diesel prices are up ~89% from pre-war levels and diesel crack spreads have fallen sharply amid calls for US export restrictions.

Headline orders came in flat at 0% month over month, missing the 0.3% estimate and decelerating from a prior 0.9% gain. Strip out transportation and you get 0.3%, still below the 0.6% consensus and the prior 0.7%. The interesting line, though, is underneath. Core capital goods orders, the proxy for business investment that people actually care about, surged 1.6% month over month against expectations of just 0.6%. Core cap goods shipments rose 0.6%, softer than the 0.8% estimate and the prior 1.4%, but the orders number is the forward-looking one. The read is that US capex trends remain strong, even when adjusted for inflation, led by AI-investment surge but also visible across machinery, metals and transportation equipment. On the labor side, continuing jobless claims for the week ending September 12 printed at 1,719,000, essentially unchanged from 1,717,000 the prior week — a 2,000 increase that rounds to noise. No stress there. The Kansas City Fed September Services Index improved to 0 from -3, though its employment subindex deteriorated to -10 from -4. Equity internals tell a split story. High beta is breaking out relative to low vol, staples are breaking down, and high yield credit shows very little stress. Market breadth, however, remains weak. The S&P 500 could be completing its fifth consecutive week without a 1% gain or loss — the last time that happened was May 2023. August core goods orders up 1.6% month-over-month.

In percentage terms, headline sentiment fell 7% on the month. The damage was concentrated in the forward-looking expectations subindex, which slid 10.1% to 46.3, down from 51.5 the prior month. Current conditions, at 50.9, barely budged from the prior 51.9. People feel roughly the same about today; it is tomorrow they are worried about. Longer-term expectations are creeping up too: the five-year gauge ticked up 0.1 points to 3.4%. Higher inflation is weighing on personal finances and business conditions, and expectations are dimmer, disproportionately amongst Republicans. The divergence between consumer sentiment and economic activity data is widening. Financial conditions remain quite accommodative, and inflation remains above target.

The US-led yield surge has become a generalized phenomenon, especially when it comes to reaching multi-decade levels. The $DVY dividend stock ETF has gotten crushed during this latest spike in Treasury yields, breaking below its 50-DMA and closing right on its 200-DMA yesterday. Bond volatility has surged, with the MOVE Index up 30 points in the last two days. The VIX is unresponsive to the MOVE upside, which seems only a bit abnormal. If the MOVE comes down, VIX would respond sharply and that would put a bid into stocks. For now, equity vol is doing nothing while bond volatility surges. 2's 30's is relevant but NOT term premium. Andy Constan went max long ZB via options structure risking 3% of AUM. An economist argues that a percentage point of GDP (and about a third of Treasury issuance) could add a bit to Treasury yields, though the effect should be modest.

Oil is still moving through the Strait of Hormuz. Flows hit 13.5 million barrels per day on a seven-day moving average as of yesterday. By far the biggest rise has come from Saudi Arabia's new Gulf loadings blitz. TotalEnergies is helping several countries, notably Iraq, to ship crude oil through the Strait of Hormuz — a dynamic one observer frames as France winning brownie points in the Middle East. So the barrels are getting out. The question is what it costs to keep them moving. Crude itself has barely budged, up just $0.03 per barrel over the past two weeks. But the back end of the curve tells a different story: December 2027 Brent crude settled at $80 per barrel, only the second >$80 per barrel print of the year and less than 10c off the war-time high. Dated Brent to frontline spreads doubled from Tuesday lows to 10 dollars a barrel by this morning. The pain is concentrated in refined products. US diesel prices are up 89% from pre-war levels, with the average pump price sitting at US$6.50 per gallon. Yet crack spreads are collapsing in the other direction: ICE gasoil crack spreads fell 15 dollars a barrel over the same period, and the diesel crack spread (NYMEX diesel vs Brent) dropped 20 dollars this week. And so politicians are increasingly calling for restrictions on US fuel exports, in a bid to bring down prices for businesses and consumers ahead of November's midterm elections. The logic is straightforward: if you cannot bring crude costs down, maybe you can trap the refined product inside the country. Whether that actually lowers prices or simply rearranges who suffers is, as usual, a secondary consideration.

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