While wages have grown faster (30%) than inflation (26%) since 2019, they have lagged behind the rise in home prices.

USD/JPY has diverged from 10Y interest rate differentials. The yen is trading weaker (and the dollar stronger) than we would expect. This may be due to Japanese fiscal concerns with rising rates.

Even with trade disturbances and higher-than-typical tariff rates in 2025, foreign investors bought more US assets in 2025 than in 2024.

The Santa Claus Rally is still alive! This seasonal pattern typically sees equities rise over the last five trading sessions of December (which began today) and the first two trading days of January. Major US equity indices today posted a gain.

Options volume is spiking on silver and gold ETFs as the commodities are at their ATHs:

A stunning relationship in EUR/USD between Trump’s two terms. The USD typically sees seasonal weakness at the end of the year, which could cause EUR/USD to rise further:

Recently, there has been significant debate around the rising cost to own a home. However, how have homes changed over time? Since 2015, the square footage of the median home has declined:

Net immigration in the US is slowing, and this has important consequences for labor supply, wage growth and housing demand.

The Japanese 10Y yield is nearing 2%, a level that we have not seen since the 90s. The BOJ will meet tomorrow. Is the BOJ an inflation-fighting central bank, or is it a government department mandated to minimize risk of a debt financing calamity?

An ounce of silver is now worth more than a barrel of oil, for the first time since 1970. Based on the historical relationship, this ratio is at all time highs, and is likely to mean revert. Silver to oil ratio:

Long term interest rates have failed to decline during this cutting cycle. The 10Y is higher today than when the Fed started cutting in September 2024.

YTD, there has been talk about the de-dollarization theme and Treasuries losing their “safe-haven” status. However, the U.S. Treasury's $39 billion sale of 10-year bonds on Tuesday was a reminder that appetite for U.S. sovereign debt remains strong.

31% of wealth owned by people over 70:

Swaption volatility and the MOVE index are at 3 year lows. The market is not pricing in significant moves in rates for the next three months.

Yesterday, US Treasuries sold off with JGBs, even with higher expectations of a Fed cut in December and poor manufacturing data. This is likely due to the unwinding of the carry trade that has performed well over the last four years:

There is no need for the Fed to cut rates to boost consumer spending: retail sales data is strong, and Black Friday sales rise by 4.1% from last year while online spending jumps 9.1%.

A decomposition by the San Francisco Fed reveals that the current inflationary environment is largely a demand-side story, with strong economic activity accounting for the majority of price growth.

The upward pressure on existing home prices is due to low inventory as many current homeowners have locked in low mortgage rates:

In the AI sector, stocks that build infrastructure (data centers) have outperformed those that stand to gain revenue from AI applications, and those with productivity problems that stand to benefit most from AI.

The topic of affordability is rising in the news, and likely reflects the "K-Shaped" economy.

Maybe my pessimism is unreasonable. Easy monetary and fiscal policy points to continued economic growth:

Not a good sign for the economy…

Variant Perception’s Asset Allocation Dashboard:

A deteriorating labor market and upward pressure on inflation makes it difficult for the Fed to make a decision in December:

Alternative labor market data sources point to a weakening labor market. The ending of the government shutdown should provide greater insight into the health of the labor market:

Before and during the pandemic, the lower-income households experienced higher wage growth than other income groups. Since 2023, this relationship has flipped:

Demographic challenges in China:

A math professor became the most successful hedge fund manager ever. Jim Simons, once a professor at Harvard and MIT, founded Renaissance Technologies, where the Medallion Fund averaged 66% annual returns over 30 years. Academic research can be powerful - subscribe for weekly summaries!

And another one...

Another warning sign from the economy…

While the government shutdown is preventing the release of official labor market data, Torsten Slok provides some alternative measures. Here are two charts that I found interesting:

Volatility drag is the difference between the arithmetic and geometric mean, and arises due to the compounding effect of gains and losses. It has a significant impact on leveraged ETFs.

This week’s newsletter features research papers that cover sunset-driven bond mispricings, crypto forecasting with Reddit sentiment, the dollar's security premium, and the partisan cost of CEO activism.

Despite the constant alarm over high energy prices, the reality is more stable: electricity prices have not outpaced inflation over the past decade.

For companies with more than $50mm in liabilities, weekly bankruptcy filings are declining into their typical range.

Elon Musk’s entry into politics has had an impact on Tesla. A new study finds that “without the Musk partisan effect, Tesla sales between October 2022 and April 2025 would have been 67-83% higher, equivalent to 1-1.26 million more vehicles.” Other carmakers' sales rose 17-22% from substitution.

U.S. consumer confidence continues to fall as the U.S. equity markets hit all time highs.

Elon Musk’s entry into politics has had an impact on Tesla. A new study finds that “without the Musk partisan effect, Tesla sales between October 2022 and April 2025 would have been 67-83% higher, equivalent to 1-1.26 million more vehicles.” Other carmakers' sales rose 17-22% from substitution.

Even with rising inflation in core goods and food, short term inflation predictions are lower:

Will the US maintain superiority in the AI race?

A strategy that longs the most shorted stocks would have performed well YTD.

For the first time in two decades, you can actually get a better yield from 10-year Japanese Government Bonds than from dividends in the S&P 500

Goldman Sachs economists David Mericle and Pierfrancesco Mei say that the US is now entering an era of “jobless growth” — an economy where GDP climbs, but hiring doesn’t. In a recent analysis, they argue that most of that growth will come from AI-driven productivity rather than fresh hires.

This is a bit scary. There is basically no growth in capex spending outside of the AI sphere for the moment. The positive real fed funds rate is impacting most industries (besides AI). If AI / datacenter capex growth slows (and other capex does not pick up), it could mean trouble for the economy:

China is focusing on other markets for exports. The weak CNY also makes their exports more competitive.

The recent surge in gold and cryptocurrencies to record highs has sparked claims that the U.S. "debasement trade" is in full swing, but the bond market tells a different story:

Credit indicators are turning bullish:

The market is pricing in more cuts than the FOMC is:

Even with the collapse of First Brands and Tricolor (and the discussion around more cockroaches in the kitchen), Chapter 11 filings have been relatively stable:

Gold has given various cryptocurrencies a run for their money this year: