James Brodie
Head of Learning & Development, Flux
New Highs In S&P & NASDAQ, Americans Cut Back Spending
Stocks hit highs as yields top 5%; inflation hot; stagflation fears rise; US strong vs EU weak; AI power bottlenecks emerge
New highs in S&P and Nasdaq with red flags waving as U.S. 30-year & UK 10-year yields trade over 5%, the 10-year JGB yield rose to 2.52%, the highest since in 29 YEARS, and U.S. inflation spikes.
ond market stress is back alongside the energy supply shock with stagflation being the long-term economic result. Yen surged 3% after $90bio of intervention, while The Fed's preferred measure of inflation (Core PCE) came in at 3.5% in March, the highest level since November 2023. This was the 61st consecutive reading above the Fed's 2% target level. (Chart 1, BLS)
OIS prices unchanged Fed rates by year end, +76 bp hikes by year end from the ECB & +66bp hikes by BOE.
US economic data keeps surprising to the upside, while European data keeps surprising to the downside. That gap just keeps growing, according to Bloomberg economic surprise indexes.(Chart 2, Bloomberg)
Americans are cutting back on discretionary spending: Expected spending fell across every major services category in April, with restaurants and bars remaining the top anticipated expense at 23.8% of respondents, according to The Conference Board.
Chicago PMI 49.2, Exp. 54.9, Last 52.9. First contraction since Dec 2025
US national debt surpasses size of the entire United States GDP for first time since World War II.
AI mania can be seen in US imports as well as the stock market. (Chart 3, BCA Research)
A 5-year backlog on grid transformers just killed half of America's 2026 AI data centre projects (delayed or cancelled).
You cannot buy a new gas turbine until 2030. Order books at GE, Siemens, and Mitsubishi stretch to 2029. Turbine prices have nearly tripled since 2019. Every AI data centre needs power and every gas plant needs a turbine.
The Bank of England's Monetary Policy Report makes for unremittingly grim reading: Inflation could hit 6.2% at the start of 2027, Food prices could rise by 6-7% by end of the year, Warnings of possible need for 'forceful ' rises in interest rates. One scenario has as many as six rises by the end of the year, taking rates to 5.25%. A bad outlook for the Pound with GBPJPY sitting on critical support. (Chart 4, Bloomberg)
Data today – US ISM Manufacturing.
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