Sonu Varghese
@sonusvarghese
Musings only. Chief Macro Strategist @CarsonGroupLLC. Advisory services through CWM, LLC, Registered Investment Advisor. Manage $7B+ for clients.
1.6K Following 15K Followers
Whoa, equity supply!
Net equity issuance by nonfinancial corporations hit $150B in Q2
Gross issuance was $502B in Q2
Retirements
Via repurchases: $216B
Via M&A: $134
@RyanDetrick @CarsonResearch
Show more
S&P 500 revenue growth est for Q3 ~ 12%, well above trend
Huge bump from tech (again!) incl semis (+80%)
Meanwhile the Warsh Fed isn't inclined to stop this train. New blog on a still dovish Fed, nevermind the hike 👇
@RyanDetrick @CarsonResearch
Show more
Rates aren’t high enough
From Eaton speaking at a conference yesterday, just jaw dropping numbers:
“So, when we released our Q2 numbers the total announced projects for data centers was 307 gigawatts to be built, just think about that. And now today, we checked this week, it’s already 342 gigawatts. So, a month later, it’s already more. And then you contrast to what this industry has ever built. We have installed 50 gigawatts. So, today operating, there are 50 gigawatts. So, we are talking about between 6x and 7x what exists today is what’s going to be built in the next years. Most of this is not going to turn into ‘27 or ‘28 revenues. So, it’s going to be a longer cycle, that’s the way to think about it.”
Show more
Hawkish Fed, really?!
Jun '25 SEP (before 75bps of cuts) vs Jun '26, for 2026 👇
Real GDP growth: 1.6 -> 2.3
Core PCE: 2.4 -> 3.4
UE Rate: 4.5 -> 4.1
Median FFR: 3.6 -> 4.1
Nominal GDP growth: 4.0 -> 6.0
Real FFR: 1.2 -> 0.4
Long-run rate: 3.0 -> 3.2
Actual FFR: 4.4 -> 3.9
Show more
Was the Fed really as hawkish as many said? We don't think so.
I take a look at it all in our latest blog.
Kudos for the honesty 👏👏👏
JPMorgan’s commodities team:
“For the first time since the start of the Iran conflict, we don’t have a baseline view. We simply don’t know how to model the endgame.”
The big surprise this year is that it took this long for markets to shift to pricing in rate hikes, and the Fed to move
Back in March the probability of a rate hike in 2026 was zero, which was baffling at the time
Show more
Baffling to me that the probability of a rate hike in 2026 is zero
Why shouldn’t the Fed even consider thinking about rate hikes. Not saying they should hike but surely a hike shouldn’t be completely off the table. Especially since there’s no prospect of fiscal deficits easing
Show more
I'd argue that the second derivative of AI capex is
1) profits/margins for chipmakers/tech companies, and excess performance for this sector
2) the growth of credit to finance to AI-buildout, including all the backstops/SPVs
Show more
Whenever Warsh turns to specifics and get precise, it really stands out (because so much of the rest is fillers). Today he introduces another “Warsh” indicator for watching geopolitics.
The three things he has told us he watches:
1) share of the 199 pce components at >3% inflation at 6 and 12 month annualized
2) the second derivative of ai capex
3) and today, on watching the inflation spillovers from geopolitical – the difference between spot prices for corn, soybeans, wheat and so-called crack spreads.
Of those 3, the first likely came down in August, the second probably ex post will have proved to have peaked this year.
Show more
Gasoline prices are at their highest level ever for this time of year, while diesel prices are also making new record-highs.
Link to the full article:
@sonusvarghese
Show more
This is how the boom keeps going … tech needs to rule
The combination of higher rates + higher oil + higher tech = disappearing consumer exposure.
The inflation problem captured neatly 👇
But how does it get better?!
Warsh said they’re removing a “dose of accommodation”, implying policy is still loose
Only 8/18 think 2 more hikes are coming over the next year
0/18 think more than 2 are needed
How is this not dovish?
Show more
Leave out the biggest part of the upcoming BEA revision (port mgmt) & strip out all imputed prices, then look at the market-based core PCE less-hsng. Inflation has not been slowing as some have suggested, and there's quite a bit of wood to chop in 2027.
Show more
Is this word choice an admission that previous statements that "monetary policy is restrictive" were wrong?
Growth revised up, inflation revised up, and unemployment revised down
And yet, the Fed’s just projecting just one more rate hike
This is a Fed that is very reluctant to raise rates, which means they’re willing to let things run hot for now
Show more
The Fed is being forced into a hike. Nice look at how we are thinking about it all from @sonusvarghese on our team.
📊 The 10-year cracked 5% for the first time since October 2023.
Nominal GDP is running near 8%.
@sonusvarghese's read: that's repricing, not necessarily a warning sign.
New Facts vs Feelings 👇
Show more
I think this is it …
A Fed that raises rates today, and even signals a few more, isn’t quite as hawkish if they’re not at the same time signaling that they want to slow the AI capex boom
Which is why a rate hike, or even 2 or 3, isn’t likely to hurt the stock market
Show more
From a markets standpoint, a hawkish Fed is one that's willing to slow AI capex/the labor market, and that's something the Fed isn't even willing to discuss yet let alone resolve to do.
Every active portfolio is a benchmark plus a long/short portfolio
What could go wrong with long short portfolios? The same thing that can go wrong with actively managed portfolios
Long short portfolios....
Who can answer this question:
What could go wrong?
This 👇
Not sure why the 10y yield should go down if the Fed starts hiking (setting aside any near-term volatility)
FED
It's popular to suggest the 10y yield will fall if the Fed hikes rates this week.
Unless this is a "one and done" hike, though, history suggests the 10y will rise as the hike cycle progresses.
The 10y has risen in every modern hike cycle (especially early in the cycle).
Show more
This is pretty neat
Bilbo traveling from Kansas City to Akron, Ohio
And Frodo and Sam from Kansas City to Florida nee Mordor 😂
The AI boom for software engineers 😀
1.63% of Americans were employed as software developers in August, a hair below the all-time record of 1.65% (from just 3 months earlier)
