April inflation (headline CPI) came in at 2.3% this morning.
That's in-line with the number we discussed yesterday, and that's the lowest inflation since early 2021, and lower than the level of inflation in September of last year, which is the month the Fed kicked off its easing campaign.
Still, the Fed is holding the real rate at 200 basis points (Fed funds rate minus inflation) — historically tight levels. And with the 90-day tariff windows not due to close until July and August, the next big focus for markets will be the budget bill and debt ceiling raise — along with the rising debt service burden which is being amplified by the Fed's chosen interest rate level.
As we discussed last week, Moody's has already telegraphed a U.S. credit downgrade (back in March), which only matters to the extent that it could be a catalyst for a broader market reckoning on global sovereign debt.
With that in mind, highly indebted countries with no credible growth plan — no plan to grow the denominator in Debt/GDP — could find themselves in trouble.
This brings us to Trump's important speech today in Saudi Arabia, which draws the distinction.
Trump is building a new global coalition of trade partnerships and mutually beneficial relationships around re-industrialization, including abundant and affordable energy (access to U.S. energy), AI infrastructure and innovation (access to U.S. chips and compute), and military commerce (access to U.S. armament and security) — all in pursuit of each countries respective national interests.
This re-orientation is already resulting in trillions of dollars of business deals and committments.
And this is an explicit rejection of the globalist, centralized control, climate-agenda driven managed decline of the past four years.
So, there's a new growth agenda happening in the world. And conversely, there are some countries doubling down on the de-growth climate agenda.
I suspect we'll begin to see the distinction in sovereign debt markets in the coming months.