The Frontier

Mike Green attributes the S&P 500's recent record gains to systematic flows from passive investment vehicles and rebalancing strategies, not macro analysis or investor sentiment.

Green notes a record one-month inflow into equity markets coincided with a record monthly performance, driven by CTAs covering shorts, vol control strategies scaling up, and risk parity leveraging.

Green argues the 1970s oil shock differs from today because the US was the marginal consumer then, whereas emerging markets are now, and global labor force growth is shrinking versus booming.

Green believes the current energy crisis will not cause persistent secular inflation because potential demand destruction and reduced mobility, enabled by remote work, could offset supply shocks.

Green highlights flawed inflation data, citing residual seasonality from COVID and Ukraine war adjustments and an overestimating birth-death model adding roughly 100,000 jobs to reports.

Green forecasts Fed Chair Kevin Warsh may cut rates aggressively by September or October due to weaker inflation data and companies absorbing tariff costs rather than passing them on.

Green observes a hiring bifurcation: rates for workers 55 and up are up 84% year-over-year, while rates for those under 29 are down 25%, mirroring a breakdown of the apprenticeship system.

Green's book argues passive investing and the shift to defined contribution plans have destroyed price discovery, inflating financial assets and outsourcing pricing to algorithms.

Rory Johnston reports the Strait of Hormuz remains effectively closed, with ship transits falling to single digits recently, leaving roughly 13 million barrels per day of non-Iranian crude shut in.

Johnston estimates total Gulf shut-in production, including Iran's, will reach about 15 million barrels per day once Iran exhausts tank storage and begins shutting wells.

Johnston says restarting shut-in Gulf production will take weeks for Saudi Arabia and UAE but months for Kuwait and Iraq, likely scaling back over three months.

Johnston argues observed demand reduction, like falling Chinese crude imports, is not true demand destruction but drawdowns from strategic stocks, as mobility indicators remain robust.

Johnston warns if Hormuz stays closed through June, draining over a billion barrels from global stocks will force prices higher, with the entire futures curve already re-rating to crisis levels.

Patrick Ceresna outlines a trade positioning for a reversal in the Fed rate path using a bull call spread on December 2027 SOFR futures, targeting a repricing of aggressive easing.