JD Straight Up - 3Aug26 - Same old, Same old

Same old, Same old

Drulard Family Capital Fund

Fortnightly Macro View

JD Straight Up:

S&P 500 at 7585 – up 1% from 7500 two weeks ago - all-time high of 7620

VIX at 16 – down 10% from 18 two weeks ago

10yr Treasury yielding 4.69% (up 3% from 4.56% two weeks ago)

Agg (US Aggregate Bond Index) at 97.22 – down 1% from 98.11 two weeks ago

Gold at 4095 per oz (up 2% from 4015 two weeks ago)

Silver at 57.81 per ounce (up 1% from 57.14 two weeks ago)

Crude Oil (WTI) at 80 per barrel (down 2% from 81 two weeks ago)

Bitcoin at 64k (flat from 64k two weeks ago)

JPM shares at 352 (up 3% from 342 two weeks ago)

Deutsche Bank shares at 36.86 (up 5% from 34.88 two weeks ago)

Truist shares at 51.47 (flat from 51.64 two weeks ago)

Blackstone shares at 131.24 (up 6% from 123.72 two weeks ago)

Magnificent 7 Index at 425 (down 2% from 432 two weeks ago)

US unemployment: at 197,000 in latest claims – down 6% from 208,000 two weeks ago

EUR at 1.15 USD (up 1% from 1.14 two weeks ago)

GBP at 1.34 USD (flat from 1.35 two weeks ago)

Macro Environment

US inflation rate is 3.5% and GDP growth rate is 1.5%.  US unemployment claims reported at lowest in over a year.  US equity markets are testing all-time highs.  EU inflation rate is 2.9% and GDP growth rate is 0.5%.  EU unemployment is 6%.  War continues in Ukraine.  Ceasefires are on and off in Iran and holding in Gaza.  AI expenditure continues at record pace.  AI adoption and related compute is driving outsized earnings for tech firms.  US and Japan engaged in currency intervention to support the Yen.  US central bank held rates steady while contemplating a hike.  US announced new sweeping trade tariffs impacting sixty trading partners.  Yields on government bonds are showing concern on debt levels and deficits.

Macro View

The same old balance on views of inflation, wars, tariffs, and debt levels versus AI, growth and productivity continues.  It is unclear how long it will persist on the high plateau or if an unforeseen or black swan event will trigger a recalibration.  If you are out of the market you miss the AI trade and related productivity gains, but if you are in the market you continue to roll over with increasing trepidation at valuation levels that would have seemed unsustainable only five years ago.  If you back out and take gains you miss additional compounding.

Relevance

Government bond markets will be the key.  10-year treasuries creeping over 5% will be a critical signal.  If productivity gains and resultant growth can bring down deficits and allow progress on debt levels, equilibrium could be reached.  If inflation persists and gains prove illusive or distant, yields will rise and debt will not only grow, but become increasingly expensive.  The contradiction between the equity market climbing and bond yields also climbing will break at some point.

Head Scratchers

1 - How much of GDP growth is being delivered through circular deals, vendor financing, or three card monte rather than traditional durable cash flow from operations?  Is it sustainable and if so how and at what quantum?

Drulard Family Capital Fund

Drulard Family Charitable Fund

www.drulardfund.com

#48 - 3Aug26