US and Iran agree 2-week ceasefire that will open Strait of Hormuz Donald Trump says 10-point plan from Iran is ‘workable basis’ for negotiations

• Iran’s foreign minister Abbas Araghchi confirmed that Tehran
  would allow two weeks of “safe passage” through the waterway while negotiations
  on a permanent deal began.
• In a Truth Social post on Wednesday, Trump said that the US
  would be “helping with the traffic build up” in the strait, adding that “Big
  money” would be made.
• Trump claimed that “almost all of the various points of past
  contention have been agreed to between the United States and Iran”.
• Iran’s leaders said in a statement that the Americans had
  accepted the “principles” of their 10-point plan “as the basis of
  negotiations”.
• As well as Iran’s continued control over the strait, Tehran has called for the full cessation of hostilities by the US and Israel against Iran and its “Axis of Resistance”, which includes proxy groups such as Lebanon’s Hizbollah.
• It also calls for “the withdrawal of United States combat forces from all bases and points of deployment within the region”, the Supreme National Security Council said in its statement.
• Iran said it would participate in the talks for a maximum of 15 days. Araghchi, who led two previous rounds of indirect talks with the US before the start of the war on February 28, is expected to serve as Iran’s top negotiator in Islamabad.

Axios:

• Two sources said Khamenei giving the negotiators his blessing to cut a deal was the “breakthrough.” All major decisions the past two days went through Khamenei. “Without his green light, there wouldn’t have been a deal,” the regional source said.
• A senior Israeli official told Axios that Netanyahu had received assurances the U.S. would insist in peace talks that Iran give up its nuclear material, cease enrichment, and abandon its ballistic missile threat.

A few more details from the FT which had the best account I have seen:

• the Islamic regime announced it had accepted the ceasefire, and would allow safe passage through the strait “via coordination” with Iran’s military — the very force holding the waterway hostage.
• But another factor will also have been crucial to Tehran’s calculations: the president’s decision to accept, at least for now, Iran’s 10-point plan to reach a permanent end to the conflict as what the US president described as a “workable basis for negotiations”.
• According to the Iranian readout, this includes the lifting of all sanctions on the republic, the unfreezing of its oil money held overseas, the withdrawal of American forces from bases in the region and an end to Israel’s war against Iran’s main proxy Hizbollah in Lebanon — which Israel has already objected to. Crucially, it also includes “regulated passage” through the strait under the coordination of the Iranian military.
• If Iran had presented such conditions before the war, it would have been dismissed as a fanciful wishlist.
• He [Trump] made no mention of Iran’s missile arsenal or nuclear programme — his main justifications for launching the war.
• But Gulf states such as Saudi Arabia, the United Arab Emirates and Bahrain will be wary about what comes next. (…) They will also fret about the potential of Trump allowing Tehran to retain some form of control or tolling over the strait, which is crucial for their energy exports and trade.
• Many in the Gulf will view the war as displaying the worst traits of the unpredictable president and the limitations on their ability to influence him.
• The Islamic regime warned that it would enter the talks with “distrust” of the US.
• “But there are no winners. Everyone has lost in this war.”

Really? Seems one of the 3 warriors is losing much more than the others…

BTW: China got involved:

The New York Times, citing three unidentified Iranian officials, reported that Iran accepted the ceasefire proposal following intervention by China, which asked the Islamic Republic to show flexibility and defuse tensions. In an interview with AFP after the ceasefire announcement, Trump said he believed China had persuaded Iran to negotiate. (…)

Underscoring Beijing’s close diplomatic ties to Tehran, Iran’s top diplomat in China on Wednesday called on the world’s No. 2 economy to help “guarantee peace” in the Middle East.

“We hope different sides could guarantee that the US would not resume the war,” Iranian diplomat Abdolreza Rahmani Fazli told reporters in Beijing, the South China Morning Post reported. (Bloomberg)

Trump’s Ceasefire Still Leaves the US and Iran Mired in Quandary

US President Donald Trump has two weeks to figure out whether he’s untangled the knot he created in Iran, or just pulled it tighter. (…)

But amid celebrations of another “TACO Tuesday” from a president known for pulling back from the brink was the looming realization that the same core challenges remain. Among the to-be-determined quandaries is whether the Strait of Hormuz is effectively open to oil tanker traffic after vague indications Iran would permit more shipping through the waterway.

Iran has shown little willingness to accept sweeping US demands that would dismantle the remaining regime or see the country follow Venezuela’s lead in elevating US-friendly leaders. Nor did Tehran commit publicly to giving in to Trump’s demands that it permanently eliminate its nuclear program or retire its ballistic missile arsenal — after the US president issued threats to wipe out Iranian civilization that may have amounted to war crimes if he followed through.

Meanwhile, Trump confirmed a ten-point Iranian proposal would serve as the basis for future negotiations. Tehran has previously called for the lifting of sanctions and compensation for war damages. That could mean imposing new fees on ships traversing the Strait of Hormuz, with increased shipping costs and energy prices here to stay.

Ultimately, falling short of those goals may have to be acceptable for a US president who was under clear political and economic pressure to find an off-ramp. (…)

Against that backdrop, much of Tuesday was dominated by allies from across Trump’s coalition warning him not to follow through on a genocidal threat to end Persian civilization. As conservative podcast hosts openly debated whether the Cabinet should seek to remove Trump from office, even loyal Republicans on Capitol Hill said his threats to target power and desalination plants went too far. Trump’s Republican party won a special election in Georgia Tuesday, but by a much smaller margin than before in the typically safe district — a potential warning sign of voter dismay. (…)

Still, even as the president claimed in his announcement that he had brought “this Longterm problem close to resolution,” there was little public indication of actual progress toward quelling a military and economic headache that has wreaked havoc on his political standing.

“It is a relief that Trump took an off-ramp tonight,” wrote Jennifer Kavanagh, the director of military analysis at Defense Priorities, a libertarian think tank. “But if he was going to back down, he did so in the worst way. Raising the stakes so high beforehand, he maximized the damage to his credibility & global perceptions of U.S. power. This is a clear strategic defeat for the U.S.” (…)

Meanwhile, the Iranian proposal calls for the withdrawal of US combat forces from bases and military deployment points in the region and the release of frozen Iranian assets, among other aims, according to a report from Al Jazeera. The likelihood that the US — or Israel — would accept such proposals appear far-fetched, at best. (…)

Trump told the AFP in an interview shortly after the ceasefire announcement that Iran’s uranium supply will be “perfectly taken care of,” declining to specify how, while also touting the deal as a “total and complete victory” for the US. (…)

“It just doesn’t sound like there’s actually an agreement because what Trump is saying is totally different than what the Iranians are saying, but if Iran has the Strait permanently now, then what, what an error, what a miscalculation this entire endeavor was,” Senator Chris Murphy said in an interview with CNN. (…)

“It’s very unlikely that Iran is going to relinquish its newfound control or assertion of control over the Strait,” said Clayton Seigle, a senior fellow at the Center for Strategic and International Studies in Washington. (…)

John Authers:

And are there terms to which both sides can agree? Iran doesn’t want this to happen again, and will want guarantees against future attacks from the US or Israel. That will be difficult. Does it get to re-enter the global economy with sanctions lifted? Who pays for the damage? Will the regime give up its nuclear program, and how can this be policed?

Last month, Points of Return warned that the question was no longer TACO (Trump Always Chickens Out) but WACO (Will the Ayatollahs Chicken Out?). That remains the case. The theocracy is more willing to compromise than thought, which is a big deal. But the rest of the world, and a protracted recovery for risk assets, is still in the uncomfortable position of relying on the leaders in Tehran.

For the next 24 hours as markets get the chance to react to this news, let the good times roll. No civilizations have ended tonight.

Also:

Israel supports President Trump’s decision to stop attacking Iran for two weeks subject to the immediate reopening of the Strait of Hormuz and the cessation of Iran attacks against the United States, Israel and other countries in the region, the office of Prime Minister Benjamin Netanyahu said in a statement. But it said the cease-fire did not include Lebanon, contradicting an earlier statement from Prime Minister Shehbaz Sharif of Pakistan.

Perhaps the most prominent television cheerleader of the Iran war, the Fox News personality Mark Levin, voiced doubts about negotiations with the Iranians. “This enemy is still the enemy,” Levin told the host Sean Hannity on Fox. “They’re still surviving.” A deal now would be hard to enforce and could abandon the people of Iran, which would be “morally very difficult,” Levin said. Trump has praised Levin as “brilliant.” (NYT)

Watching the news last night

(Serge Chapleau, La Presse)

Break-even employment declines as unauthorized immigration outflows continue

Using newly available microdata that measure net unauthorized immigration through December 2025, we update previous estimates of break-even employment growth. Our framework combines demographic trends and labor force participation dynamics to estimate the pace of job growth consistent with a stable unemployment rate.

The updated estimates show that continued net outflows of unauthorized immigrants, together with shifts in labor force participation, have pushed the monthly break-even employment growth lower than previously thought. (…)

Our updated estimates indicate that net unauthorized immigration has remained negative since February, averaging -55,000 per month in the second half of 2025. These net outflows reflect high levels of removal orders by immigration courts and self-deportations, as well as very low levels of new entries. (…)

Incorporating these updated estimates of net unauthorized immigration into our full model—allowing the labor force participation rate to vary over time—yields substantially lower break-even employment growth than previously estimated (Chart 2, yellow line).

The break-even rate peaked at about 250,000 jobs per month in 2023, fell to roughly 10,000 by July 2025, and declined to near zero thereafter, averaging about –3,000 jobs per month from August to December 2025, indicating, if anything, a modest net jobs loss over this period.

Break-even employment depends not only on population growth, but also on the share of the population participating in the labor force. Recently, the demographic headwind from immigration has coincided with a gradual decline in labor force participation. (…)

To illustrate the role of labor force participation dynamics, we consider a counterfactual scenario in which the labor force participation rate remains constant (Chart 2, red line). Because we construct break-even employment growth from the growth rates of its underlying components, assuming a constant participation rate removes its contribution to job growth.

This scenario—isolating the impact of demographic changes alone—implies break-even employment growth of about 30,000 jobs per month by the end of 2025, down from 160,000 in 2023. Thus, movements in labor force participation amplify the demographic forces in determining break-even employment growth.

Comparing our break-even estimates with actual payroll growth (Chart 2, blue bars) suggests that job growth over the recent three months—December 2025–February 2026—has slightly exceeded the break-even rate on average, consistent with the unemployment rate remaining stable despite softer headline payroll numbers.

Real-time data point to an important change in the U.S. labor market: The benchmark for evaluating payroll growth has moved significantly. As net outflows of unauthorized immigrants reduced employment growth in late 2025, payroll gains that might historically have signaled economic slack are now consistent with a balanced labor market.

While most people and the FOMC focus on the unemployment rate, the increasing challenge for the 70% of the US economy based on consumer spending is that employment growth has stalled due to an aging population and the immigration shock. The reality is that only 59.2% of the US population is working, down from 61.1% in 2019, 63.4% in 2006 and 64.7% in 2000.

This leaves labor income growth totally dependent on wages which, from most indicators, are slowing to the 3.0-3.5% YoY range, pulling aggregate payrolls down towards the same range while inflation is perking up to 3.0%+, dangerously close to bringing real labor income growth near zero.

Americans are now saving only 4% of their disposable income and their ability to borrow is constrained by already rising delinquencies:

Kathryn Anne Edwards

As Kathryn Anne Edwards writes, “the federal government enters this moment with a balance sheet that looks like the end of a recession rather than the start of one. The annual deficit reached $1.7 trillion last year.”

Meanwhile,

The Atlanta Fed’s GDPNow model has tracked Q1-2026 real GDP growth down to 1.3% as of April 7, from 3.1% in late February. The sequential downgrades were driven by incoming Q1 data releases: weaker-than-expected personal consumption expenditures, a pullback in private domestic investment growth, disappointing construction spending, and slowing retail sales. Each release nudged the model lower. We blame the weather for weighing on economic growth during December, January, and February when the winter weather was worse than usual. There should be a good rebound in Q2’s real GDP growth rate. (Ed Yardeni)

But inflation is creeping up:

More than 70% of non-manufacturing purchasing managers complained that the input prices they were paying were rising. Outside of the 2021-22 spike, that hadn’t happened since the immediate aftermath of the Global Financial Crisis; it was the biggest month-on-month rise for this measure in 13 years. Over time, this measure has a strong tendency to rise and fall with inflation excluding shelter, so it could bode ill for hopes that inflation stays contained: (John Authers)

Greer Stresses China Trade Over Investment Before Trump-Xi Meet

A top US trade official promoted the creation of a US-China board of trade, while downplaying the possibility of a similar group focused on bilateral investment, a sign of what could be at the center of talks when Chinese President Xi Jinping and US President Donald Trump meet next month.

“We’re looking at that kind of mechanism where we can work with the Chinese to figure what are the non-sensitive goods we should be trading with each other, get a handle on that, figure out what those flows should look like,” US Trade Representative Jamieson Greer said Tuesday during an event at the Hudson Institute in Washington.

“Then you’re in a better position to talk about stickier issues,” he added.

The creation of a board of trade was discussed in recent trade talks in Paris involving Greer, US Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng. That March meeting was intended to set the stage for the Trump-Xi meeting this spring. (…)

Interesting: “work with the Chinese to figure what are the non-sensitive goods we should be trading with each other”.

U.S. expects USMCA to remain in place, with ‘separate protocols’ for Canada and Mexico

The United States’ top trade official says he expects negotiations over the North American free-trade pact to extend beyond July 1, and to ultimately result in separate arrangements with Canada and Mexico built on top of the existing trilateral agreement. (…)

“Our baseline is that things have to be changed,” Mr. Greer said about the USMCA, which replaced the North American Free Trade Agreement in 2020 and governs trade between the three countries. But he suggested the core of the agreement would likely remain in place, while the U.S. would look to address specific bilateral grievances with Canada and Mexico in separate side agreements.

The existing agreement has “a bunch of load-bearing pillars” that function well, Mr. Greer said. “If we get rid of them, I just have to go back and do it again.”

“But we do have to have some kind of a protocol or something with Mexico, and one with Canada separately, I think, to deal with issues specific to those countries,” he said.

“Our import-export profile is different with each country, the labour situation in each country is different, the reasons why we have deficits with these countries are different. So it necessitates two separate protocols that we can, I think, layer over those load-bearing pillars of USMCA.” (…)

“I think that we aren’t probably going to be able to resolve all issues by July 1, but I think we are on track to resolve many of them and to move as quickly as we can,” he said.

The agreement lays out three possible paths forward. On July 1, the partners can agree to renew the deal for 16 years. If they don’t, they begin a process of annual reviews that continue for 10 years, after which the agreement ends. Any of the three partners can also withdraw from the agreement with six months’ notice.

Mr. Greer suggested that the U.S. will pursue the second option.

“On July 1, what has to happen is the United States tells Canada and Mexico what we intend to do. Do we intend to just rubber-stamp this thing and say, ‘All right, renewed, everything’s fine. Let’s hold hands and move on’?” he said.

“Or do we say, ‘This is not sufficient, we have to have modifications to this agreement, we have to change it’? And so we’ll enter into a period, we’ll be on the path to going out [of the agreement], which is actually a 10-year period. But we’ll be in negotiations during that time and try to resolve some things sooner rather than later.”

Mr. Greer has to report to Congress on June 1, a month ahead of the formal review date, to lay out the Trump administration’s plans. (…)

The Trump administration has not sought formal trade promotion authority from Congress, so its ability to alter the text of the USMCA itself is limited. A common view among trade experts is that the U.S. will use side letters to the agreement, backed by executive actions, to try to achieve its goals.

Mr. Greer has previously outlined various trade grievances with Canada and Mexico.

For Canada, these have included dairy quota allocation, digital streaming rules and provincial bans on U.S. liquor. An updated list, published by USTR last week, added several more, including Canada’s move to establish sovereign cloud computing infrastructure, Buy Canadian policies and provincial government procurement rules that exclude U.S. companies.

For Mexico, U.S. grievances include the use of “third-country content” in manufactured goods, the enforcement of labour laws and the country’s restrictions on investment in the energy sector.

Mr. Greer has also said he will push for more structural changes to the agreement that will apply to all three countries. These include tighter rules of origin (which lay out how much of a product must be made in North America to trade duty-free), as well as more alignment on external tariffs, screening of inbound investment and export controls.

Over the past year, the Trump administration has placed sectoral tariffs on a range of industries, including steel, aluminum, automobiles and forest products – in contravention of side agreements that were reached during the original USMCA negotiations. It has also placed tariffs on products that don’t meet the trade agreement’s rules of origin. The future of both types of tariffs will be a key issue in the USMCA review talks.

Insurers’ $1 Trillion Buildup in Private Credit Is Leaving Regulators in the Dust

(…) As private credit ascended from a Wall Street backwater to a booming market, the industry found the nation’s insurance companies to be a ready source of capital. Private-credit investments—which can include loans to businesses as well as pools of consumer debt such as car loans or credit-card debt—offered higher yields than plain-vanilla corporate and government bonds. Credit-ratings firms often awarded those investments letter grades saying they were just as safe.

U.S. insurers are regulated by state commissioners, whose remit also includes home and health policies. Part of their job is to determine whether an insurance company is maintaining an adequate financial cushion based on the risk level of the investments it holds. Commissioners perform periodic examinations of insurer portfolios and rely heavily on credit ratings.

These state regulators’ duties grew more complex as private-equity managers started snapping up life and annuity insurers and began moving their insurance money into private-credit investments. Other insurers followed. Of the about $6 trillion in invested assets held by life and annuity companies, nearly $1 trillion is now in private-credit investments, according to A.M. Best, a credit-rating firm that rates insurers.

About $419 billion of that debt carries a so-called private letter rating. In some ways, such a rating resembles what the ratings firms provide for publicly traded bonds: The firm issuing or packaging the debt pays a ratings company to assign a grade based on the likelihood the borrower will repay it. (…) But unlike bond ratings, “private” letter grades are available only to the debt’s issuer and investors. 

A representative for the SEC, which regulates ratings firms, declined to comment on whether the agency has access to private letter ratings.

State commissioners lack the manpower to evaluate each investment individually. So for most bonds, the NAIC’s New York-based investment staff automatically assigns a risk score—and a corresponding capital requirement—based on the bond’s public credit rating. In the past decade, insurers began submitting private letter ratings to get the same treatment for their private-credit investments.

But NAIC investment staffers were uncomfortable rubber-stamping private letter ratings with the corresponding risk score. The 2024 study explained why. Some were up to six notches higher than what NAIC analysts thought was appropriate for the investments.

The study examined 109 private letter ratings the NAIC received in 2023 for assets its staff previously scored on its own. In 106 of those cases, the private rating was higher than NAIC’s. In 17 cases, ratings firms—mostly small ones—gave investment-grade private letter ratings to assets the NAIC staff considered junk, or below investment grade.

About a quarter of the private ratings came from “large” firms, a group made up of Moody’s Ratings, S&P Global Ratings and Fitch Ratings. The rest were submitted by another group of ratings firms that have grown in number and influence in the years that followed the 2008-09 financial crisis.

Private ratings by that group of “small” firms, which included Egan-Jones, KBRA, Morningstar and other relative newcomers, were an average of three notches higher than what the analysts on the NAIC staff believed were appropriate. At big ratings firms, they were about two notches higher.

Fitch was the most-frequent “large” ratings provider, while Egan-Jones was the most-frequent “small” provider, the study found. Since the study came out, some insurers have stopped using Egan-Jones.

An Egan-Jones spokeswoman said its private letter ratings, which it began to provide about a decade ago, have been good predictors of how rated investments performed. KBRA Chief Rating Officer Bill Cox said the firm is “confident this NAIC paper had no relevance to KBRA ratings.”

When state regulators discussed giving NAIC investment staff the ability to override private ratings, eight Republican representatives wrote to the regulators accusing them of overreach. Giving the NAIC that power “would lead to less transparency, more ambiguity for insurance companies and actual damage to market efficiencies,” Rep. Warren Davidson (R., Ohio) said in a 2023 hearing.

This year NAIC analysts got authority from state regulators to challenge private letter ratings if they are three notches above what the staffers believe is appropriate. The power took effect in January, more than five years after they started asking for it.

Doug Ommen, the insurance commissioner in Iowa, home to more insurance investments than any other state, said commissioners have always used their authority to change risk scores they believe are too high.

“Regulation doesn’t just stop at the door while we’re looking for ways to improve,” Ommen said.

There was more on private credit and private equity in yesterday’s Daily Edge.

S&P Global’s Services PMI Shows First Contraction in More Than Three Years S&P Global’s purchasing managers index for services providers fell to 49.8 points in March from 51.7 in February

(…) “Confidence in the outlook weakened against a backdrop of rising cost pressures as a surge in energy prices following the outbreak of war in the Middle East cast a shadow over the sector,” S&P Global said. Firms said the negative effect of the war on sentiment added to the adverse impact of trade tariffs.

“Clearly much depends on the duration of the conflict,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. The fact business confidence dipped but didn’t slump “is a sign that businesses are hopeful of a swift resolution to the war.”

There remains a concern, however, that energy disruption may last beyond the actual conflict and test the resilience of businesses and households in the coming months, he added.

Chris Williamson had much more to say than what the WSJ reported:

“The service sector has slipped into contraction for the first time since January 2023, dragging the overall economy down to a near-stalled 0.5% annualized rate of growth in March.

Worst hit is consumer-facing service sectors where, barring the pandemic lockdowns, the downturn reported in March was among the steepest recorded since data were first available in 2009.

However, financial services and tech, both of which performed strongly last year, have shown some signs of weaker performance amid financial market volatility and concerns over higher interest rates, which have deterred investment.

“Key to the deteriorating growth trend is a pull-back in spending amid worsening affordability, with costs and selling prices surging higher in March amid spiking energy prices. The survey data are broadly consistent with consumer price inflation accelerating close to 4% as firms increasingly seek to push through higher costs onto customers in the coming months.

“The stagflationary environment of stalled growth and surging price pressures pictured by the PMI presents a major challenge to policymakers, especially with the March survey also indicating falling employment. Clearly much depends on the duration of the conflict.

The fact that business confidence has merely dipped and not slumped is a sign that businesses are hopeful of a swift resolution to the war. However, a concern is that the energy disruption unleashed by the war in the Middle East may well have an impact that lasts far longer than any actual conflict and may test the resilience of business and households over the coming months.”

The ISM Services PMI was much more upbeat:

In March, the Services PMI registered 54 percent, a decrease of 2.1 percentage points compared to February’s figure of 56.1 percent and its second-highest reading since October 2024 (55.5 percent).

The Business Activity Index remained in expansion territory in March but dropped from February’s reading of 59.9 percent to 53.9 percent, its lowest reading since September 2025 (50.2 percent).

The New Orders Index registered 60.6 percent, 2 percentage points above February’s figure of 58.6 percent and its highest level since February 2023 (61 percent).

The Employment Index contracted for the first time in four months with a reading of 45.2 percent, a 6.6-percentage point decrease from the 51.8 percent recorded in February.

The Prices Index registered 70.7 percent in March, a 7.7-percentage point increase over February’s figure of 63 percent and its highest reading since October 2022 (70.7 percent). The index has exceeded 60 percent for 16 straight months but is only 3.5 percentage points above its 12-month average of 67.2 percent.

Contracting services employment and higher inflation are worrying. Panelist commentary highlighted offshoring and cost-cutting. One respondent noted that lower US headcount was offset by higher employment in low-cost geographies.

Ed Yardeni shows how the PMI price index leads the PPI by about 6 months:

And this other chart that shows that PPI and CPI/PCED inflation are indeed correlated:

CONSUMER WATCH

Nonfarm payrolls rose 178k in March, well above expectations. Revisions continue to blur the picture. Payroll growth was revised down by 41k to -133k in February but revised up by 34k to 160k in January. Three-month average payroll growth now stands at 68k. The last 4 months: 47k.

Taking the weather impact into account, Goldman Sachs estimates that “the underlying pace of job growth now stands at 53k, roughly in line with our estimate of the breakeven pace of job growth needed to keep the unemployment rate stable.”

If so, employment growth will be 0.4% YoY in 2026.

Average hourly earnings increased 0.24% MoM in March, +3.5% YoY. Wages for production and non-supervisory workers increased by 0.16% MoM, +3.4% YoY.

Wages are thus rising at a 3.0-3.5% pace, bring labor income growth in the 3.5-4.0% range assuming stable hours worked, leaving little room for real gains after inflation which S&P Global puts at 4% in March.

Much focus is on the unemployment rate which declined to 4.26% in March, thanks to a 396k decline in the size of the labor force.

The unemployment rate is roughly in line with previous low points in 2000, 2006 and 2019 but the employment-population ratio, at 59.2 in March, is significantly lower than at previous unemployment lows and keeps falling. 

Only 59% of the US population are working, compared with 64.45 in 2000 and 61.1% at the end of 2019.

Total employment only rose 0.16% since March 2025. That’s 260k or 21k per month.

Running Out of Oil?

(Goldman Sachs)

As the last tankers that crossed the Strait of Hormuz before the war are reaching their destination, concerns about potential oil shortages are rising. (…)

Our three-way analysis highlights already critically low supplies of petrochemical feedstocks — naphtha and LPG — in Asia, with cross-product scarcity in multiple Asian countries in April. (…)

Asian countries in our sample (accounting for 1/3 of global refined products demand) typically source about ½ of their refined products supplies from the Persian Gulf, with South Korea and Singapore relying on the Persian Gulf for nearly ¾ of their refined products supplies (including via crude imports processed into products). (…)

Countries with large strategic oil reserves (e.g. China, Japan) are better positioned to offset the imports shock while other major products exporters (e.g. South Korea, Singapore) could respond by limiting products exports. (…)

Diesel and jet fuel prices have rallied most, with average global increases of around $130-140/bbl (150%). Higher price responses can reflect both tight current supply but also precautionary restocking, especially in richer countries  and even in the countries not directly affected by the Hormuz shock (e.g. the US). It also captures second-order trade effects for countries exposed to the shock via reliance on directly affected partners (e.g. Australia importing oil from South Korea and Singapore).

Source: Platts, S&P Global, Goldman Sachs Global Investment Research

Source: Carl Quintanilla

Most deliveries in Africa have already stopped.

Most deliveries in Asia and SE Asia stopped yesterday.

Most deliveries in Europe will stop April 10.

Most deliveries in the USA will stop April 15.

EARNINGS WATCH

The Q1’26 earnings season begins this week but we already have this whose quarter ends in February.

The earnings of the 18 companies having reported exploded 86.8% on revenues up 17.0%.

The 5 IT companies surprised by 20.0%, the 3 Industrials by 13.7% and the 5 Consumer Discretionary by 6.6%.

As a result, trailing EPS are now $283.49 (from $275.54 in February) and forward EPS $338.29 ($314.77).

Ed yardeni:

Despite the typical pattern of analysts’ estimates drifting lower as the reporting season approaches, their Q1 estimates stayed remarkably steady despite the war, and they have increased their forecasts for Q2-Q4.

Total forward earnings for the S&P 500 has continued to climb, even excluding the Magnificent-7.

The forward P/E of the Mag-7 is down from 31.2 on November 3, 2025, to 23.7 currently.

The IT sector’s forward P/E at 20.7 has now converged with the S&P 500’s 19.9.

This Is Starting to Look Like a Slow-Motion Bank Run

By Natasha Sarin, a NYT contributing Opinion writer and a professor at Yale Law School and the president of the Budget Lab at Yale.

Over the past few years, one of the signature funds at Blackstone, the private equity giant, has delivered, on average, 10 percent annual returns for its investors. The fund, which specializes in private credit, has lent money to more than 400 borrowers, who in turn have deployed those loans to become more profitable themselves.

And yet, in the first quarter of this year, nearly 8 percent of the fund’s investors declared they wanted out. Something similar has happened at funds managed by Apollo (where redemption requests hit 11.2 percent), Ares (11.6 percent) and Blue Owl (21.9 percent).

When asked on CNBC to explain why his investors are asking for their cash back, the Blackstone president, Jonathan Gray, blamed “noise” — a “disjointed environment now between what’s happening on the ground with underlying portfolios and what’s happening in the news cycle.”

He may well be right. Another explanation might be that we are witnessing a kind of slow-motion bank run. Investors, spooked by a litany of bad news, are rushing to pull their money out of private credit funds. If they all ask at once, these funds — and potentially the firms that manage them — could falter. (…)

Last October, I suggested that the failures of a few companies that borrowed from private credit funds were the first dominoes to fall and that more would follow. It appears that many private credit investors woke up to that risk — and now want to cash out. (…)

Private credit players may have made bad bets — the software industry might be one, given the impact of artificial intelligence on the business — but, they say, the sector should be free of runs. Losses should be contained to the investors in these firms, end of story.

(…) as private credit has grown, it has started targeting retail investors directly, in addition to big institutional ones. Mostly, that’s been wealthy people, but the scope is broadening. Last week, the Trump administration proposed a rule that would make it easier for 401(k) plans to be invested in private credit, following up on an executive order from the summer that called for “democratizing access to alternative assets.”

As private credit has gone more retail, the investors that make up its base look more like bank depositors. And they’re acting in similar ways, too, skittish and prone to panic. Although private credit funds explicitly limit investors’ ability to cash out on demand, it seems as if many didn’t read the fine print. It’s no surprise that in recent months, as the golden age of private credit looks a little less shiny, individuals are seeking to redeem more of their cash than private credit funds generally permit.

(…) Apollo is asking people to hold on and take 45 cents on every dollar they want back. Other firms are relaxing their redemption caps to meet investor demands, betting that letting itchy investors get out could prevent others from bolting.

If investors run, private credit firms will be forced to liquidate their long-term investments, much like banks were forced to do in the financial crisis. The potential fire sales of loans made to thousands of companies would be debilitating to the system, because they decrease the value of the loans that others have made, too.

Worth keeping in mind, for those nervous about private credit runs, is that the market is a relatively small sliver of the financial sector. It’s a roughly $2 trillion market, compared with a banking industry more than 12 times that size. That means the aftershocks should be smaller than the bank failures of the past.

But we run real risks that the financial system is more interconnected than we appreciate. Banks themselves are wrapped up in private credit lending. Loans that banks are making to non-bank lenders, a group of firms that includes private credit, accelerated more quickly than any other type of bank lending in recent years. That means private credit risks could easily cascade throughout the system. (…)

This blog started to warn about private credit, and private equity, last October 3 (Give Them Credit!) followed by Chris Whalen’s piece on January 2 (Credit and Freedom) and my February 18 post which warned:

And don’t presume this is limited to private credit.

The backlog of unsold companies in private equity is monumental. As the FT notes: “Private equity firms sell assets to themselves at record rate.” This will not end well. And the end may begin in 2026 as private equity companies fail in growing numbers.

The strong rally in silver and gold, and the weakness of crypto tokens, are leading the decline in US fortunes when it comes to the equity markets. Literally dozens of crypto ventures have failed in the past year, notes Comsure. Crypto exchange collapses have led to $30–50 billion in investor losses, the UK consultancy reports. But the greater concern is the mounting backlog of corporate insolvencies, a real and growing danger that could push the US into recession even as short-term interest rates fall.

This right when the US government is taking several regulatory and executive actions to “democratize” access to private equity and private credit for retail and retirement investors.

Among many measures, the SEC is exploring changes to the “accredited investor” definition to focus more on investor sophistication rather than strictly wealth or income criteria.

How will the SEC objectively measure sophistication?

Sophistication is not intelligence, and certainly not judgement (remember LTCM).

Wealth and income are much better measures of one’s ability to weather investment losses than sophistication. This is what the “accredited investor” definition was for.

But a president aggressively deregulating crypto markets won’t be bothered discussing regulations for small investor protection.

KKR’s view (one of the private lenders)

We think this Private Credit cycle will likely be more defined by recovery rates than defaults. During our travels, we heard lots of comments that defaults have only recently spiked. Our team has a slightly different view.

For some time, Kris Novell and the macro team have been tracking Fitch’s broader default measure, which extends beyond a simple missed-payment definition and includes stress events such as PIK’ing (Payment-in-Kind) of interest and amend-and-extend transactions to avoid a default.

(Note: payment-in-kind allows a borrower to preserve cash by capitalizing interest into the loan balance instead of paying it in cash, which can be a sign of stress if used to solve a liquidity problem, often resulting in increasing leverage and potentially lowering recoveries later. Amend-and-extend transactions work similarly by pushing maturities out, often with higher spreads or fees, which can suppress near-term default statistics but lead to more recovery-negative outcomes if the business does not improve).

On that yardstick, the stress rate has been fairly steady at around 5-6% in the past 2 years. Looking ahead, the key to this cycle, we believe, will be in recovery rates, which could land below the 50- 60% of prior cycles. It is hard to predict, but we think that number could actually be 30-40% in certain instances, especially for smaller companies and situations where the lender is not willing to take over the company, or the terms were too loose at the outset.

We believe the endgame winners will be defined less by who can chase yield and more by who can originate well, construct portfolios thoughtfully, and actively manage outcomes when Credit underperforms expectations.

JPM’s Jamie Dimon:

Dimon said private credit “probably does not” pose a systemic risk. But he cautioned that losses on leveraged lending will be higher-than-expected in part because of “modestly” weakened credit standards.

“By and large, private credit does not tend to have great transparency or rigorous valuation ‘marks’ of their loans — this increases the chance that people will sell if they think the environment will get worse — even if actual realized losses barely change,” he said.

He also expressed some apprehension about the private equity industry, saying that it’s a “little surprising” that the alternative asset managers didn’t seize as much on healthy markets to take more of their companies public. Instead, some have been moved to continuation funds, he said.

“Private equity investments are now held for an average of seven years — this is virtually double what it used to be,” he said. “We have generally had nothing but a bull market since the great financial crisis — it’s hard to imagine what will happen if and when we have an extended bear market.” (Bloomberg)

“Probably”?

This is what slow motion means (Via ProPublica):

August 5, 2007: During a conference call with investors, various high-ranking AIG officials stressed the near-absolute security of the credit-default swaps.

“The risk actually undertaken is very modest and remote,” said AIG’s chief risk officer.

Joseph Cassano, who oversaw the unit that dealt in the swaps, was even more emphatic: “It is hard for us with, and without being flippant, to even see a scenario within any kind of realm of reason that would see us losing $1 in any of those transactions. We see no issues at all emerging. We see no dollar of loss associated with any of that business.”

“That’s why I am sleeping a little bit easier at night,” said Martin Sullivan, AIG’s CEO.

November 7, 2007: In an SEC filing, AIG reports $352 million in unrealized losses from its credit-default swap portfolio, but says it’s “highly unlikely” AIG would really lose any money on the deals.

December 5, 2007: In an SEC filing, AIG discloses $1.05 billion to $1.15 billion in further unrealized losses to its swaps portfolio, a total of approximately $1.5 billion for 2007.

During a conference call with investors, CEO Martin Sullivan explains that the probability that AIG’s credit-default swap portfolio will sustain an “economic loss” is “close to zero.”

February 28, 2008: In its year-end regulatory filing, AIG sets its 2007 total for unrealized losses at $11.5 billion. (…) The next day, CEO Martin Sullivan tells investors that AIG expects those losses to “reverse over the remaining life” of the portfolio. These losses, he said, were “not indicative of the losses AIGFP may realize over time.”

May 8, 2008: In its first quarter filing, AIG ups its estimate of its unrealized losses in 2008 to $9.1 billion through the end of March, for a grand total loss of $20.6 billion over 2007 and 2008.

May 20, 2008: AIG raises $20 billion in private capital to help with the growing problems.

August 6, 2008: In its second quarter filing, AIG ups its unrealized loss in 2008 from the credit-default swaps to $14.7 billion, for a grand total loss of $26.2 billion.

September 15, 2008: Standard & Poors cuts AIG’s credit rating due to “the combination of reduced flexibility in meeting additional collateral needs and concerns over increasing residential mortgage-related losses.”

November 10, 2008: AIG discloses that it estimates its total unrealized losses from the credit-default swap contracts for 2007 and 2008 at $33.2 billion.

This is when the NY Fed stepped in, deeming AIG too big to fail.

Trump’s Pentagon-first presidency

President Trump’s new budget lays bare the transformation of his presidency, pairing a historic surge in military spending with historic cuts to domestic programs.

The most powerful populist of this century is at risk of becoming what he ran against — a deficit-spending interventionist asking working-class Americans to shoulder the cost of war. (…)

Even as Trump insists the conflict will end soon, his $1.5 trillion budget request for the Pentagon — plus an additional $200 billion ask for Iran costs — would lock in a wartime level of spending.

At a closed-door Easter lunch on Wednesday — accidentally live-streamed and then scrubbed from the White House YouTube page — Trump spelled out the trade-off in the bluntest of terms.

• “We’re fighting wars,” Trump told guests. “We can’t take care of daycare. Medicaid, Medicare, all these individual things. We have to take care of one thing: military protection. We have to guard the country.”
• He said the burden should be on the states, which may have to raise their taxes, and that it’s “not possible” for the federal government to fund all of these programs.
• White House Press Secretary Karoline Leavitt said Trump was referring to fraud in federal programs, and that “his record proves he will always protect and strengthen Social Security, Medicare, and Medicaid.”

Trump’s new budget — more a statement of the White House’s goals than a legislative draft — would reorient the U.S. government around military power at the expense of virtually everything else.

• Defense spending would rise 42% — a buildup the White House itself says exceeds the Reagan administration’s and approaches the pace of spending just before World War II.
• The massive Pentagon budget is framed as a response to an increasingly dangerous world that predates the Iran war, and envisions permanent U.S. military dominance as a governing principle.

Non-defense spending, which includes categories such as public health, scientific research, housing and education, would take a 10% cut, or $73 billion.

• The steepest cuts would fall on the EPA, down 52%; the National Science Foundation, down 55%; and the Small Business Administration, down 67%.
• Agencies spared from the proposed cuts include the Justice Department, which would get a 13% increase to “maximize its capacity to bring violent criminals to justice.” (…)

The combination of foreign adventurism and domestic austerity cuts against the political instincts that brought Trump to power.

• The coalition that delivered Trump his second term — working-class voters, older Americans, rural communities — relies disproportionately on the programs being compressed to fund the military.
• Congressional Republicans face a brutal choice: Back a budget that guts programs their working-class constituents depend on, or break with a president who’s made loyalty the price of survival.

REGIME CHANGE!

A Truth Social post last month had Washington and media insiders scratching their heads: Why exactly had President Trump attacked The New York Times’ Maggie Haberman and some of her “associates” — when everyone in the West Wing knew that she and her reporting partner, Jonathan Swan, had been on book leave for months?

Now it can be told: Haberman and Swan were on the president’s radar because the two supremely wired reporters, stars of the news organization the president is most obsessed with, have been working for more than two years on a book that’s causing high anxiety in Trumpworld.

The book is complete, and Axios can reveal its title: “Regime Change: Inside the Imperial Presidency of Donald Trump.” It’ll be out June 23 from Simon & Schuster.

The cover is clad in gold. Publishing sources say they’ve conducted something like 1,000 interviews. It’s the Trump book that even Trump is waiting for.

The title gives a clear clue about the book’s thesis. For generations, American journalists have parachuted into foreign capitals to chronicle regime change. Swan and Haberman concluded they were covering one at home.

The publisher’s announcement says “Regime Change” takes you inside secret deliberations of a president who has “fundamentally altered the nature of the office he holds — and, with it, how the rest of the world understands American power.”

Behind the scenes: I hear that over the past few weeks, there have been private conversations in the senior ranks of the administration about leaks to Haberman and Swan from meetings in the Oval Office and Situation Room — including from this year.

• Maggie — author of the 2022 bestseller, “Confidence Man: The Making of Donald Trump and the Breaking of America” — kept her role as a CNN contributor while working feverishly on the book (and mostly resisting her compulsion to file the breaking news that courses through her laptop).
• Jonathan, talking to sources deep into the night, hasn’t been seen on TV since he plunged into the book.

On March 16, three days after that Truth Social post, Haberman and Swan were spotted in the West Wing. I’m told the president answered their questions in the Oval Office for an hour.