Headline strong due to gas, core weaker. Rent/OE strength is persistent. Used cars weak but should pick up. Core PCE at 3% is the Fed's bigger problem.

Starting point is bad with another energy shock layered on top.

Baseline is a cut in H2, but confidence has waned. Need labor market weakness to cut; disinflation story alone is less likely.

Inflation is too high, labor market resilient.

~$150 per barrel would eliminate household buffers from tax cuts and pose recession risk. We are below that.

Economy structure has changed (net exporter), but historical parallel between oil shocks and recessions is strong.

Market sees de-escalation, making it complacent. Path to Strait of Hormuz reopening is unclear. Continued progress would subdue oil prices and buoy markets.

Clients have meaningfully taken down risk scenarios, believing peak market impact is behind us.