Headline inflation is showing signs due to food and energy, but core inflation expectations are stable. Long-term expectations are well-anchored and some are even going down.

Notes divergence between consumer sentiment (down) and actual spending (still strong). The duration of the shock hasn't been long enough to create demand destruction.

The Bloomberg survey shows a bifurcated distribution: either worry about higher inflation for extended periods or worry about a hard landing. This is the Fed's problem - weighing inflation against potential labor market deterioration.

Recession probability in the survey went up from 25% to 30%.

Next Friday's jobs report is critical. The labor market data is taking a more prominent role because inflation says hike, but the labor market might show cooling, especially with immigration restrictions weighing on payrolls.

So far it's been easy for the Fed to revise up inflation and GDP, but labor market softness would be challenging.

Argues investors should take a long-term view. The current situation is not sustainable for several years or even months. Expect a resolution, with political considerations from the midterm elections. Conclusion will likely be more stability and connection between GCC, US, and Europe.

$10T in Treasury refinancing, $2T budget deficit, $2T corporate IG issuance = $14T (~50% of GDP) supply hitting markets. This creates upside pressure on rates and credit spreads.

If oil prices come down and the economy slows, you have temporarily higher base rates and spreads, making all-in yields in credit look juicy.