Biden chaos, Soft landing secured? AI sentiment turns bearish, French elections

Much of the opening is jokes. Jason is teased as a new Fox News contributor, then says he is pulling their legs. Sacks confirms he will speak at the Republican convention next week after the news leaked to The New York Times.

Jason frames the macro question as whether the soft landing is secured. June CPI came in at 3.0% against 3.1% expected, and fell 10 basis points month over month, the first monthly decline since May 2020. Fed funds futures put the chance of at least one cut by September at 89%, up from 73% before the print. Unemployment rose to 4.1%, the highest since 2021, from a low of 3.4% in April 2023. The S&P 500 is up 26% in a year, driven mostly by Nvidia.

Chamath thinks a soft landing is likely, but the larger question is whether a real contraction is coming. Seven stocks sit at record highs while the rest of the market does not, and falling inflation could reflect long-held high rates and joblessness rather than health. He cites Bloomberg data showing the gap between the cap-weighted and equal-weighted S&P 500 is the widest since March 2000, and suggests a hype cycle may need to contract.

Friedberg argues the market has already priced in cuts, with the P/E ratio inflated by the top seven tech companies. He notes talk in Washington of resetting the Fed's inflation target from 2% to 3%. In his view stimulus and imported input costs, including food companies' price increases of 13 to 15 percent, make a return to 2% unlikely for now.

this target came from the Reserve Bank of New Zealand

The quote above supports a host's point that the 2% target is somewhat arbitrary. Sacks says the Fed erred by waiting nine months after the first high print and continuing QE for six more months. He warns that normalizing 3% inflation means permanently higher rates, for example 5% instead of 4% for a 2% real return, which drags on investment. He calls a move from 3.1% to 3.0% positive but small.