JEF Macro Weekly—Fed's Approaching Stress Test; Riding The AI Unicycle:

Research evidence excerpt

JEF Macro Weekly—Fed's Approaching Stress Test; Riding The AI Unicycle:

Global | Equity Strategy EquityMayResearch17, 2026

STRATEGY NOTEJEF Macro Weekly—Fed's Approaching Stress

Test; Riding The AI Unicycle:

GREED & fear sees lesson of history in markets testing new Fed. The latest US

inflation data has increased possibility. Mohit is not going long 10YR yet given

the geopolitical risks and the sensitivity to oil prices; but would start a small long

in 2YR. Tom did a great study on job market: Rapid loss of experienced workers

is a structural drag and neither rate cuts nor alternate forms of stimulus offset

it. DeSanctis thinks Small needs "Pause that Refreshes".

GREED & fear—The lesson of history is that markets test a new Fed chairman. The latest inflation

data has increased that possibility. The 10-year Treasury bond yield is testing 4.5%, the breaking of

which GREED & fear continues to view as the commencement of a stress point for stock markets.

The biggest hope for such a test of the new Fed chairman not happening is opening Strait of

Hormuz. However, all evidence is that Iran is digging in for a protracted standoff whereas Donald

Trump does not have the patience for such a test.

Mohit Kumar—10Y USTs have broken 4.50% which has been our target range for a while. We are not

going long 10YR yet given the geopolitical risks and the sensitivity to oil prices. We would, however,

start a small long position in the 2Y part of the curve. Market is now pricing in 12bps of hikes for

this year, which we do not think will be delivered.

Thomas Simons—When firms experience a rapid loss of experienced workers, they face higher

marginal cost of hiring inexperienced workers through more training, supervision, and error rates.