New Fed Chair, New Phillips Curve

Research evidence excerpt

New Fed Chair, New Phillips Curve

Luo's QES Research

Quantitative Research

ESG

Portfolio Strategy

Current Affairs June 4, 2026

NEW FED CHAIR, NEW PHILLIPS CURVE

Recent Phillips Curve Dynamics and Implications for Factor Performance

• The Recent Phillips Curve: The post-Covid inflation environment has largely validated our view that

deglobalization and recurring supply shocks would restore a more traditional Phillips Curve relationship, with tariffs,

energy market disruptions, and geopolitical uncertainty contributing to renewed inflationary pressure. Although

inflation has declined substantially from its 2022 peak, the Phillips Curve remains unusually steep. The economy is

approaching a critical vacancies-to-unemployment inflection point where relatively small changes in labor demand,

inflation expectations, or policy credibility could have outsized impacts.

• Asset Performance by Phillips and Beveridge Curve Regime: The updated Phillips Curve analysis shows that risk-

oriented assets generally perform best when unemployment is falling and inflation is rising, while volatility tends to

be highest during contractionary periods. Style factors exhibit similar behavior, with Momentum outperforming

during expansions and value-oriented factors such as EBITDA/EV and Book-to-Market generating stronger returns

during contractions with declining inflation. Extending the framework to the Beveridge Curve reveals an even

stronger distinction between risk-on and risk-off environments, as US equities perform best when unemployment is

falling and job openings are increasing, while cyclical assets struggle most when both indicators deteriorate.

• DeepTheme and Phillips Curve Outlooks: Our DeepTheme 2.0 model identifies Inflation and Stagflation as two of