Inflation, Fed pivot, and AI-driven market divergence (with Haidi Stroud-Watts, Shery Ahn)

Strait of Hormuz closure is the catalyst for a broad commodity shock, hitting the AI supply chain (nat gas, helium) and forcing a violent Fed pivot from cuts to hikes. This is the dominant macro theme. Japanese repatriation adds fuel to the UST sell-off, pressuring long-duration assets. The trade is to short frothy US/Korea AI (NDX) and find relative value in cheaper, more efficient China AI. DXY strength is the logical consequence of a hawkish Fed.

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Man Group 8.5
Hedge Fund $1500.00B
Christina Hooper 8.5

Inflation, Fed pivot, and AI-driven market divergence (with Haidi Stroud-Watts, Shery Ahn)

wti

The closure of the Strait of Hormuz is creating inflationary pressures... it's not just oil, it's natural gas, helium.

yields

The bond vigilantes are being ruthless... yields are turbocharging higher in the US, Japan, Korea, UK.

4/7/2026 1:21:51 AM	medium term up	20 days later	+1.47%	+1.47%
3/4/2026 1:21:15 AM	short term up	5 days later	-0.24%	-0.24%
12/9/2025 1:32:13 AM	medium term cautious up	20 days later	-0.82%	-0.41%

The market continues to grapple with the threat of higher inflation and the threat to growth from the Strait of Hormuz closure. The bond issue is proving to be a bigger challenge now.

Haidi Stroud-Watts
Christina Hooper

The key trigger was the CPI print last week, which underscores inflationary pressures from the closure of the Strait of Hormuz. It's not just oil, but natural gas, helium, and other commodities critical to the semiconductor/AI supply chain.

This is a very significant issue that markets have been trying to look through, but it is staring them in the face now.
Christina Hooper

A month ago, there was a >50% probability of a rate cut. Today, there is a >50% probability of at least one rate hike. That is a huge pivot over a short period due to inflation concerns.

This will change the trajectory the Fed was expected to be on, and could change it further depending on how long the Strait of Hormuz remains closed.
Christina Hooper

Valuations look attractive in China tech. China has taken a more measured approach to AI CapEx, achieving about 90% of the results for each dollar spent compared to the US.

The future is about diversifying into China AI, which is a somewhat different theme with more attractive valuations.
Christina Hooper

Japanese investors are enthusiastic about higher domestic yields, which will prompt money flowing into the domestic bond market. This will drive up yields elsewhere, especially US Treasuries, exerting downward pressure on equities.

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