Comments based on information available as of 6:00 am CT on 3/13/2026
Growth: Turbulence Isn’t the Tide
The February report showing a 92,000 decline in nonfarm payrolls was a shock, but it might not be a harbinger of more bad reports ahead. We haven’t seen confirming evidence of that magnitude of weakness with other data, like ADP payrolls, initial jobless claims, and the ISM indexes. A large healthcare strike and severe winter weather distorted the data, temporarily subtracting tens of thousands of workers from payroll counts and exaggerating underlying weakness. Wage growth, meanwhile, remained firm, with average hourly earnings rising 0.4% month over month and 3.8% year over year, hardly the signature of a collapsing labor market. The labor market may be softening, but one noisy data point does not make a trend—especially when transitory factors loom large.
Inflation: Past Isn’t Prologue
The inflation data delivered a deceptively calm message. February CPI (consumer price index) came in exactly as expected, with headline inflation steady at 2.4% and core inflation holding at 2.5%, offering what may be the last “clean” read before geopolitics muddy the waters. Since then, oil has surged sharply as the Middle East conflict escalated, raising the odds that future inflation prints re‑accelerate. The Fed’s preferred measure of inflation, the personal consumption expenditure deflator, puts more weight on goods and energy than the CPI. Backward‑looking inflation data may be giving false comfort about what lies ahead.
Policy: Rock and a Hard Place
The Federal Reserve is boxed in. On one hand, weaker growth signals—from negative payrolls to higher oil prices acting as a tax on consumers—argue for a more accommodative stance. On the other hand, surging energy costs threaten to lift inflation expectations, something the Fed is determined to prevent after hard‑won credibility gains since 2022. Economists are criticized for being wishy-washy by saying “One the one hand…but on the other hand…” but that is position the Fed is in. When the hands don’t meet, the best thing to do is to sit on them. The likely outcome is policy inertia: no immediate rate moves, but plenty of verbal choreography. Expect Fed officials to sound hawkish enough to keep inflation expectations anchored, while quietly acknowledging downside growth risks. In short, the Fed may do nothing—but say everything—to shape market psychology without committing to action.
Looking Ahead: From Sector to Systemic Risk
Earlier this year, the so‑called “SaaS‑pocalypse” (software as a service) looked like a contained, sector‑specific repricing driven by fears that AI would erode software business models. Now, attention has shifted to whether those stresses could spill into private credit, where software accounts for a decent share of leveraged loans and defaults are already inching higher. Layer onto that a widening Middle East war with systemic implications—oil flows, shipping insurance, supply chains—and the risk profile changes meaningfully. Oil is embedded in everything: transportation, manufacturing, food, and services. When energy becomes both a growth drag and an inflation accelerant, sector‑level risks can morph into economy‑wide ones. That doesn’t mean crisis is inevitable—but it does mean investors are right to watch the fault lines more closely.
