Keep pulling the thread on Joe Lavorgna.
AI-related activities have directly accounted for approximately one-third of US GDP output in the last year.
The Federal Reserve would likely only cut interest rates if there is significant labor market deterioration, such as the unemployment rate rising to 4.5%, 4.8%, and then 5.1%.
Goldman Sachs views a 4.60% 10-year Treasury yield as a key pivot point for the market.
Joe Lavorgna predicts that interest rates will rise due to a higher inflation risk premium and the U.S. Treasury's need to increase supply.
The market has only priced in about one interest rate tightening from the Federal Reserve, but Joe Lavorgna believes a series of tightenings could potentially occur.
The war in the Middle East fundamentally changed the economic dynamics, derailing a potential "disinflationary boom."
The specific 10-year Treasury yield that would destabilize the financial system is unknown, but could be around 4.75% or 5%.
The current inflationary environment is comparable to a "mini-COVID" due to major supply chain disruptions.
The bond market is not fully appreciating the inflationary impact of current supply chain disruptions.
In the short term, the buildout of data centers for AI may be contributing to inflation due to increased energy usage.
In the longer term, AI is likely to be disinflationary.
The New York Fed's Global Pressure Supply Index indicates ongoing supply chain disruptions that are pro-inflationary.