Below are some of the most interesting things I came across this week. Click here to subscribe to our free weekly newsletter and get this post delivered to your inbox each Saturday morning.
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Perhaps the single most important macro phenomenon of the past several decades is the precipitous decline in the labor share of income. As David Hay writes, “The Roots of Populism in the U.S. can be seen in the flip side of the long ascension by Corporate America’s profit margins: the long bear market in labor’s share of income.”
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Supportive demographics trends and increasing globalization explain much of this dynamic. However, both are now in the process of shifting back in the other direction. As to the former, Axios reports, “Forget K-shaped, try gray-shaped: Older Americans are powering the economy.”
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As to the latter, the cost of deglobalizing the economy may be only starting to materialize. According to Brean, “Core CPI excluding used vehicles and shelter has edged up. The three-month inflation rate in this category has risen to 2.9% from 1.1% in December. I do not think the data suggest that we are clear of the tariff problem and back on a disinflationary path to 2%.”
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Markets are already sending a fairly clear message in regard to these shifting macro dynamics. As Callum Thomas writes, “Gold is the best performing asset during the 2020’s so far… (and bonds are the worst). How will the rest of the decade go?”
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The relative performance of major segments within the broad stock market are beginning to do so, as well. “The Mag Seven topped out vs the energy sector in December of 2025, at the same level it did back in October of 2020, when XLE bottomed and ran 250% over the next two years,” reports Daily Chartbook.
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So far this year, energy is far and away the best-performing sector in the stock market. “Overall, the energy sector is offering what investors seek the most: high free-cash-flow generation, strong and growing dividends, meaningful share buybacks, inflation protection and real-asset exposure,” explains Rob Thummel.
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“In the words of a client who has been-there-and-done-that, we’re moving into the ‘revenge of the dinosaurs’ phase of the game now,” reports Goldman Sachs.
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