Three Things (5/14)

Cooling Off, For Now

The latest CPI report shows that U.S. inflation slowed to 2.3% in April—its lowest annual pace since early 2021. The drop comes even as President Trump’s new round of tariffs on Chinese goods begins to filter into the economy. While economists caution that tariff effects often take months to fully materialize, this reading signals that the underlying disinflation trend remains intact for now.

This report gives the Fed breathing room. With inflation cooling and growth holding steady, policymakers may pause further hikes—if not open the door to cuts. But don’t get too comfortable: tariff-driven cost pressures are still building in the background. We're positioned for a market that favors rate-sensitive sectors in the short term, but also hedges against a potential second wave of inflation if supply chain costs surge later in the year.

$600B Saudi Investment

In a sweeping diplomatic move, President Trump announced a $600 billion investment package from Saudi Arabia, encompassing deals across defense, energy, AI, and infrastructure. U.S. giants like Boeing, Nvidia, and General Electric are reportedly among the beneficiaries. This initiative, unveiled during Trump’s Middle East visit, reflects a renewed push to deepen U.S.-Saudi economic ties amid shifting global alliances.

This isn’t just about dollars—it’s about influence. The U.S. is reasserting its leadership in a region increasingly being courted by China and Russia. For investors, this opens the door to long-term tailwinds in defense and energy stocks, and could set the tone for an era of foreign policy that actively leverages American corporate strength. Global capital is clearly still betting on U.S. innovation—and Washington is eager to help it find a home.

Cut to Scale

Microsoft is trimming roughly 3% of its global headcount, affecting roles across engineering, support, and sales. While the company remains highly profitable and continues to aggressively invest in AI and cloud, the move reflects a broader trend in Big Tech: reshuffling talent and capital to align with what’s working—and what’s next.

This is less about cutting costs and more about cutting fat. In today’s tech landscape, even the biggest players are expected to do more with less. Microsoft’s move signals that the AI era is in scale-and-optimize mode. For investors, this could mean stronger operating leverage ahead as AI spending shifts from experimental to strategic—and efficiency becomes the new growth driver.