Trump invented a toll for the Strait of Hormuz and the Fed is inventing reasons to hike so at least everyone is freelancing · Daily Briefing

In 30 seconds: Trump announced a 20% toll on all cargo shipped through the Strait of Hormuz, triggering a broad market selloff with oil prices surging, yields rising, and stocks falling, while Secretary of State Rubio publicly contradicted the policy. US federal interest expense hit a record $1.35 trillion over the past 12 months, the government has spent $1.37 trillion more than it has taken in so far this fiscal year, and the stock market's value relative to GDP has reached an all-time high of 234%. US home prices are rising at their slowest pace in three years with nine major cities seeing declines, while NYC rents hit a record $4,000 for a one-bedroom, though national rents have fallen for 37 consecutive months on a year-over-year basis. Fed Governor Waller warned that another hot core inflation reading this week could prompt the FOMC to consider tightening monetary policy in the near term, with July now considered a live meeting for a potential rate hike.

Oil surged 10%. Gold: $4,009.70. No country is allowed to charge tolls or fees on an international waterway. US gas tax not adjusted for inflation. The real question is whether a 20% toll invented on the fly ever gets implemented — or quietly dialed back like the others.

The federal government has taken in $4.15 trillion so far in fiscal year 2026 and spent $5.52 trillion, leaving a gap of roughly $1.37 trillion to date. Interest Expense on US Public Debt: $1.35 trillion. We are not there yet, but the trend line is doing its best. Meanwhile, the Buffett Indicator — US stock market value to GDP — sits at 234%, an all-time high. At 234%, the ratio is more than 3 standard deviations above the long-term historical average. The justification, such as it is, comes from earnings: the S&P 500 is posting 24% year-over-year earnings growth, and we have never seen earnings growth this high outside of post-recessionary rebounds. This is an unprecedented boom fueled by massive EPS gains in big tech. One of these things will eventually have to notice the other.

The US housing market has earned a distinction nobody wanted: most unaffordable in history, cooling. The phrase does a lot of work. This is what cooling looks like when you are cooling from the surface of the sun. On the rental side, the national picture and the local picture are telling two completely different stories. Nationally, rents have fallen 1.2% year over year, marking 37 consecutive months with a year-over-year decline. US rents down 1.2% over the last year. The median one-bedroom rent in the city just hit $4,000 a month, a record high. That figure is up 54% over the last decade. If you are wondering how a city with rent control manages to produce record rents, the argument is straightforward: rent control doesn't make housing affordable. Rent control discourages new supply, reduces turnover, and pushes market-rate rents even higher. The lucky few who already hold a stabilized lease are insulated. Everyone else competes for a shrinking pool of available units at ever higher prices. The broader affordability picture is stark. Renting a home is cheaper than paying a mortgage in all 50 of the largest metro areas in the US. NYC median one-bedroom rent: $4,000. That is not a cherry-picked comparison; that is every single major metro. When renting beats owning everywhere, you do not have a housing market. You have a waiting room.

The Fed's most interesting rhetorical tradition is the conditional threat delivered with bureaucratic calm. The Fed Governor opened with a memorable analogy: "Inflation becomes like pornography. I can't define it...[but] I know it when I see it. It's true there can be noise in every print, but the last several months have shown a pattern," he noted. And lest anyone try to blame trade policy: "We're past the point where we can attribute past increases to tariffs. No matter how you cut it, or what measure you want to use, inflation is up this year." The speech was consistent with prior reporting: the bar to hike is low; oil isn't the issue; coming inflation prints (plural) matter greatly. He would be very pleased to see a lower reading on core inflation, but after its escalation over the first half of this year, he said he would need to see several months of lower readings to feel that inflation is moving in the right direction. The broader committee appears aligned on the reaction function, if not the forecast. The June minutes carried the same message: If inflation does not improve soon, there will be hikes. Fed officials were divided in their outlook for inflation, not in how to react to inflation. The division is about probability, not playbook. This week brings CPI, PPI, and import prices for June. But the numbers will speak for themselves, and the Fed has told you exactly what it plans to hear.