Moneta recently hosted a macroeconomic and markets discussion with Jason Thomas, Head of Global Research & Investment Strategy at Carlyle, where he helps formulate firmwide investment strategies and serves as the Chief Investment Officer for managed accounts and the economic adviser to the firm’s Global Private Equity and Credit Investment Committees. The conversation examined how supply disruptions—especially around the Strait of Hormuz—are spreading beyond energy into critical industrial inputs, with implications for inflation, growth, and business operations, and how companies are responding through inventory pull-forwards and shifting logistics patterns. From an investing standpoint, we discussed the ongoing rotation away from large-cap technology toward more “real economy” exposures, alongside the AI investment cycle (including potential pressure on parts of the SaaS ecosystem) and a key constraint that could slow adoption: power generation and grid capacity. We closed on the policy and structural backdrop, including potential Fed/ECB implications and the multi-year tailwinds from reindustrialization and defense modernization.
Outlook Amid Global Supply Disruptions
The conflict in the Strait of Hormuz is creating a supply shock that extends well beyond crude and refined products, disrupting key industrial inputs such as nitrogen-based fertilizers, sulfur, and industrial gases and adding operational strain across global supply chains. Management teams are bracing for a sharp but likely temporary jump in affected input costs (about 15% on average), which could lift overall inflation toward ~4% by the end of Q2 even if the rate of increase cools after peaking. At the same time, markets may be underestimating how long normalization could take, because even with a near-term agreement, it would likely still take weeks for supply chains to unwind, leaving meaningful tail risk for investors positioned for a quick resolution. One important second-order effect is helium: with Qatari volumes constrained, tighter supply could slow semiconductor production in Korea and Taiwan, and prolonged shortages could ripple into AI-related capital spending and ultimately weigh on US GDP growth.
Corporate Responses to Supply Chain Challenges
Companies have responded to the risk of further supply disruptions by pulling demand forward—accelerating deliveries and building inventories in March—which drove a 15% annualized increase in logistics volumes and echoes the playbook used during prior tariff episodes to avoid future shortages or price increases. The reaction is also uneven across regions: US management teams are more focused on passing higher costs through to end markets, supported by comparatively abundant energy supplies, while European firms are more worried about physical shortages and the possibility of having to curb production.
Market Rotation and Shifting Investment Dynamics
In 2026, equity and credit markets have rotated meaningfully away from large-cap technology and software toward more “real economy” exposures, with small-cap and value shares reversing prior years’ lagging performance. Cyclical areas such as construction, engineering, and logistics have led gains while technology and software have lagged, and that reassessment is also showing up in financing conditions: concerns around tech-sector concentration and cash-flow durability have made it harder for software and data center companies to access credit, even as less crowded, cash-generative businesses such as waste management providers have found financing relatively more available. A key driver of investor caution is the scale of hyperscaler spending on AI-related data centers, which is compressing free cash flow and raising questions about depreciation assumptions, ongoing capital intensity, and how much risk capital allocators are taking on in a narrow set of platforms.
AI Investment, Software Sector Risks, and Power Constraints
The discussion highlighted both the upside and the growing friction points behind AI-led growth, including the risk that AI could disintermediate parts of the SaaS ecosystem, the practical constraint of power availability, and how corporate IT priorities are shifting as budgets expand. While markets are pricing in explosive AI revenue growth—and that optimism has contributed to pressure on SaaS valuations amid fears that AI could replace some vendors—survey data suggest only a minority of CIOs and CTOs view reducing software subscriptions as a primary objective. Instead, much of the incremental spend is aimed at improving internal productivity and modernizing technology stacks by reducing reliance on legacy infrastructure and consultants, with IT budgets becoming increasingly central to corporate strategy. At the same time, the rapid increase in data-center energy use is straining the US power grid: coal phase-outs are being delayed, new generation is not coming online fast enough, and power shortages are becoming more likely, creating a real-world bottleneck that could ultimately cap the pace of AI expansion and temper the most aggressive revenue forecasts.
Central Bank Policy Responses and Market Implications
The current inflation impulse is viewed as supply-driven rather than demand-driven, which makes an additional round of Federal Reserve rate hikes less likely; instead, policymakers may wait for clearer evidence of slowing growth or a deterioration in the labor market before cutting rates, potentially as early as September. In contrast, the European Central Bank (ECB) has historically been more willing to raise rates into supply shocks. That single-mandate posture can create meaningful currency volatility and drive rapid appreciation in the euro, leaving ECB action as an ongoing wildcard for investors. Recent moves in short-term interest rates are also attributed less to shifting expectations for hikes and more to technical position unwinds, with markets increasingly pricing cuts if conditions weaken.
Industrial and Defense Trends
The outlook points to a meaningful pickup in industrial and defense investment as governments respond to geopolitical tensions, concerns about industrial capacity, and the technological demands of modern conflict. Policy efforts are increasingly focused on rebuilding domestic industrial and defense bases, with sizable spending planned for capabilities such as AI, cybersecurity, propulsion, and autonomous systems, trends that could translate into a broader set of commercial investment opportunities tied to reindustrialization and defense modernization.
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