Holding Through Sticky PCE and a Broken Bitcoin Line

This Week in Context

Personal Consumption Expenditures (PCE) inflation came in at 3.8% headline and 3.3% core for April. The print was released this morning by the Bureau of Economic Analysis (BEA). Three years of above-target prints in a row. The Federal Reserve's preferred inflation gauge is still saying the same thing it has been saying.

Bitcoin started the week around $77,200 and fell into Thursday morning toward $73,000. The $76,000 line we have flagged for weeks as the bull-market frame finally broke. Spot Bitcoin exchange-traded funds (ETFs) have now logged six consecutive sessions of outflows totaling about $1.55 billion, per Yahoo Finance's daily Bitcoin update.

The defensive book we built in April has held its shape. We are not adding to broad stocks here, even though the S&P 500 hit a closing record Tuesday. We are not adding Bitcoin yet, even though spot is now inside the scale-in zone we have been watching. Cash at 40% in short-dated Treasury bills (BIL) pays around 4% while we wait.

Macro Landscape

The PCE detail matters more than the headline. Core PCE at 3.3% year-over-year is the same number it was in February and roughly the same number it was last November. The path is flat, not down. Real PCE rose 0.1% month over month, so consumers are still spending but not aggressively. With Kevin Warsh now Fed Chair and his first Federal Open Market Committee (FOMC) meeting set for June 16-17, this print frames the dissent landscape. His confirmation-hearing comment about wanting "messier" meetings is about to get tested.

The 10-year Treasury yield came in to about 4.50% today from 4.61% a week ago. The bond market took the May 19 spike as a fear trade and faded it. We still want to stay short-dated. The rally in bonds is welcome but it is not a regime change. Long-duration government bonds remain an avoid.

Brent crude pulled back from roughly $110 last week to the $97-99 range this week. The latest CNBC coverage on Iran describes a proposed 60-day extension memorandum of understanding, with unrestricted Strait of Hormuz shipping as the central U.S. ask. The forward curve, however, still prices Brent above $90 well into next year. Spot can fade the headlines; the structural read sits in the December 2026 contract, which has held at new highs.

Sector Spotlight: AI Capex and the Earnings Side

Anthropic moved from a roughly $380 billion private valuation in the first quarter to a reported $900 billion this quarter. That kind of mark-up draws warning flags from disciplined market watchers because the underlying earnings have not moved nearly as much. The same names driving the S&P 500 to new highs (Nvidia, Microsoft, the data-center power infrastructure stocks) really are selling something scarce: compute and the electricity to feed it. We are not arguing with the AI capital expenditure thesis. We are arguing with the math that requires the rest of the index to participate from here while consumer real wages are turning negative on the year.

VOO at 27% is sized for "this could still work" exposure to the compute-and-energy story. We are not adding into a tape that has gone vertical, and we are not trimming into prints that confirm sticky inflation. The position is the position.

Crypto Corner

Bitcoin came into the week testing the $76,000 cycle line. The line broke. Spot fell from around $77,500 on Friday's close to a $72,700 low Thursday morning. We are now inside the $65,000 to $70,000 fair-value zone identified by the on-chain frame the panel tracks.

Two reads on this week's break.

The constructive read: the long-term hard-money case for Bitcoin (multipolar reserve fragmentation, persistent fiscal dominance, central-bank credibility in transition) has not weakened. If anything, today's PCE print strengthens it. Buying spot at $73,000 with that thesis intact is the patient bid, not the chase.

The cautious read: spot volume and stablecoin flows did not confirm the April rally, funding rates have flipped back positive, and Bitcoin's near-term momentum is rolling over. The cycle-line break may be the start of a deeper draw, not the bottom.

Our position is to hold the 7% allocation, not add at the cycle-line break, and watch for stabilization in spot volumes plus a bid back through $76,000 before scaling in. We trim conviction, not size, when the panel split widens.

Looking Ahead

Three things on the calendar.

First, Warsh's first communications as Chair. His speeches and Q&A responses through June 16-17 will set the language for whether the committee accepts core PCE at 3.3% as "stuck" or as "still on a glide path."

Second, FOMC June 16-17. The bigger question than cut-or-hold is what dissent looks like inside the new chair's first meeting.

Third, Iran-deal headline risk on Brent. A signed memorandum with Strait shipping language would pull spot Brent below $95 quickly; a breakdown takes it back toward $115 in a session.

The defensive book is intact: 27% VOO, 8% VWO, 13% GLD, 5% SLV, 7% BTC, 40% BIL. We are holding.