The Wrap: Oil Higher for Longer Means Caution on Rate Cuts

This week, “The Wrap” features our view of the key events in Washington and on Wall Street over the past week. Don’t forget to watch “The Wrap” on The Julia LaRoche Show every Saturday on YouTube to catch our discussion of what’s hot and what’s not in the world of finance and investing. 

March 13, 2026 | What were the top events of the past week? First is the continued unwind of private credit and also private equity, with JPMorgan (JPM) saying that it is market down private loans and pulling back on credit available to these clients. We published a recap of our thinking on private equity in The Daily Reckoning, which was picked up in Zero Hedge. 

"Private credit has expanded significantly over the past decade and forged linkages with traditional financial institutions, the Office of Financial Research reported this week. "While vulnerabilities within this sector appear contained, counterparty exposures between banks and private credit funds are the main channel for risk transmission. This channel merits close monitoring given the industry’s rapid growth."

In DC, the Senate passed a housing bill that reads like the agenda of Senator Elizabeth Warren (D-MA). The House is going to make a lot of changes, but President Donald Trump is not really paying attention to housing. Foreign policy and bombing Iran is a lot more fun. As things stand today, the Senate-passed housing legislation could easily die in the House.

"There is an incredible amount to like in this bill, from the modernized treatment of manufactured housing to the focus on small-dollar mortgages,” said Isaac Boltansky, Head of Public Policy at PennyMac (PFSI). “Nevertheless, there is clearly room for improvement in both certain technical matters and the SFR section. To truly move the needle, we should ensure the final language doesn't create unintended headwinds for supply, consumers, or lenders."

We wrote a long comment on housing finance in our last issue (“Countrywide II: UWMC + TWO = ? Loan Depot Flops, Again”).

Thirdly Fed Vice Chair for Supervision Michelle Bowman outlined bank-friendly Basel III endgame and GSIB surcharge proposals, reports Ian Katz at CapitalAlpha in Washington. Bowman say the proposal will be released in a week. Overall, the changes will result in a small decrease in capital requirements for the largest banks and more significant changes for smaller institutions. We’ll be responding to the request for comment on Basel III. 

Gold and silver prices continued to move sideways, but oil prices remained just below $100 or roughly double prices that prevailed most of the past year. We expect oil prices to remain elevated unless and until the Straight of Hormuz is reopened. Iran is basically seeking a cessation to airstrikes in return for negotiating an end to attacks on merchant ships in the Persian Gulf.

Gold vs Silver Futures

Data on the U.S. labor market unexpectedly deteriorated, with a net loss of 92,000 jobs in February, contradicting forecasts that predicted a gain of 50,000. This marked a significant, unexpected setback, compounded by downward revisions to employment figures for the previous two months. 

The poor jobs data led to increased concern in some quarters about a potential economic "hard landing," but higher oil prices may constrain the Fed and other central banks from easing. In fact, central banks ought not to factor the oil price change into the calculous because the rise of energy costs comes from a non-monetary factor, namely war. Higher oil prices must lead to higher inflation. 

“An oil price shock...has some dampening effect on growth and raises total headline inflation for a time, but doesn’t really pass through much to core inflation,” former Cleveland Fed President Loretta Mester told Kathleen Hays on Central Bank Central. “They’re not going to really know how long the oil prices will stay at elevated levels, so they’ll use the models to sort of work through that.”

As for the coming Fed policy meeting, Mester recommends that officials take a cautious approach. “They’d be wise to leave things where they are...until they get more evidence on how things are going to evolve in both employment and inflation.”

And US Treasury Secretary Scott Bessent stated that the Federal Reserve is a long way from returning to quantitative easing. Indeed, we suspect that once Kevin Warsh is confirmed as the next Fed Chairman, the Fed is going to make changes to the bank liquidity rules that will allow another $1 trillion reduction in the size of the Fed's balance sheet. We'll be writing about this in a future comment.

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