Automation, Inflation, and Escalation
Three Stories Shaping Markets Now
This week’s developments have been dominated by escalating geopolitical tensions in the Middle East, reigniting concerns around energy security, inflationary pressures, and broader war risks. In this edition, I’ll break down the potential implications for global markets, economic stability, and the investment landscape in the months ahead.
Amazon’s Push into Humanoid Robotics
In a move that could fundamentally reshape the logistics and delivery industry, Amazon is preparing to test humanoid robots for deliveries. This project signals Amazon’s growing ambition to automate one of the largest segments of its workforce: its last-mile delivery operations.
Testing Grounds
Amazon has reportedly completed the construction of an indoor obstacle course, a “humanoid park”, at one of its San Francisco offices. This facility will serve as the testing ground for the robots, allowing engineers to simulate real-world delivery scenarios such as stairs, doorways, and crowded urban environments.
At this stage, Amazon isn’t building the hardware itself but is instead focusing on developing the advanced AI software that would enable humanoid robots to navigate complex environments and perform tasks like picking up packages, avoiding obstacles, and even interacting with customers. For hardware, the company is sourcing humanoid robotic platforms from external manufacturers.
Impact on Labor and the Economy
This technological push is likely to raise new debates around automation and employment. Delivery jobs represent millions of employment opportunities globally. As humanoid robots move closer to real-world deployment, Amazon will face scrutiny from labor unions, regulators, and the public about the potential impact on jobs and worker rights.
Moreover, the rollout of such robots could drastically change operating costs and profit margins for Amazon. Robots could slash delivery costs, providing Amazon with even greater pricing power over competitors.
My Take
Amazon already has skin in the automation game with its stakes in Rivian and Zoox. But the humanoid robot push feels like Amazon playing the long game in logistics, not just with AI, but with hardware ownership too.
Amazon could eventually look to acquire companies like Rivian or Symbotic outright, once they hit consistent profitability.
To in-house the entire automation stack - vehicles, robots, warehouses - all under the Amazon roof.
With Amazon’s market cap north of $2.2 trillion, snapping up companies like Rivian and Symbotic, with a combined value currently under $50 billion, would barely move the needle for shareholders.
An even bigger opportunity arises if geopolitical tensions ease:
Amazon could partner with Chinese robotics and manufacturing companies offering comparable or superior quality at far lower costs.
Amazon could leverage Chinese manufacturing scale to build its logistics empire at a fraction of the cost of doing it domestically.
The US-China Trade “Deal”
China’s playing its strongest geopolitical card, rare earths. China has agreed to temporarily restore rare-earth export licenses for U.S. automakers and manufacturers, but only for six months. The deal, struck during tense trade talks in London, gives Beijing a lever it can pull if U.S.-China relations deteriorate again.
Rare earth elements, like neodymium, praseodymium, dysprosium, are the backbone of:
Electric vehicle motors (Tesla, Rivian, Ford)
Wind turbines
Smartphones
Military tech
Advanced robotics
China currently controls around 70% of global rare earth production and 90% of the world’s refining capacity. So this six-month license window would be akin to giving someone oxygen with a clock attached.
Connecting the Dots
Tying this back to Amazon’s push into humanoid robots, you can’t build humanoid robots or autonomous delivery fleets without motors, sensors, and advanced chips, all of which rely on rare earths in some way.
My Take
This “deal” isn’t a breakthrough. It’s a temporary reprieve designed to calm markets, not a real solution. It does nothing for the broader issues facing global supply chains like clothing, software, hardware, semiconductors, all still exposed to geopolitical risk.
Market Data
On the surface, inflation is cooling. Both May CPI and PPI came in lower than expected:
CPI: 3.3% YoY (vs. 3.4% expected)
Core CPI: also cooled, showing that services inflation is finally softening
PPI (Producer Prices): negative month-on-month in May
Markets loved it. Bond yields dropped, equities rallied, and everyone started whispering about rate cuts again.
Beneath the Surface:
Trump Tariffs Incoming (Maybe)
July 9 is shaping up to be a critical date. That’s when countries might get “assigned” tariff rates under Trump’s proposed trade plans. As the data is beginning to show, many firms are already buying new inventory at higher prices in anticipation.
Inventory Cushion Expiring
Much of the “low inflation” we’re seeing now is because of Q1 inventory buildup. Companies stocked up on goods early, locking in lower prices before tariffs or supply chain risks hit. But that inventory is running out.
Margin Pressure Building
New orders are coming in at higher input prices which will squeeze corporate margins going into Q3. Weak earnings revisions could be next.
Employment Risks
We’re already seeing softer hiring trends. If margins tighten and costs rise, layoffs may start creeping into the story by late summer or early fall.
My Take
Don’t get comfortable with these CPI/PPI numbers. They’re lagging indicators. The real inflation shock might hit after the summer, when new tariff-driven prices start replacing old cheap inventory on store shelves and in factories.
What I’m Watching:
Will July 9 get kicked down the road like we’ve seen before?
Earnings season guidance on margins will be key.
Watch the Fed’s tone at the Jackson Hole meeting in August.
Isreal-Iran and Oil.
Brent crude surged over 8%, to $76 per barrel, on Friday, much to the detriment of institutional traders who were largely short oil, after Israel launched strikes on Iran’s nuclear facilities. Iran claimed its oil installations weren’t hit, which soothed oil prices back to low $70 per barrel. One-third of the world’s seaborne oil flows through the Strait of Hormuz, a narrow waterway that Iran has repeatedly threatened to shut down in retaliation.
The Key Investment Risks To Watch:
Energy Inflation Loop
Gold prices also spiked to $3,440 per ounce, confirming the classic flight to safety setup.
If oil stays elevated → headline inflation rises → Fed & global central banks forced to stay hawkish longer → risk-off for equities.
Geopolitical Domino
The Strategic Petroleum Reserve (SPR) sits at 400 million barrels, down from 727 million at peak. That’s not much cushion in the event of a supply shock.
We could see SPR drawdowns combined with pressure on OPEC+ to boost output.
LNG (natural gas) is in play too. Qatar, the world’s largest LNG exporter, needs Hormuz open to supply Europe and Asia. Any disruption here would send global energy prices spiking again, hitting European consumers already battered by post-Ukraine energy insecurity.
My Take
If Iran retaliates with closure of Hormuz, $100+ Brent is back on the table.
If tensions ease, we may just see a premium priced in for months.
Either way, energy remains the inflation wildcard heading into Q3/Q4.
Energy shocks don’t just hit fuel, they hit supply chains, earnings, and central bank policy.