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2.4%
The increase in the Consumer Price Index in May compared to a year earlier.
Commodities
Raw materials used to manufacture consumer products, including energy, metals and agricultural goods. They are inputs in the production of other goods and services, rather than finished goods sold to consumers.
The Consumer Price Index showed little evidence of tariff-induced price increases so far. Vehicle prices fell and price changes across other goods exposed to tariffs such as clothing, appliances, furniture and technology commodities were mixed. Despite the encouraging inflation reports with slowing services inflation contributing to price stability, Bloomberg’s consensus forecast indicates economists anticipate a reacceleration in consumer price inflation to 3.4% year-over-year by the end of 2025.
― Bill Merz, CFA, Senior Vice President, Head of Capital Markets Research and Portfolio Construction, U.S. Bank
Quick take: Encouraging inflation reports last week indicate tariffs have yet to result in material price increases for consumers. High frequency data on credit and debit card transactions highlight healthy consumer spending activity while trade negotiations continue. Upcoming data on retail sales provides important context on consumer spending while housing starts and building permits offer insight into the housing market amid high mortgage rates.
Quick take: Equities traded mixed last week following Israel’s air strikes on Iran, with rising Middle East tensions driving oil prices higher. Year-to-date, foreign equities continue to outpace domestic stocks. At present, inflation, interest rates and earnings continue to support higher-trending equity prices. Geopolitics and second quarter corporate reports beginning in mid-July are among catalysts likely to impact investor sentiment and equity prices.
Quick take: Treasury yields fell in response to slower-than-expected inflation data last week, fueling increased investor expectations for Federal Reserve (Fed) rate cuts later this year. Multiple central banks meet this week, including the Fed. Investors will focus on the Fed’s forward guidance considering bond yields price in a near certainty that the Fed will hold rates steady this week.
Quick take: Real estate investment trust (REIT) prices fell slightly last week. Renewed geopolitical tensions in the Middle East caused a broad decline in asset prices on Friday, including REITs, but commodity prices rose, with energy-related prices rising the most due to concerns over oil supply impacts.
Based on our strategic approach to creating diversified portfolios, guidelines are in place concerning the construction of portfolios and how investments should be allocated to specific asset classes based on client goals, objectives and tolerance for risk. Not all recommended asset classes will be suitable for every portfolio. Diversification and asset allocation do not guarantee returns or protect against losses.
Past performance is no guarantee of future results. All performance data, while obtained from sources deemed to be reliable, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for direct investment. The S&P 500 Index consists of 500 widely traded stocks that are considered to represent the performance of the U.S. stock market in general. The NASDAQ Composite Index is a market-capitalization weighted average of roughly 5,000 stocks that are electronically traded in the NASDAQ market. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index and is representative of the U.S. small capitalization securities market. The MSCI EAFE Index includes approximately 1,000 companies representing the stock markets of 21 countries in Europe, Australasia and the Far East (EAFE). The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. The Consumer Price Index is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is one of the most frequently used statistics for identifying periods of inflation or deflation. The Producer Price Index (PPI) is a family of indexes that measures the average change over time in selling prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller.
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With the U.S. government’s authority to borrow money bumping up against the federally mandated debt limit this year, is a political confrontation brewing that could impact capital markets?
Persistently higher prices continue to weigh on consumers and policymakers alike.