At a glance

Airstrikes between Israel and Iran drove oil prices higher and equity prices lower last week. Slowing U.S. inflation helped pressure U.S. Treasury yields.

Number of the week:

2.4%

The increase in the Consumer Price Index in May compared to a year earlier.

Term of the week:

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.

Quote of the week:

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

Global economy

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.

Equity markets

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.

Bond markets

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.

Real assets

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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This information represents the opinion of U.S. Bank Wealth Management. The views are subject to change at any time based on market or other conditions and are current as of the date indicated on the materials. This is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable but is not guaranteed as to accuracy or completeness. U.S. Bank is not affiliated or associated with any organizations mentioned.

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.

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards and other risks associated with future political and economic developments. 

Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility.

Investments in fixed income securities are subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Investment in fixed income securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities.

Investments in high yield bonds offer the potential for high current income and attractive total return, but involve certain risks. Changes in economic conditions or other circumstances may adversely affect a bond issuer’s ability to make principal and interest payments.

The municipal bond market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issues of municipal securities. Interest rate increases can cause the price of a bond to decrease. Income on municipal bonds is free from federal taxes, but may be subject to the federal alternative minimum tax (AMT), state and local taxes.

There are special risks associated with investments in real assets such as commodities and real estate securities. For commodities, risks may include market price fluctuations, regulatory changes, interest rate changes, credit risk, economic changes and the impact of adverse political or financial factors. Investments in real estate securities can be subject to fluctuations in the value of the underlying properties, the effect of economic conditions on real estate values, changes in interest rates and risks related to renting properties (such as rental defaults).

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The information provided represents the opinion of U.S. Bank and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific investment advice and should not be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation.

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