Commentary
Last week, America was simultaneously fighting a war, negotiating a peace deal, clocking its hottest inflation print in three years, and taking SpaceX public in the largest IPO in recorded history. This week, the most anticipated Wednesday since America voted for Ruben Studdard or Clay Aiken arrives in the form of Kevin Warsh's first FOMC press conference as Fed Chair.
- Stocks: U.S. equities finished the week higher. Materials, consumer staples, and financials led the week while communication services fell by nearly 2% and energy slipped as oil prices dropped amid Iran peace deal hopes. The sectors that benefit from cheaper energy led; the sector that produces it did not. Small caps beat large caps and value beat growth for the second straight week. Europe outperformed the U.S.; Japan lagged.
- Rates: U.S. bonds recovered. The Bloomberg U.S. Aggregate Bond Index rose by 0.52%. The 10-year U.S. Treasury yield fell to 4.48% from 4.57% and the 20- and 30-year yields both retreated below 5%. This week, the bond market operated like a robovac: no discernible strategy, completely reactive to whatever it bumped into, and somehow finding its way back to the charging dock.
- Commodities and currencies: Crude oil fell to $84.88 from $91.30 a barrel, and gasoline to $4.49 per gallon. Gold slipped to $4,238/ounce. The U.S. dollar weakened slightly. Peace, it turns out, is the one thing that can do to oil prices what 18 months of Fed policy couldn't do to inflation.
- Inflation: The May consumer-price index came in at 4.2% year over year, its hottest reading since April 2023. More than 60% of that increase came from energy prices, which rose by 23.5% over the past year. Strip out gasoline and inflation is 2.9%...painfully close to the Fed’s 2% target. The May producer-price index confirmed the same finding from a different angle: up 1.1% for the month against a 0.7% forecast. Once again, the monthly surge was driven by gasoline, which is doing what the vuvuzela did at the 2010 World Cup—showing up everywhere, drowning out everything else, and outlasting everyone’s patience.
- Consumer sentiment: The University of Michigan’s June reading rose to 48.9 from a record low of 44.8 in May, beating expectations and still sitting 19% below a year ago. Consumers credited easing gasoline prices. The survey director called the outlook “relatively dour,” which at 48.9 feels a bit like calling the Titanic’s maiden voyage mildly eventful.
- The Fed: Kevin Warsh chairs his first FOMC meeting this week. He’s been Fed Chair since May 22 and hasn’t said a word about inflation, jobs, or interest rates. My Aunt Carol went silent like that once after Thanksgiving and we didn’t find out why until Easter. The difference is Aunt Carol wasn’t in charge of interest rates. This Wednesday is Warsh’s Easter. Everyone’s bringing a dish and hoping for the best.
- Earnings: With 99% of S&P 500 companies reporting, 1Q26 blended earnings growth came in at 29.4% and 84% beat estimates. Technology grew 57.2% with a 99% beat rate. Health care and energy—the two sectors most directly involved in whether you are alive and able to get to work—posted negative growth. Corporate America had a phenomenal quarter. The parts of it that keep you upright and mobile did not. Onward.