Macro4Micro

Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26

The Fall of CBS 6-3-26

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Housing Starts May 2026: Weaker for both Single Family and Multifamily

Glenn Reynolds, CFA — Wed, 17 Jun 2026 01:00:30 GMT

The soft housing season continues with total starts down by -15.4% MoM and -8.7% YoY. Multifamily was down by -41.6% MoM and -12.3% YoY. Single family was milder with a -1.9% decline MoM and -6.7% YoY.
The critical South (58% of single family starts) and West (20% of single family) and #2 market in the West were both down MoM and YoY. The smaller Midwest and Northeast markets were both up MoM. We already saw a slow start to spring in new home sales, and the planning process from here is not backed up by an optimistic tone from the builders (see New Home Sales April 2026: Slow Start to Spring 5-28-26).
Mortgage rates remain a drag in housing affordability and a strain on monthly payment math as 6.6% mortgage rates reflected the unsettled post-Iran UST curve dynamics at a time when consumer confidence was in the doldrums, PCE growth in the GDP accounts had faded to 1.4%, and the household savings rate had plunged. Residential investment in 1Q26 posted a -6.2% contraction (see GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26, PCE Inflation: Income and Outlays April 2026 5-28-26).
This week brings the first Warsh FOMC meeting on Wednesday with mid-6% mortgage rates waiting for the prevailing winds to shift with the Iran “deal in process.” The UST market is not favoring easing through the Dec 2026 FOMC meeting with FedWatch easing odds of 1 cut at 0% as we go to print. In contrast, the odds of 1 hike are at +42.7% followed by 40.6% probability for unchanged. Even 2 hikes post odds of 14.7% and 3 hikes at 1.9%. Warsh may not offer much relief without the votes.

The above chart offers a clear reminder of the wild single family residential construction cycles across the decades. With favorable demographics for housing demand, the current starts run rate of 882K is still well below the long-term median and below all the timeline medians posted above except for the “crisis to current” timeline starting in Jan 2009 at 829K.

The current backdrop includes mortgage rate pressures on the affordability of monthly payments that are not likely to get much better from here in the peak housing season. That comes after seeing mortgage rates flirt very briefly with crossing below the 6.0% line in Feb 26, just before the Iran War. This past week hit the 6.75% area before the modest rally of the UST curve to 6.54% per Mortgage News Daily.

Single family starts were soft in relative terms vs. headline total starts dragged down by a grim month for multifamily (detailed further below).

The above chart plots total permits and total starts on a Not Seasonally Adjusted (NSA) basis. NSA is viewed as closer to what is going on in the trenches without the SAAR model assumptions.

For May 2026, we see NSA total permits down by -4.2% and single family permits down by -6.8% YoY. For MoM, total permits were -6.6% with single family permits down by -6.9% MoM.

For total starts and single family starts on an NSA basis, we see total starts down by -15.8% MoM and single family NSA starts lower by -1.2% MoM.

The above plots the single family starts by region (NSA). On a MoM basis, the critical South region (totals over 49% of total NSA starts and over 55% of single family starts) was down slightly in single family by -1.2% MoM and down by -7.0% YoY. The West as the #2 single family market (20% of total) was down MoM by -4.7%. The Midwest region MoM in single family was +16.1% with the small Northeast market at +22.9% MoM. The YoY NSA starts were mixed with the South and West both lower among the big two regions. The Midwest and Northeast were both higher.

The above chart updates running multifamily starts. At +284K (SAAR), May 2026 declined by -41.6% MoM and by -12.3% YoY. The 284K is well below the long-term median of 339K, below the median from Jan 2009 to current (345K), and below the median from 2000 to 2008 (296K).

The 1960s was a period of explosive growth for multifamily with the back end of the baby boom, the postwar rise of urbanization, and the high racial migration from the South to the North all part of the multifamily tailwinds. Immigration also played an important role.

The above chart updates Multifamily permits (SAAR). The 474K in May 2026 multifamily permits declined by -3.5% MoM and was up by +3.0% YoY.

The bottom line on home starts as we move further into the peak selling season is that 2026 is shaping up as a mediocre year at best for homebuilders. This is consistent with the guidance we are getting from the major homebuilders.

Market Commentary: Asset Returns 6-14-26

Geopolitical risk: Trump’s Nuclear Saber Rattling? 6-14-26

Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26

Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26

The Fall of CBS 6-3-26

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Industrial Production May 2026: Steady, Balanced Utilization Levels

Glenn Reynolds, CFA — Mon, 15 Jun 2026 23:14:05 GMT

Now if manufacturing would only add more jobs (still lower YoY)…

The industrial production and capacity utilization trends offered some cyclical reassurance by showing the capex boom seen in the GDP lines and resilience in the consumer durables sector (16M handle light vehicle expectations in 2026) has offered macro support. The overall mix of factors has helped ease some of the recurring and justified worries around the consumer (see GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26).
The +1.4% PCE growth in 1Q26 (through 2^nd estimate), plunging savings rates (see PCE Inflation: Income and Outlays April 2026 5-28-26), and eroding credit card metrics will keep macro watchers on edge. PCE remains around 68% of GDP and we get the final estimate for 1Q26 next week.
The collective battering of tariffs on the durables sector cost structures and post-Iran energy cost hammering from industrials to households reminds everyone that it takes an “awful lot of awful” to drive a contraction. The capex cycles and well-known appetites of the US consumer “to consume” is hard to derail even with unsound (incoherent?) trade policies and top-down political instability.
Inflation has been the main consumer worry, and the deal getting to the finish line is more important than Trump selling the story that it is a better deal than Obama’s (good luck) even before tabulating the damage on so many fronts.
The best news in the industrial production mix was that the durables sectors we routinely detail in the charts ticked higher sequentially – even if minimal in some cases.

The above chart is somewhat of a regular replay of the history of the industrial production cycles across time from 1967 through today. We have covered much of this in the past, but we roll the historical recap forward for convenience. We get new readers and students all the time. It is a mini history.

As an “old guy” who covered such industries as autos and steel credits back in the 1980s (and worked on a few audits of resources and energy companies) and came of working age in the first stagflation wave and oil spikes of the 70s and early 1980s, we see much of the “old and new” these days to consider. Cyclical change and secular trends always get mixed in, and the evolution (or collapse) of industries is not new.

The current 75.7% for total manufacturing is well below the long-term median of 78.5% and below the post-COVID median of 76.2%. The industrial production and capacity utilization numbers are among many metrics that take the label of “greatest economy in history” off the table right now. Whether GDP growth or payroll trends, the current economy is a bottom quartile economy when the growth of the 1980s and 1990s are factored in (see Presidential GDP Dance Off: Clinton vs. Trump 7-27-24, Presidential GDP Dance Off: Reagan vs. Trump 7-27-24).

The wildcard for this current cycle is the scale of the fixed investment that is now ramping up around the AI ecosystem. The multiplier effects cut across the full array of products and services and extend across many major trade partners with Taiwan at the top of the list (see Taiwan: Stakes are High, US Awareness is Low 5-17-26, US-Taiwan Trade: Risks Behind the Curtain 2-1-26).

The consumer sector and PCE have been unimpressive, but fixed investment is now soaring (see 1Q26 GDP Advance Estimate: Consumer Fade, Investment Boom 4-30-26). If you like comparing numbers (not a Washington thing) as opposed to spewing partisan adjectives, Trump 1.0 did not even frame up all that well vs. Carter and Biden – let alone the 1980s and 1990s (Gut Checking Trump GDP Record 3-5-25, Trump’s “Greatest Economy in History”: Not Even Close 3-5-25). Trump 2.0 is off to a slow start on GDP growth and payroll additions relative to the earlier glory years of the 80s and 90s.

A brief cyclical lookback on replay…

The chart shows the material swings across expansion booms and busts. That includes the aftermath of some highly damaging oil spikes that brought on cyclical weakness and later saw capacity utilization plunge. There were a lot more structural changes underway in those cycles than just oil and gas price pressures.

The pace of industry restructuring was notably the case in the 1980-1982 double dip as well as the recession of late 1973 to early 1975 when the Arab Oil Embargo set off chain reactions that turned the post-1973 period into an ebb-and-flow of macro nightmares for inflation and the consumer. Currency trends and labor costs were going through major changes across many years.

The May 1975 low of 71.6% followed the first bout of severe stagflation that unfolded after the Arab Oil Embargo. The 1980-1982 double dip recession came after the 1979 inflation spike took off with the Iranian oil crisis.

Capacity utilization saw a 68.7% low in Dec 1982 as the economy was just coming off the recession trough. The first Gulf War came after the August 1990 invasion of Kuwait with capacity utilization hitting a low in March 1991 at 77.2%, which is above where capacity utilization stands now in 2026.

Bring on the tech boom and excess…

The age of tech and credit excess in the late 1990s brought some new swoons with 71.8% in Nov 2001 after the TMT meltdown and HY default wave rolled in. The Utilities and Power sectors and Telecom capex all took a beating in that time frame.

Then came the post-credit crisis low of 63.4% at the recession trough in June 2009. Mortgages and derivative excess caused a very real systemic panic and deep risk aversion from the Lehman Sept 2008 period and well into 2009. That period was famous for the bankruptcy and bailout of GM and Chrysler and how that reverberated across supplier chains from materials to components. The credit contraction was very real, and the recovery in payrolls was slow to unfold with the consumer hammered by housing sector pain.

COVID edged out the June 2009 utilization bottom with a record low of 62.6 in April 2020 and a wild 2-month recession. That pandemic period saw ZIRP, supply-demand imbalances and later the Russian invasion of Ukraine and ensuing oil spike that set off inflation and a tightening cycle that still did not trigger a 2022 recession. The Fed should get some credit for navigating that timeline even if late to the party.

Time for the new age transition to AI plus some old school crises…

As we detail below in the recession histories, the idea of what is low or high for capacity utilization in the context of corporate sector profitability is not as direct as one might think. Breakeven volumes, cost structures and pricing power are key drivers of profits. The tariff excess as a core Trump policy only makes that unit cost analysis more complicated as we head into a new round of energy related cost pressures in 2026. Material costs, operating costs for companies, and consumer discretionary household cash flow headwinds make for a tricky set of moving parts shaped by erratic geopolitical decisions.

The AI upside as well as the fallout and related fears is also a new variable in the mix that cuts across both the services and goods sectors. What AI will mean for productivity improvement vs. payroll contraction will be an ongoing test of theories. Even if AI proves true to the valuation promises and brings a “revolution” to the economy, many will also pay the price. Revolution is a term often associated with a body count (even if jobs and not KIA). We have been getting a taste in the recent SaaS services panic. Those SaaS services markets consume a lot of goods and have a lot of employees.

The above table breaks out the high-level groupings with total industry and total manufacturing posting a mix of positive and negative variances in May 2026. We include a “delta column” on the right.

Mining and Utilities were mixed for the month, but a rational expectation is that utilities will see more capacity added and more demand. The data center and power supply issue is more pressing and getting more political by the day in an area where there has been working class bipartisan anger around the side effects of such projects on power costs and water threats among other issues. That controversy has spread to Canada.

It may be local on a center-by-center basis, but it will find its way into an assessment of data center adequacy at some point for growth valuations, revenue models, and costs. Any sense of faltering optimism around volumes (e.g. international restrictions on AI), pricing power, and regulatory backlash or political risks (elections have consequences, etc.) could roil valuations.

We see Durables and Nondurables as the main events to track, and durables showed notable strength this month. The durables sector is especially important with all of the supplier-to-OEM multiplier effects. That also is the sector more meaningfully tagged by the Trump tariff policies.

The IEEPA SCOTUS setbacks and recent attempts by Trump to counterattack by creatively using existing tariff legislation is struggling in the courts. Trump goes to “Plan B” and “Plan C” in his attempts to cut Congress out of the tariff decisions. He is hanging his hat on Section 301. This week he threatened France with triple digit wine tariffs even without IEEPA. He seems to forget the EU works as a bloc.

Looking back from 2025 into early 2026, we see Manufacturing in a relatively narrow range and the same for Durables. Tariffs have not moved the production needle much so far, but that does not tell the profitability story on the tariff cost impact. Most people (outside the White House) know that buyers/importers write the check for the tariff, so that implies a higher breakeven volume or some offsetting action on other costs or pricing.

Those tariff impacts will only play out over time across working capital cycles. Pricing decisions are more likely to come at a lag given the White House pressures, so there is a lot more to play out in 2026 earnings seasons and in company color.

The inflation story has turned negative for the macro picture in 2026. The “good news, bad news” aspect of a resilient industrial sector is that higher input costs can lead to the exercise of pricing power that flows into inflation. That beats the stagflation alternative but will keep life challenging for the FOMC and “Team Warsh” (if he can assemble a supportive voting team). We get our first taste of Warsh this week.

The above table breaks out the details for the top 5 Durables lines and the two largest Nondurables lines. We include the capacity utilization deltas in the column on the right. We see positive moves across all the major durables industries presented with “Fabricated Metals” and “Motor Vehicles and Parts” making the more notable moves. The two major Nondurables lines were both lower with Chemicals down by more than Food, Beverage and Tobacco.

The above table updates the capacity utilization history for expansions and recessions. As we routinely discuss, the ability of companies to generate solid profits at lower capacity utilization in today’s markets relative to past cycles is tied to both automation and the evolution of low-cost global supplier chains.

Low-cost supplier chains are getting undermined by tariffs and are now facing supply chain headwinds from the Iran War energy effects and the supply-demand imbalances. The latest round of news on a “deal” will ease some worries along the supplier to customer chain, but there are always lags while more tariffs are rolling in.

The “AI story” and what it all means for productivity and headcount will be a big part of the risk analysis ahead. The natural outcome will be less jobs in a service intensive economy such as the US. The irony is that the most immediate impact on jobs has been in tech, but that can easily spread.

The above chart details economic expansion and recession averages and lines them up by height as a frame of reference. We see the current level on the left at 75.7%. The fact that the current capacity utilization is below numerous recession averages posted on the right side of the chart also scoffs at the recurring “Golden Age” and “hottest country” rhetoric.

In the context of the tariff priorities and reshoring ambitions, the slack capacity implied by the chart in historical context underscores that the analysis is a lot more complicated than just “build more plants” and “keep tariffs high” to force reshoring. That is a story told on an industry-by-industry basis. It gets into themes around pricing power, cost structures and sourcing risks (tariffs, etc.). These days the topical questions revolve around “AI winners and losers” in productivity and the relative ability to adjust and engage in tariff cost mitigation strategies.

The multiplier effects are important, but the relocation of supplier chains and OEM assembly relocation and retooling is by definition very slow to unfold given intrinsic lag times, tooling equipment, and contracts in place. Manufacturing jobs edged slightly higher this month on a MoM basis but remain lower YoY (see Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26).

There is also the fact that the cost of relocation has risen with all the tariff effects for materials, components, and qualified labor. Autos are the main relocation stories, but that is generally going to be tied to existing infrastructure and not a strategy of all-new greenfield plants. In the end, many companies can just wait for Trump to “move on” and revisit plans later.

The issues around the USMCA review and its fate effectively make planning much more difficult if not impossible to do with clear economic certainty on trade rules. Trump’s signaling that he may terminate the USMCA entirely regardless of any legal interpretations on whether his sole-actor decision is even legal. That adds more drama to a policymaking framework that does not lack drama in the best of times and even injects surprise endings.

Geopolitical risk: Trump’s Nuclear Saber Rattling? 6-14-26

Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26

Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26

The Fall of CBS 6-3-26

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Market Commentary: Asset Returns 6-14-26

Glenn Reynolds, CFA — Mon, 15 Jun 2026 03:27:44 GMT

JFK in Berlin: “We cannot negotiate with people who say what’s mine is mine and what’s yours is negotiable.”

We review the asset return results across a range of time horizons after a week with ugly inflation trends, and an Iran “deal” announced on Sunday (or MOU in process that could be signed this coming Friday). The details are not clear nor are the scale of side deals which will not likely get reported. An end to the reckless, poorly planned fiasco is worth celebrating if it holds.
Inflation has stayed grim, but the market has been looking past the May inflation numbers. There were many “worst since 2022” references the past week with many stand-alone lines posting bad numbers that do not get much media visibility (see Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26, CPI May 2026: The 4% Rubicon 6-10-26).
The Strait of Hormuz supply shock remains tenuous even if scenarios on the aftereffects (e.g., when does China step back in to buy?) have ebbed and flowed. The risk of escalation still cannot be ruled out after Trump issued a less-than-veiled nuclear strike threat over the weekend (see Geopolitical risk: Trump’s Nuclear Saber Rattling? 6-14-26). Like the long drive one experienced as a kid, some in the market will say “call me when we get there.”
The market gets its first Warsh-led FOMC meeting this week as investors will be looking for candor or hints of macro doubletalk and politicized ambiguity. Retail Sales will offer some new color this week on the consumers while Housing Starts will offer another important signal on how builders are dealing with traffic and mid 6% mortgage rates.
Toxic geopolitics, USMCA threats, a fresh wave of tariffs, and wholly dysfunctional domestic politics with some bad policy intent (voter suppression, fresh ICE swarm threats at NYC) have not taken a sentiment toll in the market (yet), but negative real wage growth and plunging savings rates are very real, tangible economic realities.

The above table breaks out various timeline returns for the equity and fixed income benchmarks that we monitor. The trailing 1-month, 3-months, and YTD show that the post-Iran period has not derailed the very strong equity markets. The semiconductor and AI ecosystem and infrastructure subsectors have dwarfed the setbacks in the software and SaaS-based services operators as we cover below in the charts.

In contrast, debt markets have felt the sting of duration but not credit risk pricing in high grade corporates or HY bonds. The world of private credit is a different story. The negative returns in UST markets over 3 months and YTD highlight the inflation worries and the spiraling UST deficits and supply scenarios.

The weekly UST deltas above show a rally week as oil declined and investors looked past the May CPI and PPI numbers. Those inflation metrics posted trends that were decidedly unfavorable (see Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26, CPI May 2026: The 4% Rubicon 6-10-26). The tough call is the question of “Where does oil go from here?” after the immediate dip we are seeing now. The proclamation of a done deal (in theory) subject to a final signature and process is getting a lot of qualifiers and caveats from experts outside the partisan theme spinners on each side. WTI is posting an $80 handle as we go to print down from $90+ to close last Friday (6-5-26).

The above UST deltas cover the post-Iran period from 2-26-26 (the bombing started 2-28) through the end of the past week. A bear flattener was framed by +67 bps in the 2Y and +46 bps in the 10Y. We see the 30Y at +4.97%.

The YTD UST deltas posted above have been a headwind for bonds YTD. As we cover in other charts below, all 7 bond ETFs were positive but 5 of the 7 were below 1% returns YTD. The two above 1% were HYG at +1.65% and EMB at 2.29%.

The tech bellwether table highlights the major divide of recent weeks between the semiconductor names and ETFs and software and SaaS names. The AI ecosystem in general has made winners of those attached to data centers and what goes in the data centers. On the negative side, the business model threats from AI to software-related products and services have put some companies in the badly out of favor bucket. We have been covering that in the weekly tech check commentaries and in various charts below where we break out more single names.

The above chart highlights the tale of two product subsectors again with Oracle on the bottom for the week at -13.83% and the Semiconductor ETF (SOXX) at #1 with 10.46%. The Software ETF (IGV) was 3 off the bottom at -5.37%. Microsoft is sitting in 2^nd to last place for the week at -6.22%.

The Mag 7 weighed in with 2 positive in Tesla (TSLA) at +3.95% but NVIDIA (NVDA) was barely positive at 0.04%. The rest of the Mag 7 were negative.

The following is a cut and paste from a Saturday LinkedIn post with some edits and updates:

The chart updates the weekly total returns for the 32 benchmarks and ETFs we monitor. The week was obviously a winner with a score of 28-4 with 3 of the 4 lines in the red comprised of energy ETFs with the Midstream ETF (AMLP) in last place and the E&P ETF (XOP) joining the broader Energy ETF (XLC) in the bottom 3. The Communications Services ETF (XLC) was very slightly negative.

Notable winners this week included Regional Banks (KRE), Transports (XTN), and curve-sensitive Homebuilders (XHB) in the top 3. It is easy enough to point at the hopes for long-end curve relief if the Iran-Trump mind games finalize a solution with the skeletal detail from Sunday. WTI ending Friday quoted at $84.88 vs. $90.54 the prior Friday and $80+ as of Sunday with the Trump announcements on the “deal being done” (as he describes it). Lower oil can flow into mortgage relief via the curve. For Transports, lower oil is intrinsically favorable for jet fuel, diesel, and gasoline.

Duration was a winner this week on a favorable UST curve shift as detailed earlier despite some ugly inflation data in both the CPI and PPI releases. We covered inflation metrics on those release days in separate commentaries (see Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26, CPI May 2026: The 4% Rubicon 6-10-26). We see all 7 fixed income ETFs in positive range.

There were some very important CPI lines near and dear to the consumer that got minimal focus in the headlines – or for that matter in the text below the headlines. The FedWatch odds are not promising easy times for Warsh. The FOMC as a group will be hard to convince. Payroll trends have been a “good news, bad news” item but do not help the easing odds.

As we go to print, there has been some notable realignment from earlier in the weekend (Saturday). The highest odds now are for fed funds unchanged by the Dec 2026 FOMC meeting at 49.4%. The prior reading on the weekend showed 1 hike leading at 42.3%. The 1-hike odds have now declined to 38.2%. The odds of a single fed funds cut by the Dec 2026 FOMC meeting is still quite low but have risen to 1.7% after posting a 1.0% probability late morning Saturday. The odds of 2 hikes have declined to 9.7% from 14.9% earlier in the weekend while 3 hikes are now 0.9% after 2.1% on Saturday. These will be rapidly moving around as the week kicks off and as the Iran news gets handicapped.

The S&P 500 showed a favorable sector return profile this week with 9 of 11 sectors positive. Of the 11 sectors, only Communications Services and Energy were in the red. The S&P 500 was still only in the 3rd quartile. The Equal Weight S&P 500 ETF (RSP) beat the broad benchmark and was in the upper half of the 2nd quartile vs. the lower half of the 3rd quartile for the S&P 500 index.

NASDAQ was also in the third quartile, joining the tech-heavy S&P 500 with a weekly return below 1.0%. The small cap Russell 2000 made the top 4 in the high quartile with Midcaps (MDY) a few more slots below in the top tier.

As we cover separately in the Tech Check weekly return chart, the tech equity mix was very divided with semiconductors rallying back impressively but software taking a beating. The Semiconductor ETF (SOXX) ranked at #4 with +10.5% on the week while the Software ETF (IGV) was at the bottom of the 3rd quartile at -5.4%.

The following is a cut and paste from a Saturday LinkedIn post with some edits and updates:

The Tech Check return chart this week shows the tech mix overall still having a rough time even with some major semiconductor names generating solid rebounds on the week. The price return score was 14-18 in this mix and shows a general theme of positive trends for semiconductor and critical AI ecosystem names. Meanwhile, software and SaaS-based services names were back in the tank.

We see 4 semiconductor names with positive double-digit returns on the week but with 3 software/SaaS names with negative double-digit returns. The Semiconductor ETF (SOXX) ranked #4 at 10.46% behind 3 major semi-based names in Intel (INTC) at #1, Applied Materials (AMAT) at #2, and Micron (MU) at #3. AMAT is wagged by global capex expansion and equipment demand.

The Software ETF (IGV) was at the bottom of the third quartile at -5.37%. That is a return differential for SOXX vs. IGV of 15.8 points in a single week. Adobe (-18.86%) and Oracle (-13.83%) earnings reports this week did not bring joy as those two names held down the bottom two positions.

The Mag 7 were once again spread out with MSFT in the bottom quartile, 4 in the 3rd quartile (AAPL, META, AMZN, GOOGL), NVDA in the 2nd quartile, and TSLA in the top tier. The “Mag 7 + 3” got little extra support from “the 3” with Oracle deep in the red, Broadcom (AVGO) at -0.95% and Taiwan Semi (TSM) a more muted +2.1%.

The CBOE uses a “Mag 10” mix on options (MGTN) that includes Broadcom, Advanced Micro (AMD), and Palantir (PLTR). PLTR posted -5.56% this week in the bottom quartile. Another broad frame of reference is the Tech ETF (XLK) at +2.50% at the top of the 2nd quartile. Not shown above is the Equal Weight NASDAQ 100 ETF (QQEW), which posted +1.24% on the week.

The 1-month score of 24-8 was still solid for the broader group of 32 benchmarks and ETFs. For the names in the red, we see 3 of the 8 from energy ETFs (XOP, AMLP, XLE) with the NASDAQ in the red and Communications Services ETF (XLC) in the bottom. With some hope for reduced supply shock out of the Gulf, we also see Base Metals ETF (DBB) in the bottom quartile. Consumer Discretionary (XLY) as a major S&P 500 sector was in the bottom tier, so that needs to be watched.

Among the big winners was Transports (XTN) way out in front at #1. XTN saw airlines soar on jet fuel relief and a range of freight and logistics operators saw major, healthy double-digit rallies for the month. Homebuilders (XHB) get wagged by mortgage rates and the Tech ETF (XLK) is heavy on the major semi names.

Of the major indexes, Russell 2000 was the winner in the top quartile with Midcaps (MDY) in the second quartile, S&P 500 in the 3^rd quartile, and NASDAQ in the bottom quartile. The Equal Weight S&P 500 managed to end up in the top quartile just ahead of the Russell 2000.

The 1-month Tech Check follows the pattern discussed earlier and across the recent weekly updates. The 17-15 score mirrors the trend of semiconductors performing impressively and the software and SaaS-based services companies taking a beating. The big difference has been a few more bouts of downside for semis and AI ecosystem names, but the running results are still stellar.

For the Mag 7, we see 5 of the 7 in the bottom quartile with only Microsoft (MSFT) and Apple (AAPL) making it into the 3^rd quartile. All 7 were negative. That was notably the case even with NVDA. The Semiconductor ETF (SOXX) posted 15.5% in the top quartile. Dell was the outlier on its sudden and dramatic surge this past month as addressed in earlier commentaries.

The 3-month return chart is entirely within the post-Iran period with all the big swings along the way. The score of 27-5 is a reminder that the bull market will not bend for now. The bond ETFs were not hit too hard with only 2 in the red with the long duration UST ETF (TLT) and UST ETF (GOVT).

The big winners show some cyclical diversity with Tech (XLK), Transports (XTN), Russell 2000, Equal Weight NASDAQ 100 (QQEW), and Regional Banks (KRE) comprising the top 5. The NASDAQ, Midcaps (MDY), and S&P 500 all made the top quartile with the Equal Weight S&P 500 ETF (RSP) just one notch below the top quartile.

The YTD returns are impressive even with the warm inflation and supply shocks. We see a score of 27-5 with the 5 in the red zone putting up very small negative numbers. The BDCs (BIZD) sit on the bottom at only -6.8% with 8 asset lines in the top quartile posting double-digit positive returns.

It took 11.7% to make the top quartile over only around 5 ½ months. The median return was only slightly below 10% YTD. On a positive note, all the bond ETFs are positive even if only slightly so straddling the 3^rd and 4^th quartile.

The top quartile includes 3 energy ETFs (XOP, XLE, AMLP) with Tech (XLK), Transports (XTN) and the Russell 2000 in the top 5. Materials (XLB) and Midcaps (MDY) rounded out the top tier. NASDAQ was down in the 2^nd quartile with the S&P 500 in the 3^rd quartile.

The YTD Tech Check mix continues the theme of a major split between the semiconductors and “data center contents” and AI ecosystem beneficiaries on one side. On the other side was negative returns for software and “AI displacement risks.” The SaaS-based service operators dominate the worst returns.

We see 9 asset lines with double digit negative returns, but the magnitude of the returns for the winners are in some cases off the charts (+243.9% Micron, +237.6% Intel, +214.2% Dell) with a 39.5% return required to make the top quartile.

The 31-1 score for the trailing year has been steady with only BDCs (BIZD) sitting in last place at -11.6%. The median return in the mix of 32 asset lines is in the mid-14% range, which comfortably beats the historical long-term return on equities. We see 6 bond ETFs in the bottom quartile with only EM Sovereigns (EMB) in the third quartile.

Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26

Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26

The Fall of CBS 6-3-26

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Geopolitical risk: Trump's Nuclear Saber Rattling?

Glenn Reynolds, CFA — Sun, 14 Jun 2026 16:33:01 GMT

Dr Strangelove: “I love this guy.”

Trump: “Hopefully, this process will all work out quickly, easily, and smoothly. If it doesn’t, we have the ultimate alternative, hopefully never to be used again.” (Yes, a direct quote from Trump’s Truth Social 6-13-26 post below.)

Much of the posturing is to be expected and especially the attack on the Obama plan. Then Trump takes another dark turn that reflects his state of mind. The threat of the “ultimate alternative” crosses into the realm of the apocalyptic even if it comes with the asterisk of the bluster and “mentality” of the guy it came from.

This is not the first time in this circumstance that nuke imagery was waved around (remember the whole “obliterate civilization” thing?), but this time the media barely addressed it. The media is truly cowed or simply exhausted (or both). The CBS events of late may become the norm.

For markets, they will get a vote if the deal does not happen. The earlier threats of “taking the oil” and full destruction of infrastructure, power plants, and water are easy enough to believe. What shocks us is the lack of weekend media focus on the implied nuke threat.

For now, this language goes under the heading of geopolitical risk at a time when Russia threatens NATO and China will most certainly look to consolidate control of Taiwan under the long established One China policy at some point.

Being the first nation to go nuclear since the US did it the first two times in WWII is sending a bad signal to Russia as they are busy losing the war with Ukraine. It also signals China to jack up the nuke and missile arms race even more or even to move more quickly in Taiwan. Words have meaning even if a lot less when spewed by this character.

Excess in threats could someday be taken seriously. It also offers Europe another reason to revamp their security plans and how to position a nuclear umbrella. Some might say it is the most extreme version of distracting from the Epstein files. It is also safe to say “Reichstag Mushroom Cloud” has a bad ring to it.

The refuge of the weak and cowardly (e.g., GOP Senators) is “he does not mean it” and “he would never do it.” They say that about him canceling or nullifying elections also. He has already pursued a path of “constitutional amendment by executive order.” Dangerous times.

Existing Home Sales May 2026: Slow Rise Despite Rates

Glenn Reynolds, CFA — Fri, 12 Jun 2026 03:47:11 GMT

The spring season is bringing modest increases for May MoM and YoY. Inventory rose and median prices were higher YoY at $429.3K for total existing home sales and $434.3K for single family. The NAR cites improved YoY affordability indexes across all four regions.
The UST curve has not been friendly at around 6.6% mortgage rates, and curve dynamics are still working against lower rates with odds heavily favoring 1 hike or no action with negligible odds of easing at this point. More oil price increases or inflation pressure in a US-Iran escalation would put further upward pressure on longer rates and mortgages.
As we go to print, Trump says a deal is done, but that has become a punchline at this point. If it happens there could be some mortgage relief. The debates among industry experts on the lingering effects in the physical markets even with a “real truce” and open Strait are on balance still flagging a lot of oil and refined product price risk into the summer.

The above chart details existing home sales SAAR run rates by month from January 2023 to May 2026 at 4.17 million, up from 4.04 million. As a frame of reference, in 2022 market was posting 6 million and 5 million handle sales volumes in the first half of that year.

The early read on peak selling season ahead is off to a guarded start with mid-6% handle 30Y mortgage rates remaining a headwind, and the consumer sector shaky and less confident this year than last spring as inflation and payroll anxiety remain factors in 2026.

The recent numbers look more like the late 2023 period when mortgages had peaked (see Existing Home Sales Dec 2023: Rerun of Multi-Decade Low 1-19-24). The 30Y mortgage rates have moved within a 200 bps range since the Oct 2023 peak when Freddie Mac 30Y hit 7.8% and many mortgage offerings were near 8%.

The modest move in existing home sales is set against a fairly grim set of numbers from the CPI and PPI releases (see Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26, CPI May 2026: The 4% Rubicon 6-10-26). The PPI and CPI headline inflation numbers spell back-to-back trouble even if the markets are not reacting much to the sustained evidence of rising inflation. The new Fed Chair will be somewhat hamstrung by economic reality and the need to convince a committee in the voting process.

The inflation metrics and Iran War fallout remain critical to the consumer story line with savings rates plunging to 2Q22 levels. We see consumers continuing to “show up” as framed in the monthly income and outlays reports (see PCE Inflation: Income and Outlays April 2026 5-28-26), but consumers remain vulnerable as evident in credit card quality metrics and balance trends.

PCE growth rates in the GDP accounts comprise 68% of GDP, and that PCE line has clearly slowed down in the 1Q26 GDP reports at 1.4% in the 2^nd estimate GDP (see GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26). That is weaker, but it is not a contraction.

Trying to handicap UST levels and shapeshifting has been a challenge when we started the year with a lot of focus on easing and the new FOMC regime. Mortgage rates have been a headwind, and gauging what the FOMC might do is important even if the 10Y UST is what drives mortgage rates.

The odds as shown in the FedWatch CME models frame the odds of a single fed fund easing by the FOMC Dec 2026 meeting as well below 1%. By Thursday evening, the odds of 3 hikes (2.9%) are higher than the odds of 1 cut (0.6%). The high odds FOMC scenarios point at 1 hike (42.9%) or no change at 40.2% and 2 hikes at 14.4%. These odds whip around with Iran headlines and inflation and payroll releases.

The above chart shows the sales volume delta by price tier for May 2026, and we see 4 of the 6 price tiers posting positive growth with only the two lowest price tiers posting declines. That was the same mix of deltas as last month. Note: We use “not seasonally adjusted data” for this chart.

For existing home sales, the monthly payment math is still not working well for those looking to cash out, move up, or simply relocate. Expectations for a bull flattener in the UST market that would translate into low to mid 5% mortgage rates have been thwarted and are highly unlikely to resurface. It is a very challenging leap of faith to see any probability of the conditions for easing getting better from here given steady payrolls and rising inflation.

An easing would require a macro backdrop that hits payrolls and homebuyer confidence to make the FOMC move to ease. Such a move by the Fed could also drive a UST steepener subject to the underlying reasons used by the FOMC. The oil spike and price swings since Iran plus the documented inflation pressures will make life a challenge for Warsh. The years of “repricing of the household basket” under Biden and again under Trump has made life a struggle for many and now we are looking at negative real wage growth.

The above chart shows the geographic mix of volumes and details on price mix by region. The South is the main event in single family volumes whether new or existing at almost 47%.

For the bar chart, we break out the mix for each region by price tier. For example, the South shows around 50% of its existing home sales volume in the $250K to $500K range and over 17% of its sales in the $100K to $250K bucket.

The high cost of homes in the West (notably California) is clear enough just by glancing at the bar chart with over 17% at prices over $1 million. The second highest in the $1 million club is the Northeast at over 11%.

We see a major concentration across the regions in the $250K to $500K although the $100K to $250K bracket for the Midwest stands at over 28.4%. The West shows a high share of 28.3% in the $500 to $750K bracket, which again underscores how expensive the West region price tags remain in national context.

The map explains what states are in each Census region. There is a very wide range of home price profiles in the West and Midwest states.

Inventory for total existing homes ticked higher MoM to 1.55 million units for +3.3% MoM and +0.6% higher YoY. Current inventory is well below longer term medians including 2.08 million for the post-1998 median. The median from Jan 2011 (homebuilding low) to current times is 1.76 million. In other words, existing home sales inventory remains low even if the level is materially higher than the stunning low of 850K of Feb 2022 ahead of the end of ZIRP and start of the tightening cycle in March 2022.

The existing home inventory balance had shown a steady rise off the sub-1 million lows of 2022. Inventory had risen to the 1.3 million handle range in 2024 before dipping back down to a recent low of 1.14 million to close out 2024. We bounced off those numbers in 2025 to get back above 1.5 million handles before the recent move lower to 1.2 and 1.3 million handles and then back to current levels above 1.5 million.

The above two-sided chart updates the trend line in total existing home sales vs. new single family homes. After some material disruptions in the data updates during the shutdown, the new home sales data is current again (see New Home Sales April 2026: Slow Start to Spring 5-28-26).

The above chart breaks out the timeline for existing single family only of 3.8 million vs. total existing home sales of 4.17 million. The 4.17 million total is well below the long-term median (from Jan 1999) of 5.21 million. The total of 3.8 million for single family is well below the long-term median of 4.63 million.

Existing single family growth was 3.5% sequentially and 3.3% YoY (SAAR). The lower line is ex-condo/ex-coops. We saw 370K in condo and coop sales in May 2026, up from 360K YoY and flat to 370K MoM.

The above chart updates the median price for existing single-family homes at $434.3K (vs. $429.3K total) after June 2025 hit a record $438.6K. The median price in May 2026 is dramatically above the $308K level back in Jan 2021 and $277K in Dec 2019 when mortgage rates were in a different zip code and closer to 3.7% for 30Y Freddie Mac.

The above chart shows another angle on the sales mix across the price tiers. We just lift the numbers off the monthly handout for single family homes released by the NAR each month. Higher price homes and wealthier buyers have had a better time across this cycle as the “K recovery” certainly applies in housing given the mortgage pressure on monthly payments.

The $250K to $750K range is comprised of two tiers that add up to almost 2/3 of the market with the $100K to $250K showing a big share in some of the Midwest states as detailed in an earlier chart. We also looked at the growth trends for each tier earlier. Lower price tiers declined while the top 4 tiers rose. The lower price tiers are more on the cusp of where affordability and mortgage eligibility could be strained at 6.6% area handle mortgage rates (today’s Mortgage News Daily survey).

Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26

The Fall of CBS 6-3-26

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Producer Price Index May 2026: Too Many “Since 2022” References

Glenn Reynolds, CFA — Thu, 11 Jun 2026 18:16:39 GMT

PPI provides useful leading indicator metrics for PCE and CPI trends ahead, so the May PPI results are bad news unless some major progress is made in energy this summer with an Iran deal that is real.
Lag times from the underlying PPI cost pressures as well as event risk complicate the potential range of outcomes in the days ahead with more tariffs rolling in and Iran and Trump apparently back in a more violent exchange of “ceasefire actions.”
The total Final Demand index of +6.5% was the highest since +7.4% in Nov 2022. Final demand “less food, energy, and trade services” MoM at +0.8% was the highest since March 2022 at 0.9%. The YoY metric for the same index was +5.1% or the highest since Oct 2022 (5.5%). Bottom line: that is too many 2022 comps except PCE growth and monthly payroll additions, which were higher in 2022 than 2026.
The “Final Demand Goods” metrics were especially grim with the +2.8% MoM in May, which was the highest since it was first computed back in Dec 2009. The 12-month rate was +10.4%. The +36.6% rate for “Final Demand Energy” was (as all expected) a major culprit. “Final demand goods less foods and energy” was a less daunting +5.1%.

The above time series updates the running PPI line for “Total Final Demand.” The current 6.5% for May is triple the median since 2010 but the real test lies ahead with the questions of where energy markets could take this number. That wholesale effect will include raw materials across the supplier chains, and the pricing pressure at the end of those chains including impacts from freight and logistics costs to inventory costs.

To what extent tariffs might flow into goods pricing and services is also something that must still play out at a lag. Whether trade partners will respond to the latest barrage of tariffs or the US and Mexico will need to react to Trump’s threat to cancel the USMCA is among myriad possible decision points that tie more into geopolitical than rational economic decision making.

One thing is clear, and that is the reality there are no bragging rights in the PPI numbers even on a core basis. The same was true for CPI (see CPI May 2026: The 4% Rubicon 6-10-26).

The above table breaks out some of the important PPI metrics that we monitor plus a few smaller line items we like to watch (Construction, Private Capital Equipment). The PPI provides a stunning and lengthy range of metrics across over 20 pages in the release tables.

The YoY column tells a story of deteriorating inflation trends. Total PPI Final Demand has again delivered 6% handle numbers with 6.5% for May. The trend underscores the distinctly negative direction of underlying cost pressures along the chain from PPI to PCE/CPI.

We now have a backdrop where the flow-through of the above cost pressures will lead to higher costs and this means either higher prices or narrowing margins. Protecting margins from PPI pressures or tariffs can also bring cost reductions (layoffs, store/plant closings, capex cuts, etc.). That is where the stories need to be researched at the industry and company level.

The equity and bond market reaction have been relatively muted in returns around these inflation threats as we cover in other commentaries (see Market Commentary: Asset Returns 6-8-26). The UST has been climbing over the trailing month and YTD as we detail in the asset return recaps. Iran and Trump escalating will not help UST prospects.

The “Vegas line” over at FedWatch has essentially wiped out the odds of a cut in 2026. The chance of the FOMC acting on 1 cut by the Dec 2026 FOMC meeting as we go to print is 0.5% while the odds of 3 hikes is at 4.6%. That is not pretty. The leaderboard shows 1 hike posting the highest odds at 43.3% followed by “no change” at 28.9% and 2 hikes at 22.4%.

Warsh is in for a ride. Trump may need plastic bottles for the ketchup.

See also:

Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26

The Fall of CBS 6-3-26

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

CPI May 2026: The 4% Rubicon

Glenn Reynolds, CFA — Wed, 10 Jun 2026 17:48:35 GMT

All we need now is a major Iran escalation and more tariffs.

Headline CPI of +4.2% gets us into a new zone while Core at 2.9% is still not “core” to what is causing consumer headaches at the pump and in the aisles. Meats at 7.6% include beef and veal at 12.9% and fish and seafood at 6.5% while fresh vegetables weighed in at 11.9%. Coffee CPI was 17.5%. If you want to die young and smoke with that coffee, cigarettes are at 8.7% (I was on a long EU road show with the CFO of Philip Morris once in the 90s, and I think that shaved 5 years).
To quote Trump on Meet the Press: “Prices are down on groceries.” Not really… unless you are on an all-cheese diet (-6.0% for cheese) and drink tap water. Just scan the YoY column in Table 2. Then again, you use gas in the tank driving to the store and disposal/waste services costs are rising. So is the gas or electricity from the stove if you want that cheese grilled since utility costs are rising (also for the tap water). If the high cholesterol diet from the cheese and stress from caffeine withdrawal kills you, at least funeral CPI only rose 3.4%. The multiplier effect is alive and well.
In other household joy moments, Apparel is now at 4.8% and Footwear at +5.2% with the latest round of Section 301 trade actions unlikely to offer relief. Under “Recreation services” we are seeing some sharp moves in subscription and rental quietly sneaking up 14.2% YoY and 6.1% for the broader bucket. Music subscriptions were +7.2%. For some basic items, we see such items as “water and sewage services” at +4.7%, dental services at 8.5%, pet services at 7.0%, postage and delivery 14.7%. This can be framed at the household level where real wage growth is now underwater.
Looking at some special aggregate indexes, we see 4.7% for “All items less shelter” to go with 4.4% for “All items less food” and 5.2% for “All items less food and shelter.” Other adjusted lines such as Commodities at +5.5% and “Commodities less food” at 7.0% will get some attention (except from Hassett or Bessent).
Nondurables at 8.0% CPI have a CPI index weighting of 2.5x Durables with its -0.1% CPI. That low Durables CPI raises questions around the ability of many subsectors and industries to offset tariffs with the USMCA about to see a fresh round of upheaval. As we go to print, Trump has indicated he will not renew the USMCA. That is a very big topic for another day.
Services at almost 2/3 the CPI index is stubborn at 3.5% with some notable lines including Hospital Services at +5.7% and Electricity at 5.9% in the “Energy Services” bucket. Financial services have posted a sharp rise the past two months and now stand at 6.8%.
The Iran “ceasefire” is seeing more military action (as “ceasefires” go), with just the past few days swinging from an imminent deal yesterday to Iran will “pay the price” for delay overnight. That could mean hikes on the short end of the UST curve in 2026 and higher long rates regardless of the Fed.

The above chart plots the historical time series for fed funds vs. headline CPI, and the headline CPI keeps moving higher and crossed the 4% threshhold after ending 2024 below the 3% line. We also include the long-term medians, which underscores that this is “not normal.” We reiterate that you can tell the consumer that “core is all that matters” for inflation but just don’t do it while he is filling up his gas tank on the way to the grocery store.

Oil prices also will clearly matter to FOMC voters who cut their academic teeth studying the disaster of the 1970s (notably 1974-1975) and the 1980-1982 stagflation double dip (Iranian oil crisis in 1979). The common features of Mideast conflict and embargos and supply disruption cannot be ignored. The most dramatic difference is that the US is now a record oil producer exporting record volumes at high prices. If oil exports were banned, prices would plunge in the US. That said, Trump knows where is meal ticket is.

“Core” CPI (or PCE) may be more significant to the debate around inflation (as defined by economists and monetary junkies), but the purchasing power and the relative affordability of the household basket is about real wages and what in that basket may have to change. The negative real wage growth and household cash flow strain is a topic you cannot hide from. Something has to give on Iran or in wages if this keeps up with higher financing costs also a reality in monthly payment stress (durables funding and mortgages). Household cash flow dilution has already taken savings rates back to 2Q22 levels (see PCE Inflation: Income and Outlays April 2026 5-28-26).

The above chart frames fed funds vs. CPI. It is now negative at -0.6. vs. the long term median of +0.6%. In the world of very basic theory, that is accommodation. So, the walk from here to an easing policy will need more than trimmed CPI. That would require more than a trim but would need a chainsaw to remove economic reality and abandon the household sea level experience.

As we go to print, the Vegas odds (CME FedWatch) show the odds of 1 fed cut by the Dec 2026 FOMC meeting stands at 1.2% vs. the odds of 1 hike at 42.5%. The odds of “No changes” in fed funds is 32.3%. That “unchanged” probability is lower than the 1 hike odds. The odds of 2 hikes by Dec 2026 is 19.9% while the probability of 3 hikes at 3.8% is higher odds than 1 cut at 1.2%.

The above time series for headline CPI vs. Core CPI highlights the divergence of the two in this market backdrop. We see some of the highs and lows of the post-COVID timeline with the 2.4% Sept 2024 headline level that should call for treating the Powell legacy with a little more respect rather than giving him (and the collective FOMC) the electric chair (which now costs much more to operate).

We don’t see Trump, Hassett, or Bessent using such images in their sales pitches. They sure would not post them. After all, facts make noise while the theme music is playing. The idea of CNBC delivering a tough factual follow-up question like “Is inflation higher or lower than late 2024?) would make guests mad and be less likely to come back on. The constant focus on June 2022 by Trump and team takes away from the reality of the starting point of Jan 2025.

As we covered in the bullets, the customized CPI benchmarks posted in Table 3 of the BLS release are troubling in historical context. These detailed above are our favorites, but there is a long list worth reviewing. All items less shelter has been our top pick across time as we have cited in prior research since “Shelter CPI” comes with too many asterisks and derived numbers that do not fit the typical household reality (or even close).

The chart shows “Services” still stubborn. It also drives home the stark differential between the Durables CPI trend and the much larger Nondurables line. The ability (or desire) to pass through tariff costs has not hit Durables CPI yet.

The 4.7% for this “ex-shelter” metric in May is a material contrast with the sub-2% levels of 2024 including 1.9% in Dec 2024 (Biden’s last month). In mid-2023 the level was +0.7%. The FOMC was doing its job the right way by then, and the payroll adds of those 2023 days crushed what was posted on Friday (see Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26). Friday’s payroll additions were only around the median posted since the start of 2009. It was only very strong compared to the weak 2025 numbers.

One line that caught our attention this month in the special aggregates was “Utilities and public transportation” CPI at 6.0% (not shown above) along a CPI line with an 8.0% CPI index weighting. Total transportation CPI in Table 3 was 9.3%, which includes “private” transportation CPI of 8.6%.

The above table details our Big 5 subsectors for CPI. These roll up to around 75% of the CPI index, so overall this mix of 5 broad categories is the main event even if there are plenty of line items outside this group that matter a lot to consumers.

We will not give much space to our long-held view on the low value of the lines that are derived and inconsistent with the household “checkbook experience” and household cash flow (notably shelter and the steep deflationary number of -6.4% for health insurance). Some of those lines speak for themselves at a time when such items as ACA premiums have soared and the deductibles offering are shifting the mix in the wrong direction. Too many people have had to drop coverage or see deductibles spike to find “affordable” health care.

The energy and food at home buckets show adverse moves. The higher costs of housing is also ugly when including financing and the monthly payment pain even if the CPI metrics do not capture that. Mortgages and the cost of financing do not get factored in the product line CPI and mortgages and auto financing are clearly going in the wrong direction.

With many households crushed by health care premiums (notably the ACA), the consumer is certainly not “feeling the deflation” in health insurance seen in the table. Those that struggle with coverage then get held hostage to the rising costs of services as broken out. The 5.5% for “hospital and related services” rose by +0.7% MoM and is high by any measure with 6.4% for the outpatient subset.

The above table updates some of the lines near and dear to households. Airline fares are heavily tied to jet fuel costs and that gets back to the K recovery debate on who can eat those price increases. These lines are a mixed picture with divergences across lines within these buckets.

The Apparel CPI is starting to look more rational relative to the pain Trump looked to inflict on the low-cost Asian countries. He lost on IEEPA and is now using the Section 301 “forced labor” strategy to raise tariffs (10%, 12.5%) on essentially all trade partners. Total apparel at 4.8% included 4.1% on Women’s and Girls Apparel but with the total Footwear line at 5.2% (Women’s Footwear at 6.2%). Jewelry CPI was 21.4%.

See also:

Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26

The Fall of CBS 6-3-26

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Taiwan: Stakes are High, US Awareness is Low 5-17-26

Industrial Production April 2026: Bringing a Lift 5-15-26

Existing Home Sales April 2026: Steady or Clinging? 5-14-26

Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26

Market Commentary: Asset Returns 6-8-26

Glenn Reynolds, CFA — Mon, 08 Jun 2026 18:19:31 GMT

Pick one for this week, but they are both ceasefires.

We enter the week with a fresh wave of missiles in the US-Israel-Iran War (we mean “ceasefire” per Trump and “war is over” per Rubio). The oil experts continue to weigh in on what the supply shock will look like as the Strait disruptions continue. How that will impact the chain from oil to refined products is a material risk with EU and Asia on the ropes. China inevitably will step back in to buy and push the demand side at some point. Meanwhile, the fertilizer shock is a “brace for impact” X factor Washington does not discuss much.
Trump also is now launching his latest tariff gambit to recover the tariff revenue stream using “forced labor” as his angle (see USTR release on Section 301 tariffs). The USTR is worth a read how all the major (and minor) trade partners are guilty of violations. The USTR rationalization is worth a read while the White House tries to keep a straight face on how they care for the plight of oppressed workers in developing nations. The substance of the grounds is a lot like the Section 232 National Security grounds for upholstered furniture (seriously?!). The risk again now is whether trade partners respond.
As we cover in the charts below, the scale of the moves for tech on the downside are mitigated by the even more stunning recent spikes higher. The Semiconductor ETF (SOXX) at over a +79% return YTD and single names such as Dell (+213%) and Micron (+208%) along with Intel (+169%) are showing supernatural returns YTD even after this week’s sell-off.

The above table updates various timeline returns for the major fixed income and equity asset class benchmarks we watch. The duration setbacks are evident in the UST index and the weak returns for the longer duration IG Corporate index. Credit spreads have remained quite compressed with HY and IG spreads signaling resilient credit risk appetites in bonds (private credit loans a different story).

Equities had a setback this week as we detail below, but the running time horizons are still impressive looking back YTD and 1 year. Even just for the 1-month period with all of this week’s “noise,” only the Russell 2000 small caps was in the red. The running 3-month and YTD numbers annualize to results well in excess (in some cases a multiple) of the long-term returns on the equity asset class.

Another week of bad news for UST deltas undermined bond funds as we detail below. With Iran deal uncertainty, oil price swings, and the supply of numerous critical commodities from the strait looking questionable, the CPI and PPI data this week could complicate life for Warsh in his sales pitch to the FOMC to ease. Warsh is looking to pitch his new focus on modified data benchmarks. He may come across as more “axed” than analytical to his very seasoned and analytically oriented audience.

The above UST deltas basically cover the post-Iran moves. We start the timeline two days before the bombing began. The results are obvious enough. The economic talking heads can get into discussions of the economic definition of inflation (monetary only, yada, yada, etc.), but the big question for household economics is the erosion of purchasing power for the “household basket” and what adjustment they need to make in the face of a weaker household cash flow position. The plunge in savings rates may hold a clue (see PCE Inflation: Income and Outlays April 2026 5-28-26).

The Magnificent 7 heavy ETFs…

Some of the benchmarks and industry ETFs we include have issuer concentration elements that leave them wagged by a few names. When looking across some of the bellwether industry and subsector ETFs in the rankings, it is good to keep in mind which narrow ETFs (vs. broad market benchmarks) get wagged more by the “Magnificent 7” including Consumer Discretionary (XLY) with Amazon and Tesla, Tech (XLK) with Microsoft, Apple, and NVIDIA, and Communications Services (XLC) with Alphabet and Meta.

The “Mag 7+3” can be considered a key part of the tech drivers when Broadcom (AVGO), Oracle (ORCL) and Taiwan Semiconductor (TSM) are added to the mix. Those market cap rankings have been moving around across the months, and the growth in names such as Micron ($974 bn market cap 6-5-26) may require some new grouping and tag lines as 2026 proceeds. Oracle is more a software and systems company that has been volatile and has fallen off the pace (ORCL is a holding in the Software ETF, IGV). Taiwan Semi has been consistent, and Broadcom also is in “the trillion plus club” at this point.

The above table updates the bellwether tech names and some key benchmarks and ETFs for the week. We see a shutout this week with all lines negative. Broadcom sitting on the bottom with -13.7%. We see the Semiconductor ETF (SOXX) at -5.15% and the Software ETF (IGV) at -5.72%. This week Oracle reports earnings as does Adobe.

The attached text was already posted on LinkedIn on Saturday. We update with some edits:

The broader mix of 32 benchmarks and ETFs show some broad-based pain with a positive-negative score of 11-21 that included carnage in tech and all the bond ETFs in the red this past week. The S&P 500, NASDAQ, Russell 2000 small caps and midcaps (MDY) were all negative. We can throw in the Dow as well, but we don’t include that in our checklist of 32 asset lines (30 companies makes it a low value indicator in our view with the Dow more about tradition).

We see the energy ETFs (XLE, AMLP, and XOP) back in the top quartile joined by Health Care (XLV). In a counterintuitive trend when the UST curve was not happy and UST deltas made adverse moves, we saw Financials (XLF), Regional Banks (KRE), Homebuilders (XHB) and Real Estate (XLRE) back in the top quartile. KRE and XHB made the top tier with minimal sub-1% returns, so the bar was low.

The S&P 500 saw its 11 sectors post a 6-5 positive to negative score, but larger sectors took a major hit with Consumer Discretionary at -6.2%, Info Tech at -5.4%, and Communications Services at -3.9%. Those 3 sectors are over half the S&P 500. NASDAQ was blitzed with a -4.7% return on the week with the Friday bloodbath cited as the worst “point drop” (not % drop) in its history.

The problem was clearly not just tech even if tech usually bogarts all the headlines. For example, we saw Ford Motor drop -14.6% on the week after its recent sharp rally that saw it partially close the 1Y return gap with GM. For Ford, it was more idiosyncratic with a major recall on some very popular nameplates (Bronco, Maverick).

More broadly for consumers, the worries around credit card debt total and quality trends have been picking up along with all the fears around Iran fallout. There is also the question of what the FOMC might need to say at its June meeting after this coming week’s CPI and PPI data on top of the solid jobs report.

Iran realities (vs. headline mis/dis-information) are not going as most had hoped. The further we get into the summer, the more the scenarios of oil supply disruptions and oil shock risk will get tested. Questions like “When will China start buying in scale again?” among others keep showing up in the oil trade rags.

Across the 32 asset lines above, we see the Tech ETF (XLK) in dead last and Consumer Discretionary ETF (XLY) just ahead with the NASDAQ 3 off the bottom and Communication Services (XLC) just ahead of EM Equities (VWO) in the bottom 5. The small cap Russell 2000, the Equal Weight NASDAQ 100 ETF (QQEW) and increasingly tech heavy S&P 500 are in the bottom tier. Among some other changes (POOL out, FLEX in), bumping Campbell’s out of the S&P 500 this month for an AI play in Marvell Technology was the end of an era.

The attached text was already posted on LinkedIn on Saturday. We update with some edits:

This week’s Tech Check mix was a contest for who would turn in the worst numbers as financial journalists scrambled for synonyms and other ways to say, “worst since.” The positive vs. negative return score in our Tech Check mix shown in the chart was 3-29 with all the broader benchmarks in the red as covered in a separate post. Beyond the NASDAQ and increasingly tech-heavy S&P 500, we see Russell 2000 also negative on the week. Note: We replaced Zillow with Dell since the Saturday LinkedIn post.

Friday was a brutal day as the headlines covered with the NASDAQ dropping 1,121.5 points for the worst single day in points in its history. For the decline in percentage terms of 4.2%, the drop was the highest since April 2025 in the aftermath of Trump’s reciprocal tariff pitch and ensuing chaos (including the UST market).

Disturbances along the UST curve can serve to undermine the growth stock valuation math, so the broader risk picture (massive, growing deficits, inflation, oil uncertainty, etc.) can weigh on portfolio decisions for those sitting on outsized unrealized gains built into positions.

All the Mag 7 names were in the red spread across each quartile with Apple (AAPL) in the top quartile while NVIDIA (NVDA) and Alphabet (GOOGL) were in the second quartile. Meta (META), Microsoft (MSFT), and Amazon (AMZN) were in the third quartile with Tesla (TSLA) bringing up the rear in the bottom quartile.

The 3 assets in positive range show a mild rally by FactSet (FDS) at #1 after the SaaS-based services equities have been beaten down YTD on fears of AI displacement. Legacy tech stalwarts Cisco (CSCO) and Applied Materials (AMAT) joined the small group of 3 posting positive returns. Of those in the top quartile, we see Midcaps (MDY) and S&P 500. Only Taiwan Semi (TSM) of the major semi names made the top quartile - but with a negative return. Salesforce (CRM) climbed back into the #8 position.

The Semiconductor ETF (SOXX) was at the bottom of the second quartile and Software ETF (IGV) was down in the third quartile. The bottom quartile is heavier on the semiconductor names than usual this past week with some of the usual underperforming software/SaaS suspects (Intuit, Palantir) plus Tesla. Oracle reports this coming week (6-10-26) with its fiscal 4Q earnings report.

The overall profile of returns was grim with 7 asset line items posting negative double-digit returns and the #1 performer (FactSet) at only +4.1% and the #2 performer (CSCO) at 1.0%. No joy for tech for the week and ended on a bad note.

The trailing 1-month timeline trimmed a strong May record with the 24-8 score for 1-month returns last week giving way to a 15-17 positive vs. negative tally this week. We see 5 of 7 bond ETFs in the red in the above with two on the positive side but close to zero.

E&P (XOP) and Energy (XLE) dropped into the bottom quartile while Midstream Energy (AMLP) was slightly negative in the third quartile. BDCs had another bad month at second to last. The important Consumer Discretionary ETF (XLY) and Communications Services ETF (XLC) – among the largest of the 11 S&P Sectors – were in the bottom quartile.

The winners include Transports at #1 and followed closely by Tech (XLK) and the Equal Weight NASDAQ 100 (QQEW) as the bad week in tech did not cut too far in the prior banner weeks. Interestingly, the Equal Weight S&P 500 (RSP) ranked #5 and outperformed the 4 broad market indexes.

The tech drama has really picked up in recent weeks with dramatic swings higher and lower, but the semiconductor and AI ecosystem is overwhelmingly biased higher. The software and SaaS-based service providers have been whipsawed around in the “AI displacement” theories and existential threats to business models (or at least threats to growth rates and “price x volume” threats).

We have covered the big movers in past weekly posts on LinkedIn and Substack (see Market Commentary: Asset Returns 5-31-26). With the search for anything with a direct and/or indirect relationship with AI, the results have been stunning with legacy incumbents such as Dell or Intel running off the charts in some weeks.

We will get more color from a megacap this week with Oracle (ORCL) earnings. We will also get a fresh round of explanations from Adobe (ADBE), who is posting a YTD return deep in the red zone (-28%). For the railing 1-month, ADBE was slightly negative at -1.64% and trailed the Software ETF (IGV) with its +8.6% return.

The software and SaaS names are still showing a lot of pain in the 1-month chart. We removed Zillow from our tech check mix to make room for Dell, but Intuit (INTU) on the bottom still highlights the “AI threat” effects on the SaaS front.

The 1-month bottom quartile is more mixed now with 3 Mag 7 names in the bottom tier mix (AMZN, GOOGL, META). We also see Broadcom (AVGO) taking a fall for the 1-month period with Intel (INTC) and Communications Services ETF (XLC). These names have been really swinging around.

The 3-month horizon gives a better visual on the immediate post-Iran period with the reaction to inflation worries and the UST yield curve and consumer reactions that might unfold. The 20-12 score for the broader mix of 32 asset lines shows resilience. That has been supported by the stock market momentum and a stabilization in jobs numbers – even if the occupational mix lacks the optimal multiplier effects in such areas as manufacturing (see Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26).

We see 5 of 7 bond ETFs in negative return range with only EM Sovereigns (EMB) and HY (HYG) slightly positive at returns below 1%. Among the weaker lines, we see Homebuilding (XHB) feeling mortgage rates with the dividend-heavy story lines such as Consumer Staples ETF (XLP) and Utilities (XLU) underperforming. The XLP and Discretionary Consumer ETF (XLY) also reflects worries around inflation pressures and how core spending items such as gasoline and electricity bills were going to weigh on personal consumption.

The YTD score for the broader 32 benchmarks and ETFs weighed in at 24-8 YTD with duration only sending 3 bond ETFs into the red zone with 4 bond ETFs just across the line. The easy winners were in energy with XOP at #1, XLE at #2 and AMLP at #5. Tech (XLK) at #3 and Transports (XTN) at #4 rounded out the top 5.

The private credit setbacks show BDCs (BIZD) mired in last place on a combination of high profile headline disaster names (including fraud) and the growing awareness of the very unsurprising reality that leveraged, private loans of smaller cap companies are not liquid in the face of redemption requests. Some earnings releases and efforts to improve transparency helped calm some nerves recently. Asset managers have reminded the market of what a large and diverse mix of borrowers (by quality, industry, and alternative funding options) are in the broadly defined market of “private credit.”

The YTD Tech Check return offers a stark reminder that “tech” covers a wide expanse of names going through rapid secular shifts. Some of the names are on a pure growth and expansion curve while others are exposed to slowing growth or “zero sum” syndrome. The score of 20-12 on the chart reflects that reality with many software and SaaS-based service names taking a beating YTD.

Semiconductors were big winners and “anything AI” and “anything inside the data center” took off with the market suddenly loving Dell in recent weeks. The YTD return of 79.2% on the Semi ETF (SOXX) is in stark contrast with the -9.3% on the Software ETF (IGV). The recent swings in legacy names with more business line diversity such as IBM show investors spreading their exposures across more product subsectors.

The bottom quartile runs from -11.9% for FactSet (FDS) to -55.2% for Intuit (INTU). We had bumped Zillow from our Tech Check list to make room for Dell, but Z is running around -48.6% YTD or modestly better than Intuit.

At 31-1 positive vs. negative is clear enough with the Tech ETF at #1 posting a +53.6% return and BDCs (BIZD) sitting in last place with -11.8%. The median return in the mix is around 16.3%. It took 27% to make the top tier.

The bottom tier shows bond ETFs comprising 5 of 8 joined by BIZD, Financials (XLF), and dividend-heavy Consumer Staples (XLP). Financials have been a mixed bag with the struggles of private credit and software exposure as well as potential setbacks in interest margin on cost of funds expectations with FOMC policy now more likely exposed to tightening.

The winners LTM include a mix of tech (XLK, NASDAQ) and Energy (XLE, XOP) with Base Metals (DBB) riding the commodity price wave from Gulf supplier chain disruptions – notably for Aluminum and Copper (via sulfur). Transports (XTN), Russell 2000, and Regional Banks (KRE) rounded out the top tier as we have covered along the way.

The above chart provides a visual of the positive vs. negative symmetry across the various time horizons. As time marches on, results are arguably going in the wrong direction for breadth despite the dazzling tech numbers.

The Fall of CBS 6-3-26

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Taiwan: Stakes are High, US Awareness is Low 5-17-26

Industrial Production April 2026: Bringing a Lift 5-15-26

Existing Home Sales April 2026: Steady or Clinging? 5-14-26

Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26

CPI April 2026: 4.1% All Items Less Shelter, 30Y UST 5% 5-12-26

Remembering D-Day: June 6, 1944

Glenn Reynolds, CFA — Sat, 06 Jun 2026 21:29:56 GMT

Employment May 2026: Big Rebound, Low Multiplier Bias

Glenn Reynolds, CFA — Fri, 05 Jun 2026 17:13:12 GMT

Not the prime-time economic multiplier effects? OK for now.

The massive “beat” vs. consensus on job adds weighed in at +172K for May. The release includes major upward revisions in March (+29K to +214K) and April (+64K to +179K). The unemployment rate was flat at 4.3%.
The payroll additions are dominated by Leisure and Hospitality at +70K, Local Government at +55K, and Health Care and Social Assistance of +47.2K for a total of over +172K just on those three occupation lines. Those are not in the high “economic multiplier effect” category but more paychecks are intrinsically positive.
“Goods” payroll additions of +28K included +17K in Construction, +7 in Manufacturing, and +4 in “Mining and Logging” (primarily E&P). An important note is that Manufacturing was lower YoY by -46K, which for now means the Golden Age onset for manufacturing has not arrived yet. Services rose by +92K, and Government by +52K for the Establishment Survey total payroll additions of +172K (92 Services + 52 Government + 28 Goods).
The average hourly earnings increase of 3.4% is not stacking up well vs. the 3.8% CPI in April. Real earnings are also looking grim vs. recent PCE inflation numbers including +3.8% headline PCE and core PCE of 3.3% (see PCE Inflation: Income and Outlays April 2026 5-28-26). The 1Q26 GDP release posted a headline PCE price index for 1Q26 at +4.5% while the core PCE price index ticked slightly higher to +4.4% from +4.3% (see GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26). The story is ugly for real earnings.
In the Household Survey, the report details a decline of -66K unemployed for a total of 7,307K (7.31 million) and a 4.3% unemployment rate (7.31 unemployed/170.1 mn labor force). The number of total employed rose by 149K to 162.77 million.

The JOLTS openings as detailed earlier this week show more of those openings getting filled as we move closer to the summer (see JOLTS April 2026: A Modestly Positive Turn 6-2-26). That is good news for the “paycheck count.” One can make qualitative assessments on the mix of occupations reporting increases in payrolls, but the reported number meet the “MO jobs, MO money” rule to support consumer spending volumes.

Consumer sentiment/confidence has been very low, but the material decline in savings rates can mean a range of things with either (or both) a desire to spend or “a need to borrow” on the list (See PCE Inflation: Income and Outlays April 2026 5-28-26). More jobs always help the backdrop. As of now, inflation exceeds wage growth. That is by definition bad.

The monthly payroll adds/declines chart above starts in March 2022 with the end of ZIRP and the start of the tightening cycle. The bar chart tells an objective data story. The revised +214K for March, revised +179K for April and May print of 172K along with the 4.3% unemployment rate are not only “not easing friendly” for the FOMC but the direction of oil and Iran and Gulf chaos could determine whether the backdrop is “hike friendly.”

As we go to print, the odds of 1 hike by the Dec 2026 FOMC meeting is 43.3% vs. 28.7% for no change. The odds of 2 hikes are up to 22.4%. The odds of 1 cut are +0.8%.

The payroll addition numbers in 2025 and 2026 include the only negative deltas on the chart since March 2022 with 6 months in the red during Trump 2.0. We are now at least seeing some numbers above the post-Jan 2009 median of 170K. That long-term median of +170K includes a slice of the longest recession since the Great Depression, so it is not a high bar to clear.

A glance back at the 2022 numbers offer a reminder of what a high rate of job adds looks like. Of course, the labor backdrop and immigration issues change the overriding variables.

The above chart plots the running job adds/declines since Jan 2009 against the unemployment rate, which at 4.3% would be considered full employment in past cycles. In the chart, we isolate the worst months of the COVID dislocations in the box for better visuals to capture the other periods.

The 4.3% U-3 is below the long-term median from Jan 2009 of 4.9%. Payroll has been struggling somewhat in relative terms, but history is very kind to 4.3%. If the 2025-2026 frame of reference for payroll additions is 2024 (not a good jobs year) then the 2025-2026 numbers are solid (not great). If we compare 2025-2026 monthly adds to the 2022-2023 period, the current job add run rates are weak.

The above chart updates the time series for the U-3 unemployment rate and U-6 structural underemployment rate across the years from 1994.

As a reminder, the U-6 metric is defined with the numerator as “total unemployed + persons marginally attached to the labor force + total employed part time for economic reasons.” The denominator is “civilian labor force + workers marginally attached to the labor force.”

The U-6 is the structural underemployment metric that is always useful to watch. To start 2025, the U-6 rose sharply in Feb 2025 to 8.0% from 7.5% in Jan 2025. The U-6 jumped to 8.7% in Nov 2025 from 8.1% in Sept 2025.

The current 8.1% marks a decline from 8.2% in April but an increase from 7.9% YoY vs. May 2025. The U-6 is well above the 6% handles seen in spring of 2023. The U-6 is still below the median from 1994 of +9.3%, which notably includes the post-crisis shock and the longest recession since the Great Depression.

The time series above updates the U-6 minus U-3 differential as a measure of relative employment quality and to flag risks of major dislocations in large swaths of the economy (think oil patch collapse in the late 1980s, tech bubble imploding into a weak 2001-2003, and financial services and automotive meltdown in 2009).

The current 3.8% differential is just below the long-term median of 4.0%. The job ranks are still vulnerable now with the Iran war effects flowing into hiring decisions, industry fundamentals, and FOMC policy planning. The recent rising rate of adds is clearly favorable but do feature some of the occupations in services where major swings come easily. The AI wildcard will remain a critical X-factor on where payrolls head in Services especially.

The above chart updates total payroll vs. the unemployment rate. The trend needle has not moved much in 2026 and has been in a narrow range. More bodies with more paychecks are always a good thing. The trick from here is how the consumer deploys that paycheck and whether the zero-sum realities of household budgets undercut spending. The PCE line in the GDP accounts is a critical driver of growth and negative real wage reality a soft leading indicator either on spending or on wage demand pressure.

The above chart updates the total payroll number vs. job openings. JOLTS data had been recovering with banner job openings this past week even though hires were weak. We see some of those openings being filled in the May payrolls (see JOLTS April 2026: A Modestly Positive Turn 6-2-26).

Management teams have a lot of moving parts to factor into planning whether quantitative or qualitative. The final IEEPA decision from SCOTUS came in against Trump, but he was prepared to start slapping on tariffs under Section 122, 232, and 301. That is well underway on Section 301 tariffs with a range of announcements this week. Those tariff actions will create more trade partner strife with the EU and Asia.

The USMCA is up for review and that is already starting out ugly with Trump bringing out his “51^st state” trash talking even as MAGA stokes the fires for Alberta secession. The EU diplomatic setbacks and trade relations are downright ugly at this point after Iran. NATO appears to be in the crosshairs.

The trade flows have been looked at in many past commentaries (see Meanwhile…Back in Economics and Tariffs 3-2-26, US Trade with the World: Import-Export Mix 2-25-26). The US has a goods trade surplus with Canada ex-oil. Canada is also the leading export market for almost 3 dozen US states.

The FOMC and the market both have much to digest, and Trump is making it clear to the domestic audience that there is a ceasefire and the “war is over.” This is hard to reconcile with a full blockade (an act of war by international law) and ongoing Iranian actions against both the US and Gulf nations.

The headlines around multiple supplier chains have been covered in other research, but fertilizer is one that aims directly at food while oil aims at just about everything from the gas pump to delivery costs, raw materials, and leisure and travel (airfare). The headlines highlighted the threat to semiconductor production while some customers could see IT budgets slammed. With so many bad headlines in private credit, the idea of financial stress and the need to be cautious on spending/capex will be an issue to be played out. That means the consumer sector is likely to be facing more risk ahead even with these good payroll numbers. Inflation and the lowest savings rate since the inflation peak of 2022 is a metric that needs to be watched over the summer.

The overall economic impact of tariffs had been far less than feared given the reality that most trade partners backed down in 2025. That still could change in 2026 with the latest wave of Section 301 attacks on supplier chains and trading partners.

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Taiwan: Stakes are High, US Awareness is Low 5-17-26

Industrial Production April 2026: Bringing a Lift 5-15-26

Existing Home Sales April 2026: Steady or Clinging? 5-14-26

Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26

CPI April 2026: 4.1% All Items Less Shelter, 30Y UST 5% 5-12-26

The Fall of CBS

Glenn Reynolds, CFA — Wed, 03 Jun 2026 17:27:43 GMT

CBS: You will be visited by three ghosts - Murrow, Sevareid, and Cronkite.

It will not go well.

JOLTS April 2026: A Modestly Positive Turn

Glenn Reynolds, CFA — Wed, 03 Jun 2026 01:18:52 GMT

What’s behind door #1 (Iran deal?), #2 (skies-the-limit tech boom?), or #3 (escalation + Houthis + Red Sea?)

The +731K (+10.3%) rise in openings MoM (+7.3% YoY) was dominated by the “Professional and business services” with a +668K increase. Notable declines included “Finance and Insurance” at -135K.
Hires decreased by -419K or by -7.6% and that takes a little luster off the job openings optimism. Manufacturing as a recurring focal point in the new tariff regime saw hires move modestly lower by -20K. Retail trade was lower by -81K and “Transportation, warehousing and utilities” lower by -41K. “Professional and business services” hires were down by -131K , Financial activities down by -30K, “Private education and health services” was down by -67K.
On a positive note, “layoffs and discharges” declined by -192K or by -10.2% MoM and by -6.9% YoY. Retail trade layoffs declined by -88K, “Professional and business services” dropped by -112K. Manufacturing layoffs rose slightly but construction layoffs declined.
A big question from here is where Iran and the consumer cycle go next and what will happen to Services hiring/firing in the age of AI. For now, it is still “low hire/low fire” but job openings offer hope.

The above time series plots job openings across the timeline from 2007 to current. This month brought a very sharp rebound in openings that starts to claw back some of the material downward trends from the end of ZIRP and the start of the tightening cycle in March 2022.

The high of 12.2 million off the lows of 4.6 million at the peak of the COVID panic are pretty dramatic, but recent periods had been soft before the April 2026 bounce of +731K back to 7.6 million. Openings are running well above the long-term median (5.92 million).

The 10.6% increase YoY job openings for April 2026 was good news and the questions from here will be how quickly (or not) those translate into actual hiring with the Iran X-factor playing a big role. The AI economic effects in terms of productivity and payroll needs also will be up in the air in a services economy.

The above chart plots Hires vs. Layoff/Discharges on a SAAR basis. Note: we remove the COVID numbers from several charts to support the visual value for “normal” periods. We comment on COVID history at the end of the note.

Hires declined by -419K sequentially from March 2026 while layoffs/discharges declined by -192K. The hires YoY declined by -275K or by 5.1%. While we are in an expanding economy, the annual GDP growth of 2.1% in 2025 had lagged 2024’s 2.8%. The hires rate is still tentative even if the openings are there. Layoffs were down -126K YoY or by -6.9%

The 1Q26 GDP as revised in the second estimate is off to an unimpressive start at 1.6%, which was revised down from +2.0% in the advance estimate (see GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26). That is not much of a tailwind. We get payroll numbers later this week.

The above chart updates the ratio of Hires to Layoffs/Discharges. The relationship stands at 3.02x, above the long-term median of 2.91x from 2007. The post-2007 period includes the effects of the longest recession since the Great Depression (Dec 2007 – June 2009) followed by the longest expansion in history from June 2009 to COVID (Feb 2020), which brought a very brief 2-month recession wrapped around a wild swing in pandemic employment.

The above chart plots Hires vs. Total Separations on a SAAR basis. Separations include Quits, Layoffs/Discharges, and “Other Separations.” Total Separations declined by -399K in April 2026 vs. March 2026 and were lower by -292K YoY.

We typically do not find “Total Separations” particularly interesting as a multi-line net number. The decline in Separations can be attributed to a decline in layoffs as noted earlier and to a -183K MoM decline in “Quits.” One theory is that quits signal relative confidence in finding a job on the other side of quitting. That theory implies some nervousness right now.

The Hires minus Total Separations differential is plotted above. As covered, the decline in Hires is material while Separations declined on lower Layoffs and lower Quits.

The net number above has moved notably lower in recent months and dipped into the negative range in Feb 2026 before bouncing back into positive range in March and April. The differential is below the long-term median of +174K.

The time series for Total Quits as a % of Separations (SAAR basis) was 59.8%, slightly above the long-term median of 58.0%. The classic “Quits Rate” is measured by Total Quits as a % Total Employment, and that metric moved slightly lower on the month to +1.9%, down from 2.0% in March 2026. The Quits rate is also down YoY from 2.0% to 1.9%.

The bottom line on the JOLTS numbers for April is that it was one that UST bulls cannot use to make a case for easing, which is pretty much impossible now anyway unless you are Hassett and threw out your facts and concepts book.

The long-suffering bull flattener advocates who are already worried about oil will remain worried about oil until Iran is cleared up and the effects of the massive inventory drawdown are clear (or not) this summer.

NOTE ON COVID DISTORTIONS

The Hires vs. Separations time series make for interesting numbers but tough charts to plot visually given how much the spike in Separations/Hiring during COVID distorted the numbers from March 2020 to June 2020. The swings literally were off the charts. For presentation purposes, we adjust the charts above to exclude the raw data for those months to get a better vantage point on somewhat more normal times. Compared to COVID, the credit crisis seems “normal” in terms of the job count moves.

For disclosure purposes, Separations across March 2020 (16.3 million), April 2020 (11.6 million), May (4.7 million), and June (5.2 million) were running against Hires in March (5.2 million), April (4.0 million), May (8.1 million), and June (7.4 million). We remove those from the charts to get better scale visuals on the periods that precede and follow as the market saw 50-year lows in unemployment in 2022. Wild swings were experienced by all as industries saw shutdowns and layoffs in the COVID recession. The long-term medians from 2007 to 2022 for Hires and Separations were very close.

Almost 28 million Separations combined in March-April 2020 as a brutal reminder of that period.

See also:

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Taiwan: Stakes are High, US Awareness is Low 5-17-26

Industrial Production April 2026: Bringing a Lift 5-15-26

Existing Home Sales April 2026: Steady or Clinging? 5-14-26

Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26

CPI April 2026: 4.1% All Items Less Shelter, 30Y UST 5% 5-12-26

Retail Signal Read Part Deux 6-1-26

Glenn Reynolds, CFA — Mon, 01 Jun 2026 20:03:08 GMT

Gasoline costs how much?!

After our earlier look at the performance of retail equities last week with a wave of earnings reports, we update a broad group of retailer equity returns for the past week (see Retail Equity Comps: Looking for Signals 5-26-26).
The Hi-Lo range of around 36% (30% if we toss out the Hi and Lo data points) and a positive-negative score of 13-19 tell a very mixed story. The two bellwether retailer ETFs (XRT, RTH) split the difference for the 1-week period with a +1% handle return for XRT (very well diversified) and -1% handle return for RTH (heavy weighting of Amazon and Walmart).
We excerpt some quotes from the management calls that signal the impact of tariffs or summarize their view on the consumer. It is just a flavor sampler.

We discussed the two major Retail ETFs plotted above in a brief retail commentary last week. This update above uses price returns and starts just before the Iran adventure (aka “war”) kicked into gear. RTH is very exposed to Amazon (AMZN) and Walmart (WMT) at around a 35% weighting while the XRT is exceptionally diverse with the largest holding well under 2%.

The negative trend is evident in both. Retail equities are mostly in negative return range since Iran. That is not a surprise given the cost fallout. The chart below for weekly total returns from this past week can be read in conjunction with the earlier note that includes that week as well as a YTD cut of the data. The takeaway is one of winners and losers (as is usually the case in retail peer groups) but also a theme of resilient consumers that are shifting gears on affordability challenges but not in sales contraction mode.

The lower economic tier consumers and value seekers are not a new theme by any stretch, but the news of late has been about strain in credit card debt service starting to appear. Those are more important than soft sentiment indicators. The recent PCE release also flagged a plunge in savings rates to the lowest since 2Q22 at the inflation peak. That is not good news in this case if the pressure on household costs increases from here (see PCE Inflation: Income and Outlays April 2026 5-28-26).

The above chart follows up on what we posted after the first big round of retail earnings. Two weeks ago, earnings releases included bellwether Walmart along with a range of other key players such as BJ’s, Home Depot, Lowe’s, TJX, Ross Stores, Target, and Urban Outfitters among others (see Retail Equity Comps: Looking for Signals 5-26-26).

This past week brought a fresh batch of earnings that provided a mixed but balanced picture with some clear winners and losers. Among the stellar performances on the week as posted above was Best Buy (BBY) and Dollar Tree (DLTR) along with the much smaller cap Kohl’s (KSS) who beat on their numbers and rallied by almost 10% on the week. That doesn’t change the fact that KSS is running at almost -29% YTD.

The profile of returns above shows a lot of negative numbers on the week with The GAP on the bottom. The 13-19 score in the mix shows the Equal Weight S&P 500 ETF (RSP) on the bottom of the positive asset lines at +1.1%. The weighting toward negative returns is suboptimal for retail but not anything resembling a panic button. We ran through a range of press releases and transcript excerpts and looked for brief statements on a few high-level topics to find some cut-and-paste material:

· How do they see their customer base narrowly or the consumer broadly?

· What is happening with tariffs? (they are always very cautious on that political hot button).

We use some from the past week and some from the prior week. We found The GAP disclosure among the more extensive on the topics.

Notable tariff and cost commentary from retailers…

We spot checked for tariff color in terms of margin impact and how some retailers see the world in the post-IEEPA period after the SCOTUS decision and how they are gauging what comes next with Team Trump scrambling to replace the IEEPA tariff revenue.

The apparel companies were especially exposed to the tariffs slapped on low-cost Asian suppliers by IEEPA. The companies see plenty of the same risks ahead with Trump determined (as confirmed by a few of the Cabinet including Bessent) to get tariff revenue back up to their original levels using existing legislation (without any additional use of Congress of course).

The GAP and tariffs:

“Gross margin of 40.5% declined 130 basis points versus last year, coming in ahead of guidance…The 100 basis point decline in merchandise margins reflects an expected headwind from the net impact of tariffs of approximately 200 basis points implying 100 basis points of underlying merchandise margin expansion.”

“First quarter reported operating margin was 12.7%. On an adjusted basis, operating margin was 5.2%, down 230 basis points compared to last year, primarily reflecting the net impact of tariffs.”

“We are updating our assumptions today to reflect Section 122 tariffs at a 10% rate on goods received after February 24 through the July 24 deadline. For the remainder of the year, we’ve assumed tariff rates revert back to IEEPA level rates incorporated in our original plan.”

“Tying these pieces together, we now expect approximately $80 million or 50 basis points of year-over-year net tariff relief to our gross and operating margin relative to our prior outlook for tariffs to be net neutral for the year. Given the timing of receipts -- this benefit is expected to be weighted towards the second and third quarters”

“We are keeping a close watch on the extent to which companies may reinvest this year’s tariff upside into pricing actions.”

Costco on tariffs:

“Our plan is to return to our members in some form, the portion of tariffs that were passed on to them. How much we return and when depends on a variety of factors, including how much refund money we receive and when it arrives as well as developments in the lawsuit filed against the company regarding the return process.”

“We’re closely monitoring the longer-term inflationary impacts of higher oil prices as well as the future impacts of tariffs. Our buyers continue to demonstrate their ability to adapt and are using their significant experience and expertise to try to reduce the impact on prices for our members. Our goal is to be the first to lower prices and the last to raise them…”

Best Buy on costs and prices:

“In Q1, our blended computing ASP was flat to last year, largely as a result of product mix and the staggered implementation of these product price increases.

“I will touch on how we are navigating the impacts of memory cost increases, which mostly impacts our computing category. As expected, product costs have been increasing and product price increases have been flowing into our assortment.”

“We’ve seen evidence of this with our customer behavior in the past situations, most recently in response to tariffs. We have also made some strategic decisions to pull forward supply in certain areas to alleviate these impacts, as you can see from the growth in our inventory on our balance sheet in the first quarter.”

Dollar Tree on costs and tariffs:

“Against a backdrop of ongoing uncertainty around fuel costs and tariffs, we will continue to protect value while strengthening the quality and relevance of our assortment. In this environment, our powerful combination of value, convenience and discovery continues to resonate with customers across all income levels and a wide range of shopping occasions.”

“…we are assuming that the current tariff rates remain in place through July and then increase in the back half of the year to the levels predating the February 20 Supreme Court decision. Additionally, we’ve not included any tariff refunds in the outlook.”

Burlington Stores:

“…we expected tariffs to be less disruptive to pricing and supply this year. Well, check, that is what we are seeing. The supply of off-price merchandise is excellent right now.”

Kohl’s:

“The total tariff refunds we are eligible to receive is $190 million. We did not receive any tariff refunds within the first quarter… There’s no tariff refund in any of the estimates that we had given today. Obviously, we talked about the fact that we did apply for those but we haven’t received those refunds yet. So those will be all on top of the numbers that we have guided today.”

“We serve a middle to lower-income customer. So this is very important to them. So we’re going to make sure that we continue to lean in on that. So I think those kind of become your balancing factors, and that’s really where you get to the guide of that flat to slightly down giving us some room”

Walmart:

“on tariffs, we are availing ourselves of the process to get refunds. We would definitely bias and try to prioritize price investment for that, given what we’ve seen both in terms of the pressure on consumers from fuel prices, but importantly, as well as the retention and the share gains that we’ve had, we think the single best return that we can have on a $1 of capital right now is to invest in the customer and invest in price.”

BJ’s:

“…we invested considerably in value during the quarter by returning tariff refunds to our members through pricing… we made the investments in price not really in response to any particular competitor, but really just to use the opportunity we had from the tariff refund to invest in our membership for the long term.”’

TXJ:

“we have submitted for tariff refunds, but our guidance currently does not assume any benefit from any potential refund and nothing more to add on that…”

Home Depot:

“obviously, as we stand today, we could say we could see potential cost pressures building in the form of fuel prices and other commodity input costs, new tariffs have been introduced. But the environment is changing almost every day. And so it’s hard to see where all of that winds up and where it settles…”

“…we see increased fuel costs, not only hitting us directly. Obviously, we obviously have a considerable amount of transportation expense in our P&L but also in the form of input costs. At the same time, number one, it’s still very early in the year. And number two, there are some potential tailwinds here. We’ve talked in our sector about tariff refunds. We have filed for those tariff refunds. And while we don’t disclose the amount and while we have received an immaterial amount to date, we have assumed… that could provide a significant offset to those costs.”

Sample comments on consumers generally…

The GAP:

“From what we can see today, the consumer remains resilient…”

Costco:

“…we don’t give guidance on what we expect future trends to look like…I would say, in broad terms, what we’re seeing at the moment is just a continuation, I should say, of the trends that we’ve seen in really the last year or so, members being very willing and having the capacity to spend.”

Dollar Tree:

“…we recognize the consumer environment remains dynamic, especially for lower income households, navigating higher fuel costs and broader macro uncertainty. Customers are shopping thoughtfully and closer to need, with a continued focus on affordability, convenience and trip efficiency. Customers value the ability to shop nearby and quickly to stretch their budgets through smaller and more affordable pack sizes and to still find a compelling assortment and discovery throughout the store.”

“On your question about fuel, there was some sort of small volatility in the quarter, but it really wasn’t a factor so much this quarter because of the timing of the conflict and the increases in the fuel rate. We’ll start to see that coming in the back part of the year.”

Burlington Stores:

“…we’re perhaps a little more wary now than we were in March, based on higher gas prices and the potential impact on inflation. We’re watching the trend very closely and looking for any change in consumer behavior, we haven’t seen it yet. But as an off-price retailer, that is what we do. We watch to see how the trend changes. And the benefit of the off-price model, when it’s well executed, is that we can tap the brakes or we can hit the accelerator if we need to.

Kohl’s:

“We continue to see choiceful discretionary spending from our core low to middle income consumer as they remain financially pressured.”

Dick’s Sporting Goods:

“We continue to see a healthy consumer across income demographics with no signs of trading down alongside particularly strong engagement from our younger athletes. Our consumer is really responding to newness and innovation, which is showing up throughout the DICK’S business with broad-based growth across footwear, apparel and hard lines. Given our continued confidence in the DICK’S business, we are raising the low end of our expectations for comparable sales and now expect growth of 2.5% to 4%, up from 2% to 4% previously.”

“…the outlook that we have provided continues to kind of indicate that level of confidence around the core strategies, and we are balancing that against the macroeconomic and the geopolitical landscape.”

Walmart:

“the consumer, especially here in the U.S., they’re telling us they’re feeling some pressure, and they’re looking to Walmart for value… the consumer, increasingly, it depends upon which consumer you’re talking about. We see with our customers that the high income customer is spending with confidence into many categories, while the lower income consumer is more budget conscious and perhaps navigating financial distress.”

BJs:

“While the consumer in the broadest sense has been resilient in the face of continuing challenges, we continue to see a more pressured environment for the lower income households. Elevated costs are weighing more heavily on that segment, and we’re seeing more value-seeking behavior as a result.

TJX:

“… our values and merchandise assortment resonated with consumers across all of our retail banners, and that each of our divisions grew their customer base. Looking ahead, the second quarter is off to a good start, and we have many initiatives underway that we believe can continue to drive sales and customer traffic… we’ll have more consumers looking for value is an opportunity for us going forward…”

Home Depot:

“The underlying demand in our business was relatively similar to what we saw throughout fiscal 2025 despite greater consumer uncertainty and housing affordability pressure.”

“underlying demand was relatively similar to what we saw throughout 2025. So that suggests that our consumer has been remarkably resilient. There’s been a lot thrown at them. But if you look at PCE growth year-over-year, that was similar in the first quarter, that was similar to all of last year. Employment is hanging in there. Wage growth has been reasonably strong. And you look at our core customer, they’re probably amongst the healthiest of all consumers. So they tend to own their homes. They did have that 50% value pop in the value of their homes over the past several years. And their portfolios of equities have also improved

Market Commentary: Asset Returns 5-31-26

Glenn Reynolds, CFA — Sun, 31 May 2026 20:47:34 GMT

What do you mean it is canceled!? I thought Trump loves ICE?

May wraps up a month for the ages in tech but at a time when risks show a wide range of potential outcomes that include some wildly unpredictable flow-through effects.
Tech returns were stunning on a weekly and monthly basis with even the SaaS services names climbing out of the pit. Oil prices dropping from $105 handle WTI to $87 in two weeks helps on a numerous fronts even if the odds of easing by the Dec 2026 FOMC meeting have faded to essentially zero with the odds of 3 hikes higher than 1 cut.
Domestic political instability in the US and a basic lack of analytical factual focus in Washington on major economic risks (micro, macro, geopolitical) make the chaos hard to price. Iran could escalate dramatically or simply go away as the market would then look past the readjustment process for energy and commodities into 2027. Partisan distortions (aka lies) often rule the dialogue.
The good news is that Vanilla Ice and half of Milli Vinilli may fade as a discussion point except on Truth Social posts in the middle of the night. Even Morris Day gave Trump The Bird.

The above table updates returns for the debt and equity benchmarks we track. Debt is back to all positive for the trailing 1-month but negative for 3-months in three of the four most exposed to duration risk. HY is still holding in at positive for 3-months even if at a subpar positive YTD run rate featuring compressed spreads.

Equities have obviously been a very different world than fixed income with especially impressive run rates in tech heavy benchmarks. The 1-month and 3-month timeline for growth benchmarks have been dazzling even with software and SaaS-based services operators taking a beating as we review in the “Tech Check” charts below. Some SaaS and Software names are back in rally mode.

Breadth has no bragging rights at this point for the large caps but the subsector allocators and stock pickers can still excel outside of tech. Energy has been an obvious winner YTD subject to volatility, but the small cap Russell 2000 and Midcaps also have been strong performers. In the industry mix, the YTD chart further below shows Industrials (XLI), Base Metals (DBB), and Materials (XLB) in double digits YTD on the very high fixed investment that we see in the GDP lines. Some have also been direct beneficiaries of the Gulf supply disruptions (e.g. aluminum, petrochemicals).

The above chart updates the UST deltas in a week when oil was lower and hope for an Iran deal was rising. WTI was at an $87 handle Friday after $96 last Friday and $105 the prior Friday.

As we go to print Sunday, CME FedWatch shows odds of 1 cut by the Dec 2026 FOMC meeting stood at 0.2% while the odds of 3 hikes was 0.9%. The probability of unchanged leads the odds at 51.8% while 1 hike stands at 37.9% and 2 hikes at 9.2%.

Those probabilities whip around, and the UST market is anxiously awaiting new on a deal with Iran. That outcome will set off a fresh round of handicapping on where that will take crude oil and gasoline during peak driving season. The inflation anxiety is high with peak refinery runs for gasoline, diesel, and jet fuel facing high feedstock prices now. That flows into surcharges and operating costs for the food chain from farmers to delivery and freight costs.

The above table updates the UST deltas from the period just before the bombing started in Iran. This past week brought the rate deltas down but credit card financing costs, durables financing (e.g. retail financing), and certainly mortgage rates are more headwinds hitting household cash flow flexibility.

The tech bellwether update showed only 2 lines in the red this week with two Mag 7 names – NVIDIA and Alphabet. The top tier had blowout weeks in this mix with Oracle (ORCL) at +17.5%. We look at a wider range of tech names in the “Tech Check” list further below, where ORCL was an “also ran” relative to the +42.6% for Dell and over +29% for Micron (MU).

A notable move on the above list was the Software ETF (IGV) and its position as #2 this week. IGV beat out the Semiconductor ETF (SOXX). As we detail below in the “Tech Check” chart below, we see some beaten-down software and SaaS names making a comeback with ServiceNow (NOW) at +21.8% and Palantir (PLTR) at +14.4%. Oracle is also a major holding in IGV as is Microsoft (MSFT) and Salesforce (CRM) that all posted solid weeks.

The following is an edited and updated cut-and-paste from our weekend LinkeIn post on the weekly asset returns:

We update weekly total returns for the mix of 32 benchmarks and ETFs. The obvious themes are tech is still booming, oil is lower, and rates are lower. Only the Russell 2000 joined the NASDAQ in the top tier with the S&P 500 and Midcaps (MDY) in the second tier. The S&P 500 saw 6 of 11 sectors positive with Information Tech and Consumer Discretionary carrying the week partially offset by Financials and Energy.

Iran handicapping flows into numerous rate-sensitive sectors but factors into consumer sector handicapping. We looked at retailer performances last week in a separate commentary and will update that later. Retail results were mixed overall but no red flags. We see general concerns around price sensitive shoppers and value brands but not a case of broad gloom based on traffic and sales trends.

Another banner week for tech keeps the record index streak going for the market benchmarks. The Tech ETF (XLK) weighed in at #1 with the Equal Weight NASDAQ 100 ETF (QQEW) at #3 and NASDAQ at #5. Lower oil gave an immediate lift to airlines and the Transport ETF (XTN).

Homebuilders also felt tailwinds with mortgages declining from the recent 6.75% peak now slightly under 6.6%. The news from builders has generally been unfavorable but a monthly rebound in the Census “New Home Sales” release was impressive. We cover that in our Macro4Micro Substack.

For the UST curve effects, all bond ETFs are positive this week with 4 bond ETFs in the third quartile and 3 in the second quartile, where bond ETF returns are led by the EM Bond ETF (EMB). The next move on Iran will be a critical risk-reward variable this coming week (if Trump decides or counters). Trump is learning that Iran is not like Congressional GOP game theory where all orders and ultimatums lead to surrender. The memo on the “martyrdom thing” never got to him. SCOTUS is not his refuge from Iran’s fanaticism.

As noted earlier, the odds of the Fed easing by the Dec 2026 FOMC meeting remain negligible even though the probability of a cut rose from 0% in recent weeks to 0.2% this week. By comparison, the odds of 3 hikes stand at 0.9% (as of Sunday mornin). The high probabilities still favor no action (51.8%) with the odds of 1 hike at 37.9% and 2 hikes at 9.2%.

The low potential for easing has weighed on Financials (XLF) in the bottom quartile and Regional Banks (KRE) in the third quartile with interest margins a question and asset quality a mix of private credit concerns (notably for KRE) and consumer worries that are only slowly surfacing (credit cards).

The BDC ETF (BIZD) popped up into the top quartile with more of the big players making efforts to beef up disclosure and tackle the worries head on with clear statements and transparency. Otherwise, extrapolation will run amok with each new blowup in the private credit sector and gets mapped onto the entire, highly diverse asset class.

The bottom 3 asset lines in the low quartile cut across diversified Energy (XLE), Midstream (AMLP), and E&P (XOP). Some interest rate sensitive (and dividend reliant) sectors will need more good news from Iran to break out of the inflation worry bucket. We see Consumer Staples (XLP), Utilities (XLU), and Real Estate (XLRE) in the bottom quartile despite the brief favorable move in rates.

The following is an edited and updated cut-and-paste from our weekend LinkeIn post on the weekly asset returns:

The week brought another banner performance for the “Tech Check” list except this time the software and SaaS-based service names stepped up the comeback pace. We see a score of 29-3. We note that the score was 28-4 before we dropped Zillow from the mix and added Dell to the group. Dell burst back into the headlines with a daily price move on Friday of 32.8% for +42.6% on the week and a 104.7% month.

We dropped Zillow from the mix to make room for Dell in our group of 32. Zillow just does not seem like it is going to be as interesting as Dell for a while (then again, in tech you never know). At least we have plenty of other SaaS-based services examples. Zillow put up a -3.7% return for the past week and is cruising along at an ugly -48.7% YTD. We will drop that one for now from the collection among the services companies that have been tagged as AI displacement risks.

Besides Dell, a big story for the week was the material rebound in some SaaS names led by ServiceNow (NOW), who placed #3 at +21.8%. Software also played catchup. The top tier saw IBM have another good week at #5, Palantir (PLTR) at #6, and Software ETF (IGV) at #8.

IBM, which is more of a multiline hybrid tech legacy leader, posted +17.3% for the week at #5 but only just broke back into YTD positive return range at +0.54%. PLTR remains negative YTD at -11.9% despite a +14.4% week. With a +8.1% week, IGV is still in the third quartile with a negative YTD price return of -3.8%. The bottom quartile YTD returns are still bracketed between Meta at -4.2% and last place Intuit (INTU) at -50.0%.

The top quartile in the Tech Check is heavily about semiconductors and the AI ecosystem effects with Micron (MU) at #2 after steamrolling the month of May at +87.3% with a weekly return of +29.3%. MU was #2 for the month behind Dell. Oracle (ORCL) weighed in at #4 for the week with +17.5% and placed #6 for the month of May with +37.8%.

The 1-month score for the broader mix of 32 benchmarks and ETFs weighed in at 24-8 in a banner month for the broad benchmarks with the NASDAQ, S&P 500, and the small cap Russell 2000 in the top quartile. We see the Equal Weight S&P 500 (RSP) just below the top quartile with Midcaps (MDY).

We see the 3 energy ETFs (XOP, XLE, and AMLP) dropping into the bottom quartile for the 1-month number after a run into the top tier YTD where they remain as of this week. Interest rate sensitive sectors have had their share of headwinds even with the rally in the UST curve this past week with Homebuilding (XHB) in negative range and Financials (XLF) feeling the concerns over net interest margins and asset quality.

We see BDCs (BIZD) coming off a good recent week but still in the red for the month. The BDC journey this year has been an interesting one as the market had been framing rapid asset growth against some high-profile meltdowns and fraud. That was another excuse to look back to past periods of excess in “new” credit asset classes launched in past cycles whether it was HY excess in the late 1980s (notably 1987-1988), the tech borrowing boom of the late 1990s, or the structured credit lunacy of the 2004-2007 stretch.

Private loans are not a new asset class at all (I started my credit career in insurance private placements in the early 1980s). What is new is the nature of the origination wave and the scale of disintermediation. Risky credit already did that dance in the transition from the thrift crisis into CBOs and then into the CLOs of the 1990s before the onslaught of credit derivative structures and counterparty exposure in the new millennium.

The private credit story and “hyper-origination wave” to maximize fees and AUM is arguably more like the rise of the HY bond markets. That excess eventually highlighted the questionable secondary liquidity of the asset class as sharp repricing hit the headlines and refinancing alternatives dried up outside restructurings.

Life got spooky in 1990 when the securities shops faced hung bridge loans and Drexel filed Chapter 11. As we highlight in the 3-month return chart below, BIZD climbed back into the middle of the second quartile. The private credit asset class saw more earnings reports and more extensive originator and manager commentary coming into the market. It also helps when newer or more aggressive lenders back off from the “anything with a pulse” mentality of lending.

As the 1-month Tech Check timeline shows, May was a spectacular month for tech with all the “best since” and “best ever” accolades seen in the headlines. It took 31% to make the top quartile that was led by Dell at +104.7% and bracketed on the low end by IBM at over 31% in the #8 position. The score of 30-2 shows Intuit still in the red with Meta also in negative range.

The median across the 32 was just under 12% (for 1 month!). We see 3 Mag 7 names in the bottom quartile (META, NVDA, AMZN), 2 Mag 7’s in the third quartile (MSFT, GOOGL) and 2 more in the lower end of the second quartile (AAPL, TSLA). The semiconductor-heavy rankings and the AI capex boom themes include an array of other tech products and services offerings as driven home by Dell this past week. We see the Software ETF (IGV) closing the gap with the Semiconductor ETF (SOXX).

For the month, we see the software and SaaS names making a comeback with ServiceNow (NOW) at +39.9% and the Software ETF (IGV) at +20.3%. Oracle is in IGV and weighed in with +37.8%.

The 3-month timeline is like a post-Iran horizon that includes a mix of consumer and cyclical anxiety, an oil price spike and partial retrenchment in energy, and a strong run by other commodities as Base Metals (DBB) rose in the face of Gulf disruptions.

The score of 19-13 shows the period was no picnic with 6 of 7 bond ETFs in the red and the HY ETF (HYG) just under 1% with resilient spreads and decent coupons mitigating the more limited duration damage. HY was still just under 1% for the period.

We see the Tech ETF (XLK) almost 2x NASDAQ returns (the #2 line) followed by the Equal Weight NASDAQ 100 ETF (QQEW). The small cap Russell 2000 and tech heavy S&P 500 round out the top 5. It only took 7.1% to make the top quartile while it took over 13.3% to make the top quartile YTD.

The YTD numbers show a strong market that ran alongside the tech boom and good corporate sector earnings. The consumer sector’s resilience is a reminder that it takes a lot to make PCE contract (as in almost never does but it can slow down). GDP has been held up by the fixed investment while Personal Consumption Expenditures (PCE) at 68% of GDP have been weak in context but at least growing.

A secular shift such as the AI capex boom can make a big difference in multiplier effects. The same is true for easy credit markets. The test will be whether credit risk and equity valuation end up as “too much too soon.” Iran has to get put to bed. The other big topic is that AI multiplier effects already has cost a lot of jobs in tech and could cost a lot more from here and extend somewhat more brutally to service jobs in what is a “service economy.”

For fixed income, we see only 1 bond ETF in the red with the rest posting minimal returns with only two over 1% (EMB and HYG). The long duration UST ETF (TLT) was the only bond ETF in the red YTD. Iran’s side effects could jeopardize some of the good news in the consumer sector on household budgets. For interest rate sensitive sectors, the Iran risk is high. The worry is that Iran is not dealt with more intelligently than it has been to date (a very low bar).

The Tech Check YTD is impressive for the big winner returns but perhaps less so than one might guess at 21-11. The struggles of software and SaaS services names underscore that radical change brings its share of risks, costs, and victims (corporate and human).

It took a spectacular 46.8% (QCOM) for around 5 months to make the top quartile. The median for the 32 lines has a 15% return handle, and that already is 50% ahead of the long-term annual returns of the equity asset class in a single year.

The cluster of negative returns in the bottom tier includes 6 lines in double-digit negative returns, and that is after the recent rally. Intuit at -50.0% (-49.95%), Salesforce at -27.9%, and Adobe at -25.9% are sobering for owners of assets in these highly successful, branded tech service businesses.

The 1-year returns show a score of 31-1 with only BDCs (BIZD) in the red. All the bond ETFs are positive, but we see Financials (XLF) and dividend-centric Consumer Staples (XLP) in the bottom quartile on the uncertain curve outlook among other reasons (cyclical worry, bottom half of the “K” craters, mixed payroll trends).

For the overall return profiles, the returns are very strong. It took +29.8% to make the top quartile and the median across the 32 is a 16% handle for the LTM period. For the full period, we see impressive breadth and diversity of returns at the 20% line or above. That said, the latest trends have highlighted the absence of breadth as a recurring theme.

For the LTM period, we see sectors such as Industrials (XLI) and Materials (XLB) above the 20% line. Midcaps (MDY) with 20% handles and small caps (RUT) with 40% handles tell a very good story for corporate performance. Even Transports (XTN) at #2 with 45% returns has been reassuring and the same for the Base Metals (DBB), who were riding solid demand but also the distortions of the Gulf.

Where we go from here will turn very heavily on Trump’s Iran moonwalk, the potential for a major clash in trade on the USMCA review, and fallout from the dramatic erosion of relations with Europe.

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Market Commentary: Asset Returns 5-26-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Taiwan: Stakes are High, US Awareness is Low 5-17-26

Industrial Production April 2026: Bringing a Lift 5-15-26

Existing Home Sales April 2026: Steady or Clinging? 5-14-26

Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26

CPI April 2026: 4.1% All Items Less Shelter, 30Y UST 5% 5-12-26

JOLTS March 2026: Openings Down, Hires Up, Layoffs/Discharges Up 5-5-26

Synchrony Financial: Favorable Consumer Credit Signals 4-24-26

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

New Home Sales April 2026: Slow Start to Spring

Glenn Reynolds, CFA — Fri, 29 May 2026 02:10:19 GMT

The new home sales data show declines on a SAAR basis MoM (-6.2%) and YoY (-11.3%) volume declines even as the spring season is rolling in. The market saw another one of those “higher prices with high inventory” backdrops. Total inventory was up +1.7% MoM and down -2.2% YoY. On a Not Seasonally adjusted basis, the YTD 2026 sales decline stands at -6.5%.
The volumes show 3 of 4 regions down MoM and YoY with only the West higher. The South region at 59% of total sales was down -9.8% MoM and -14.7% YoY. That mix shift by region presumably explains the higher median prices with the pricier West being the region that saw material increases in sales.
The $422.5K median price bucks the trend seen in the 1Q26 reporting season with numerous major builders reporting lower ASPs.

The above chart updates the new single family home sales series from 1963, and the current 622K (SAAR) still marks a healthy rebound relative to the grim Jan 2026 number (576K revised). That said, the 622K is still weak in the context of 2025. The volumes are in the range of the long-term median but well below the 1980s/1990s.

The median of 989K in the housing boom/bust cycle from 2001-2009 is almost 60% higher. As we look back to the peak of the housing bubble, we see 1389K in July 2005 at over 2x the April 2026 volume. The COVID panic buying and relocation spree in Aug 2020 saw sales of 1036K as a wild period for new home sales and home starts in a ZIRP market with very low mortgage rates.

The above chart plots the share of total home sales (new + existing) that were captured by the “new home” builders. We see the share is now at 13.4% vs. the long-term median of 11.6%. When inventory is scarce, the right home at the right price wins. The challenge overall for new home sales has been mixed for builders by region. Major buyers generally report gross margin compression in 2026 and guided to similar expectations.

The market edge favors builders vs. existing home sales (note: existing is still the vast majority of volume). The homebuilder has the ability to use incentives and financing support (see Existing Home Sales April 2026: Steady or Clinging? 5-14-26).

Given the headwinds for volume in the existing home sales market in mortgage refinancing (golden handcuffs,” etc.), the shortage of existing housing inventory at economic all-in costs (price and mortgage rates) has been a recurring drag (see Existing Home Sales March 2026: New Beginnings or New Ends? 4-15-26).

D.R. Horton as the #1 US homebuilder offers a useful microcosm of the new home challenges (see D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26). The 6% handle mortgage rates have been a struggle and had moved briefly as high as 6.75% before easing back to 6.6%.

The new home sales volumes are softer overall, and that can vary by region and product tier. On the other hand, the higher prices posted this month are not consistent with some of the color we hear from major builders on prices and narrowing gross margins.

Incentives are still a material part of the builders’ selling strategies, but the bias on ASPs should be downward extrapolating from some of the major builders. For example, the average selling prices in the recent quarter for DR Horton, Lennar, Pulte, and NVR among the biggest names all posted lower average selling prices. The census release points in the other direction for April.

The mid 6% handle mortgage rates are not offering relief on monthly payment pressures and affordability. The past week shows the 6.6% area in surveys as reported by Mortgage News Daily. The 10Y UST is the key benchmark for the direction of 30Y mortgages.

The median price time series above tells a simple story that prices had been under modest pressure after a period of record highs and a long stretch over the $400K threshold with a few dips below the $400K line.

As noted above, the move higher to $422.5K in April 2026 is bucking the trend after $391.1K last month. Lower average selling prices have been seen in the first quarter for a sampling of major builders. The trend could be explained as a matter of geographic mix with the volume declines in such regions as the South with its lower ASP mix. Meanwhile, the West rose with its traditionally higher ASP mix.

The above chart gives a different visual angle on the median new home sales prices from early 2022. That is a lot of $400K handles with some sub-$400K outliers. The current $422.5K posted a sharp rebound from $391.1K. The price metrics can shift with regional mix as well as home price tiers and related supply issues. The affordability question is still intertwined with the monthly payment pressures from mortgages. It is about more than price.

The time series above updates the new single family home sales across the cycles since 1973 for the #1 and #2 regions of the South and the West. The 370K for the South is around 59% of the total of all single-family new home sales (SAAR) and marks a sequential decline of -9.8% from March 2026 and is down by -14.7% YoY. The West at 159K is 26% of the total. For the month, the West was +18.7% sequentially and +4.6% YoY.

The timeline for new home sales for the smaller Midwest and much smaller Northeast market is detailed above. The Midwest (11% of total) was -25% sequentially and -21.4% YoY. The Northeast market (4% of total) was -12.9% sequentially and -12.9% YoY.

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Market Commentary: Asset Returns 5-26-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Taiwan: Stakes are High, US Awareness is Low 5-17-26

Industrial Production April 2026: Bringing a Lift 5-15-26

Existing Home Sales April 2026: Steady or Clinging? 5-14-26

Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26

CPI April 2026: 4.1% All Items Less Shelter, 30Y UST 5% 5-12-26

JOLTS March 2026: Openings Down, Hires Up, Layoffs/Discharges Up 5-5-26

Synchrony Financial: Favorable Consumer Credit Signals 4-24-26

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

PCE Inflation: Income and Outlays April 2026

Glenn Reynolds, CFA — Thu, 28 May 2026 21:58:28 GMT

Which voice will the UST curve get next week?

Real fed funds with fed funds net of core PCE is very compressed vs. history you with inflation rising. The “Warsh Watch” will be trying to gauge how he addresses the Iran effects in tone or in specific policy. The new Fed head will need to walk some Trumpian hot coals, and he needs to convince the FOMC voters.
The +3.8% headline PCE and core PCE of 3.3% is well ahead of target but not in a 2022 red zone without a lot more damage from Iran fallout. The sequential MoM rate declined for both headline (+0.7% to +0.4%) and core (+0.3% to +0.2%). Energy Goods and Services were high MoM (+3.9%) but materially lower than the March Iran shock of +11.6%.
For YoY PCE price trends, the +3.8% in April is up from +3.5% in March while core PCE inflation ticked higher to +3.3% from +3.2% in March. “Energy Goods & Services” PCE prices rose to +18.3% after +14.4% in March. That is a spike from -0.2% in Feb and -0.9% in Jan 2026. Housing was muted in the low 3% during 2026 with +3.2% in the +3.0% to +3.2% range we have seen since Jan 2026.
The personal income and consumption story for April 2026 saw MoM “Current Dollar Disposable Income” slightly negative at -0.1% with “real DPI” at -0.5% in April, down from -0.2%. Meanwhile, “current dollar PCE” MoM was +0.5% vs. real PCE MoM at +0.1%. Those relationships of DPI vs. PCE flag why savings rates plunged to 2.6% or the lowest since the months of 2Q22 during the inflation peak.

The above chart frames the timeline for “effective fed funds minus Core PCE.” For this latest date posted, we are down to +0.3% with a slight reduction MoM. The level is well below the long-term median of 1.4%. If one sees inflation moving higher and demands from the White House to take rates lower, the economics class students could start wondering why they bother studying.

The FedWatch odds of an FOMC easing by the Dec 2026 meeting are zero as we go to print. The odds of 1 hike are 37.8% and no changes at 51.9% and 2 hikes at 9.4%. Those odds will swing around with Iran, oil and inflation readings.

The above chart updates the long-term time series from 1972 for PCE vs. Core PCE across the decades and cycles. We see the 2.6% headline PCE long-term median in the lower left (below the current 3.5%) and the 2.6% Core PCE median (vs. current 3.3%). That 3.8% headline PCE for April 2026 is dramatically better than where we came from in July 2022 at 7.1% PCE, but it is still well above the 2.0% target and going in the wrong direction. In the context of 2025-2026, the headline PCE price index was 2.6% in Jan 2025 to start Trump 2.0 before dipping down to 2.3% in April 2026.

This is a replay slide we use as a reminder on how the 2.0% target inflation rate frames up across the cycles.

We include the 1997-2026 timeline above as it offers a useful frame of reference on the PCE target of 2.0% that is routinely discussed by the Fed and in the markets. The shorter timeline from 1997 offers a better visual scale separate from the wild 1970s and 1980s.

The “1997 to 2026” period presents a rare stretch at or below the 2.0% PCE line and Core PCE median as noted in the chart. It took a lot to go wrong in that time horizon at the systemic level and in terms of macro shocks to cross below or at that 2.0% threshold. The events along the way included tech bubbles bursting in 2000-2001; oil crashes in the late 1990s and in the late 2014 to early 2016 period; and a bank system crisis from 2008 to 2011 (including sovereign stress) to get us there. The COVID pandemic in 2020 was a new one for the modern capital markets.

That gets us back to the debate over what is the correct formal inflation target or the “closet target” somewhere above 2%. There is not likely to be a formal change in the target, but the current backdrop would be missing it regardless and going in the wrong direction.

With an oil spike and Mideast war, the inflation history is a very bad one looking at late 1973-1974 and again in 1979 (The original ‘Iran oil crisis”) on the way into the 1980-1982 double dip.

The above chart frames the long-term differential history between PCE and Core PCE since 1972. The long-term median differential is zero and we are currently at +0.5%. The volatility around that compressed long-term median ties into the energy wildcard with some food distortions also back in the 1970s.

We look at some of the CPI energy and food inflation moves in separate commentaries (see Inflation: The Grocery Price Thing vs. Energy 12-16-24, Inflation Timelines: Cyclical Histories, Key CPI Buckets11-20-23). Food and electricity inflation have been near the top of the affordability political rage-fest in this cycle.

The power demands of data centers are going to keep that line item in the headlines and notably as data centers get pushback in the states given power costs and environmental effects. Life will get sticky in AI and the related ecosystem if the electricity topic cannot be addressed.

Oil and refined products have joined in at this point, but there seems to be little interest from team Trump to argue that the 2022 inflation spike was heavily influenced by the Russian invasion of Ukraine. That evasion of the oil impact in 2022 as a major inflation driver crushes the credibility of the talking heads in the White House (Hassett, Bessent et al.). They can’t let on that Biden is not entirely to blame.

The above time series plots headline CPI vs PCE across time. The debates around which inflation metric is the best is something more for the faculty club types, but the above chart drives home how each has behaved across time.

“Higher or lower or stable?” is a good place to start regardless. Any investor should be aware of the line-item trends by product groupings, and relative weights are also useful to help guide the strategic reaction to headline and core inflation metrics.

Food and Energy is crucial for the consumer even if the monetary ideologues will carry on their views around inflation as narrowly defined in academic terms. The household experience with prices underscore that consumers care about household discretionary cash flow and how their take-home pay frames up vs. their household basket. “Derived metrics” that do not match up with their own checkbook experience (owners’ equivalent rent, health insurance CPI, etc.) matter less to many versus their increasing health insurance premiums and financing costs for their major big-ticket purchases (e.g. autos).

The above chart is something of a “replay chart” we include in updates as a reminder that political theme-spinning out of Washington on economic cycles and inflation are usually stacked with selective memories, false statements aka (self-serving lies), material omissions, and conceptually anorexic story telling (like “seller pays the tariffs”).

The above chart updates the trend line in disposable personal income (DPI) vs. personal consumption expenditures (PCE) that we get with each monthly PCE release. We like updating this chart each month for a reminder of what really happened given the waves of disinformation from the current administration. Revisionist history is one thing, but it is good to challenge gross falsehoods and misstatements with facts and history.

When PCE growth exceeds DPI growth (or negative DPI), as we see in April 2026, one conclusion is that many consumers are feeling good (i.e., ignore the sentiment metrics). Or perhaps they are tapping credit cards by necessity (e.g. the PCE could include outsized health care premiums put on their credit cards?).

We have been watching the rate of ACA dropouts and premium increases and shift to higher deductible plans. Health care is a mess and note clearly captured in the headline data. Ite all adds up to less cash flow at the household level, more borrowing (in some cases), and zero sum effects on other outlays.

The stimulus overload of 2021…

Talking heads in Washington will “play pretend” around what happened in the “COVID tunnel and what unfolded coming out of that tunnel. That was a lot of structural imbalances and supply-demand dislocations.

The 2021 period was a big macro rebound in GDP off the COVID peak period. The strong macro backdrop in 2021 and heavy dose of fiscal accommodation did not mesh well with residual supply-side shortages in goods broadly as 2022 saw the end of ZIRP and a material inflation spike ensued.

Oil was a problem after the Putin invasion of Ukraine in late Feb 2022, and inflation hit a high in June 2022 at +9.1% for CPI as a headline grabber (headline PCE at +7.1% in June 2022) before the steady inflation slide to under 3% by the end of 2024. Core PCE had dueling peaks at +5.6% for Feb 2022 and Sept 2022.

Try to get Team Trump to even mention the oil price spike in 2022 as a factor in the 2022 CPI numbers. The questioning on the topic by mainstream media is also lame. The CNBC team does not push such Q&A since they are looking to take GOP interview share away from Bartiromo. They need to GOP to keep coming back. Tough questions don’t help that priority.

The COVID relief binge…

The above chart plots MoM Disposable Personal Income vs. PCE and offers a read on how wild things got during and right after the pandemic peak. This is a chart we use each month to revisit the DPI swings that came with the three COVID relief/stimulus packages. That included two COVID relief bills under Trump and one under Biden.

As a reminder, Trump signed the CARES Act in March 2020 (shows up in the DPI in April 2020) and Trump also signed the Dec 2020 legislation disbursed in Jan 2021 (Trump seldom mentions that Dec 2020 one since it is easier to blame Biden and Powell). Biden signed the America Rescue Plan (disbursed in March 2021) that was a demand pile-on (we would argue it was over the-top-stimulus) in a supply-constrained environment (thus inflation). The DPI and PCE wave tied to each of those shows up in the chart above.

As a reminder, the vaccine was announced in early Nov 2020 just ahead of two stimulus actions. That was soon to be a factor in PCE patterns and lag effects. The quarterly GDP numbers in 2021 on the post-COVID bounce were numbers generally not seen since the Reagan and Clinton years (see Presidential GDP Dance Off: Clinton vs. Trump 7-27-24, Presidential GDP Dance Off: Reagan vs. Trump 7-27-24).

COVID was a distinct period for supply chains and supply-demand imbalances. With tariffs and potential trade wars, it will remain important to look for similar imbalances whether in narrow product categories or in broad commodities and materials areas. We clearly face some now in oil and gas, refined products, fertilizers, aluminum, and numerous other inputs generating headlines (helium, sulfuric acid undermining copper production). Some shortages also undermine military readiness.

In terms of tariffs, the major trade partners have not initiated much in retaliation with the exception of a brief China spat. A “peace at all costs” strategy by the EU and USMCA partners has mitigated the damage, but that de facto submission could come back to haunt some major trade partners if others run for office with a “get tough on Trump” election pitch. Caving in to Trump on tariffs is getting less popular in the EU and Canada. Trump is also pushing his luck after Iran in attacking allies.

Jacking up aluminum, steel, and copper on the materials side and seeking even more tariffs on lumber was not and is not a great idea for keeping prices and costs contained. Auto tariffs under Section 232 are extreme even after the array of “deals” and could go higher if the USMCA breaks down in 2026. Trump recently fired a shot across the EU’s bow aimed at German autos.

We saw semis, pharma, and aircraft/engines/parts added to the Section 232 pipeline although most of the aircraft/parts risk was mitigated in EU talks. Those EU talks are now in jeopardy again. Other actions brought in commercial vehicles, branded pharma, cabinets, and a range of targets on national security grounds including upholstered furniture.

The most important development in the tariff area was the SCOTUS decision on IEEPA. Trump is launching tariffs under Section 122 laws and initiating more Section 301 actions (unfair trade) to maximize his flexibility with Section 232 (national security) also in the playbook. He has already been hit with setbacks in court.

The above chart covers the time horizon for DPI vs. PCE from early 2022 as the tightening cycle kicked into gear after March 2022. Life in Jan 2022 was still quiet for Disposable Personal Income. We like to include this chart in the PCE updates just given the heavy mix of disinformation and politically axed story lines we constantly hear from Trump on Biden being the cause of all the macro problems even at the end of 2025 and into 2026.

Accurate factual and conceptual frameworks of “the now” matter more than qualitative political spin looking backwards. That said, having a sense of what the numbers were then helps clear up the misinformation nonsense. After all, this is a very different world of tariffs and top-down government policy with very different tax structures and priorities.

The above table plots the monthly Disposable Personal Income MoM change numbers vs. the Personal Consumption Expenditure MoM numbers across the years from 2020 through March 2026 (we dropped 2019 from the table to avoid crowding). It is an easy scan across key time periods for a look at turning points in DPI (e.g. stimulus payments) or PCE.

One exercise to do from time to time is to look at Table 1 in the monthly PCE release for the granular dollar amount on each DPI reconciliation line. The line items can sometimes show some volatility. We like to look for gaps between DPI and PCE and moves in Personal Savings.

Any reader of Table 1 can simply tick off which lines might come under pressure in coming months. Examples include expense lines such as Medicaid (post tax bill) or other health care premiums under ACA. There is also the recurring pressure expected on durable goods that face tariffs.

It is always worth remembering that a tariff is a regressive tax that hits lower income consumers harder and the same for small businesses. The same is true in Medicaid costs based on the income brackets of Medicaid users. A loss of health care benefits and higher pharma costs is a zero-sum game with other consumption lines. As noted earlier, the current ACA premium spikes will also be a zero sum “game” for many budgets.

The above chart updates the running savings rate reconciliation that comes with the Personal Income and Outlays each month. We see a fresh low in April 2026 of 2.6% or well below the April 2025 high of 5.5%.

The “Why?” of declining savings rates can be like a political Rorschach test on “buying on happiness” or “getting slammed on prices of the household basket, tariffs and financing costs.” The saving rate dipped below the 4% line in Oct 2025 and posted 3% handles and edged back above 4% in one month (Jan 2026). That savings rate decline can be a function of various forces, but the inflation trends (health care premiums, gasoline, home heating, and financing costs) and related household cash drain are eating more into real wages and the household bottom line.

Market Commentary: Asset Returns 5-26-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Taiwan: Stakes are High, US Awareness is Low 5-17-26

Industrial Production April 2026: Bringing a Lift 5-15-26

Existing Home Sales April 2026: Steady or Clinging? 5-14-26

Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26

CPI April 2026: 4.1% All Items Less Shelter, 30Y UST 5% 5-12-26

JOLTS March 2026: Openings Down, Hires Up, Layoffs/Discharges Up 5-5-26

New Home Sales March 2026: Favorable Volume, Weaker Prices 5-5-26

1Q26 GDP Advance Estimate: Consumer Fade, Investment Boom 4-30-26

Synchrony Financial: Favorable Consumer Credit Signals 4-24-26

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer

Glenn Reynolds, CFA — Thu, 28 May 2026 16:14:05 GMT

Fixed Investment looms large, but the imbalance with consumer growth remains.

A downward revision in GDP growth from 2.0% to 1.6% offers minimal bragging rights in the line item that is over 68% of GDP. The fixed investment line is a very different story with GPDI at +7.0% including +10.1% in Nonresidential investment. Government weighs in at +4.4%.
Residential remains under a cloud at -6.2% and offers a prism to view how interest rates dampen consumer big tickets on financing costs. Mortgage rates at a 6.6% handle are not helping. The FOMC easing story line and bull flattener theories are taking a beating unless the Iran situation gets to a more constructive conclusion. The 1Q26 headline PCE price index still weighed in at +4.5% while the Core PCE price index ticked slightly higher to +4.4% from +4.3%.
The Personal Consumption Expenditure line at +1.4% is weak in historical context with Goods at only +0.4% and Services at +1.8%. That is even with saving rates hitting post-2022 lows at 2.6% (vs. 3.2% in March and 4.3% to start the year in January). Savings rates are above the 2.2% lows of June 2022 and flat to the 2.6% in April and May of 2022.
Fixed asset investment is booming with Equipment at +17.2% and Intellectual Property Products at +11.6% partially offset by -5.4% on Structures and -6.2% on Residential.

The above chart updates the GDP line item deltas to reflect the 2^nd estimate for 1Q26. The main moves include a downward revision of Gross Private Domestic Investment (GPDI) from “extremely high” to “slightly less extremely high.” The negative growth in Residential was less negative. PCE was clipped by a material revision to the large Services line. Goods as revised higher, which was a positive signal considering tariffs.

The above table updates the running GDP line items beginning in 1Q22 during the quarter when ZIRP ended, inflation was kicking into gear, and the tightening cycle got busy in the following quarters. The easing cycle started in 3Q24.

4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26

3Q25 GDP: Morning After Variables to Ponder 12-27-25

2Q25 GDP Final Estimate: Big Upward Revision 9-25-25

1Q25 GDP: Final Estimate, Consumer Fade 6-26-25

Trump’s “Greatest Economy in History”: Not Even Close 3-5-25

Gut Checking Trump GDP Record 3-5-25

Presidential GDP Dance Off: Clinton vs. Trump 7-27-24

Presidential GDP Dance Off: Reagan vs. Trump 7-27-24

Market Commentary: Asset Returns 5-26-26

Glenn Reynolds, CFA — Tue, 26 May 2026 23:15:00 GMT

The wild swings in oil continue with some UST gyrations that will face a fresh round of PCE data this week along with an update of 1Q26 GDP.
The “game theory” (a euphemism) of the Trump-Iran to-and-fro process continues with concerns around a ticking clock still very significant to the world economy but also to what the lag effects will be for oil prices and thus the UST curve shape. For now, the odds of a cut in 2026 are framed at 0%.
The semiconductor and AI ecosystem trade keeps on rocking with Micron joining the trillion dollar club and market breadth a more distant memory.
The SaaS-based service players and software names are seeing some mount a slow, limited comeback, but the numbers remain grim YTD.

The above table updates timeline returns for our usual equity and debt benchmarks. We see all fixed income lines in the red for the 1-month period with only HY making it into positive range (barely) for 3 months. The duration impact is also evident in the YTD returns for UST and IG corporates with its longer duration.

Iran fallout has slowed equity progress even with techcentric benchmarks holding in well for the trailing 1-month period. The moves from here face an important series of pivotal points ahead for the Strait of Hormuz and how the cost pressures from the energy spike will flow into inflation directly (energy CPI/PCE) and indirectly through materials costs or surcharges in freight and logistics.

The above chart updates the UST deltas since the Iran bombing kicked into gear. It is an ugly move considering how 2026 began with debates around FOMC easing with “how many and how soon.” It is now a question of hikes.

As we go to print today, the FedWatch odds of easing by the FOMC Dec 2026 are now posting 0%. The odds of no change by Dec 2026 are now 49.5% while 1 hike stands at 38.7% and 2 hikes at 10.6%. These probabilities have been whipping around. One week ago, the probability of 1 hike was ahead of unchanged.

The above chart updated the 1-week UST deltas as a modest rise on the front end contrasted with a slight decline on the long end as oil pulled back. The potential for a bear steepener or upward shift may be more tied to a satisfactory outcome with Iran and the Strait, but the near-term inflation outlook is not an optimistic one after last month’s turn for the worse in inflation (see Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26, CPI April 2026: 4.1% All Items Less Shelter, 30Y UST 5% 5-12-26).

As we covered in our weekly tech check posted on LinkedIn and reposted below, the tech bellwethers weighed in with a mixed week with a few of the bellwethers such as NVIDIA, Alphabet, and Broadcom having an off week as NVDA beat estimates but faded quickly in the market. The Semiconductor ETF (SOXX) still delivered a 5.67% week in the #1 spot despite NVDA sitting on the bottom.

The following is a cut and paste of our weekend LinkedIn post with some edits:

We update weekly returns for the 32 benchmarks and ETFs we follow. Political dysfunction so far is not derailing winning streaks or intermittent record highs for major benchmarks. Iran escalation risk, inflation worries, UST curve migration, and handicapping consumer fallout are the main events with a wide range of potential outcomes.

The score of 28-4 in the chart shows all bond ETFs positive. The long duration UST ETF (TLT) led the way despite bearish commentary.

Legislative turmoil is a risk and took a bad turn the past week as Trump handed himself immunity from the IRS at a time when his billions have multiplied since he became President. The Trump plan would generate “1,776” million ($1.8bn) to dispense checks to a range of “characters” that include those who beat police and sacked the capitol.

The House and Senate went fleeing from votes for the holiday weekend to avoid going on record. Hopefully they visited some Memorial Day monuments and rubbed them a few times to perhaps get a remote sense of courage – or consider what real sacrifice is for those with the mettle they lack.

The question of whether the US is becoming more like an emerging market of the 1970s is getting answered. This “1776” abomination is not good news. Some see it as a thug retainer for the midterms and a signal to state houses to take “legal risk” (i.e. break election laws).

If you believe policy=politics=economics=finance, then in theory lunacy in Washington should flow into policy anxiety, deficit fears, and potential for more erratic behavior in the geopolitical realm (NATO, Greenland, Cuba, anything Europe, USMCA review). The Iran strategy signals a divorce from the reality of secondary and tertiary effects as well as a lack of respect for unintended consequences. We have moved beyond the usual political hate mongering into hot wars and believable threats of annexation (Greenland, Cuba, Alberta next?). Legitimate fears of election interference by Trump are spiking.

A strong earnings season has been a source of support. Debates around consumers stabilizing has some hard number support pushing back on the “soft” consumer sentiment index that hit fresh record lows this past week. Walmart’s and BJ’s earnings brought some negative color that hammered their equities as proxies, but some retail earnings were “beats” and drove stock rallies such as Ross Stores and TJX. Retail equity performance is relatively good 2026 YTD and this past week as we will look at separately (see Retail Equity Comps: Looking for Signals 5-26-26).

The Trump game of picking daisy petals (“I will bomb them, I will bomb them not”) can wag $10 swings in oil each week, but the bridge to a deal between the parties is really hard to envision. Oil saw WTI drop down to a $96 handle to close Friday from $105 the prior Friday, but the UST curve only saw modest relief by the end of the week. As of Tuesday, WTI is just under $94 handle as we post this.

We covered the ugly UST deltas since Iran in our Substack commentaries (Macro4Micro.com) and LinkedIn posts. There is no hiding from more of the same UST pain and bearish inflation expectations until there is clarity on Iran and the Strait.

The following is a cut and paste of our weekend LinkedIn post with some edits:

We update the weekly returns on our “Tech Check” list in what has been a volatile market for the winners and losers. The price returns were mixed even if we see the usual pattern of Hi-Lo outliers with semiconductors crushing the market and some SaaS-based companies taking a beating. The score this week was 21-11 with 3 of the Mag 7 in the bottom quartile, 3 in the 3rd quartile, and 1 in the 2nd quartile.

Most of the major tech names beat the NASDAQ and S&P 500 this week with those benchmarks in the 3rd quartile. In contrast, the Russell 2000 small cap benchmark was in the upper half of the 2nd quartile. The top quartile was half semis with 3 SaaS-based names and 1 diversified tech (IBM). That was a more balanced mix than in recent weeks.

We see 4 names with double-digit returns on the week with Qualcomm (QCOMM), IBM, Advanced Micro (AMD), and Intel (INTC) in that group. IBM had been one of the names tagged as vulnerable to AI displacement and remains in the bottom quartile YTD even if at the top of the YTD bottom quartile with a -14.3% return. IBM’s boost this week was tied in part to the headlines around government support for quantum computing and supercomputers with talk around direct investments by the US. Market commentary included some jawboning of parallels to the Intel comeback that came after US government investment and support.

On the downside, the market saw Intuit (INTU) slaughtered with a -18.6% week. On a YTD basis, that puts INTU in last place in price return at -51.7% just behind Zillow (Z) at -46.7%. Zillow joined INTU in the bottom quartile again this week in the bottom 3 and were surprisingly joined by NVDA in second to last after an earnings report beat.

On a YTD basis, NVDA was positioned in the lower half of the second quartile with a wide range of semiconductor peers and AI-sensitive names. We look at the YTD and other asset return horizons separately.

We see some notable software and SaaS-based names clawing back up the ranks lately with FactSet (FDS), ServiceNow (NOW) and Salesforce (CRM) in the top quartile this week. All three of those are in negative range for YTD returns, so it has been a long road back. The Software ETF (IGV) was positive this week but still negative YTD.

The 1-month horizon reminds us that the equity market has been a case study in resilience with a score of 19-13 even with troubling inflation numbers and Iran turmoil leaving some critical variables subject to highly uncertain geopolitical deal outcomes. Escalation scenarios are ugly, but the peaceful end game is encumbered by radical religious extremism on one side and geopolitical incompetence and pathological delusion on the other. That makes for some challenging ground to cover in the context of global capital markets. Just sayin’.

The UST curve action has been unkind with all 7 of the bond ETFs in the red zone. Duration is mounting a comeback to start the shortened post-Memorial Day week on Tuesday, but the oil price swings could go either way and in dramatic fashion. The energy trade rags are conveying competing stories around how long the tail pain in oil prices will be for upstream and downstream energy if the situation lasts (in some scenarios even if it does not last).

Looking back at the winners through Friday, we see the Tech ETF (XLK) well out in front followed by the Equal Weight NASDAQ 100 (QQEW) and NASDAQ in 3 of the top 4 slots with energy (XLE, AMLP) comprising the other 2 of the top 5 slots.

The major tech heavy benchmarks are killing the breadth story but holding up headline price action and index “new highs.” The tech heavy S&P 500 and small cap Russell 2000 are in the top tier with the more defensive and dividend-focused Consumer Staples (XLP).

Besides the 7 bond ETFs in negative range, we see Homebuilding (XHB) on the bottom with builders reporting shaky earnings and guidance, BDCs (BIZD) under a dark cloud with more fraud headlines and second guessing on the downside for marks, and some pressure on Transports (XTN) and Cyclical Materials (XLB).

The 1-month Tech Check list is no surprise and in line with the recent price action we frame each week with Semiconductors the big winner. We see the entire top quartile comprised of tech even with no broad market tech-centric benchmarks in the top tier (NASDAQ and the S&P 500 are in the second quartile).

Intel (INTC), Qualcomm (QCOMM), Advanced Micro (AMD), Micron (MU) were well ahead of the pack through Friday with Cisco (CSCO), the Semi ETF (SOXX), the Tech ETF (XLK), and Apple (AAPL) rounding out the top tier. Micron ran wild again on Tuesday as we go to print and is up 19% on the day with NASDAQ and S&P 500 hitting all-time highs and MU joining the $1 trillion market cap club.

The bottom dwellers are still the SaaS-based services operators and software names. We see Intuit (INTU) at -21.7% in last place with Zillow in 2nd to last at -21.0%. Palantir (PLTR) at -10.3% and Meta at -9.6% are also in a hole with Microsoft (MSFT) in the bottom quartile and in the red. The software ETF (IGV) has managed to claw its way back into the middle of the second quartile over the month.

The 3-month timeline is essentially an Iran time horizon. The positive vs. negative score is a tossup at 16-16. We see some obvious trends such as the E&P ETF (XOP) and Diversified Energy ETF (XLE) charging ahead and the Tech ETF (XLK) well ahead at #1 with the NASDAQ and Equal Weight NASDAQ 100 (QQEW) rounding out the top 5.

The surge in Base Metals (DBB) is also directly tied to the Strait shutdown as aluminum supply-demand imbalances sent aluminum soaring directly on supply while the Strait has also undermined the supply of sulfur/sulfuric acid for global copper production.

For bond ETFs, we see 6 of 7 negative with the long duration UST ETF (TLT) generating the worst returns of the pack. The shorter duration US HY ETF (HYG) managed to land in a very slight positive range on coupon income and spreads. Spreads tightened by around 24 bps from 2-26-26 through recent days (5-25-26 at +274 bps). Those spreads are compressed by any standard.

The above chart frames the YTD for the diversified group of 32 and we see the positive bias at a score of 23-9. Bond ETFs comprise 4 of the 9 asset lines in the red. The others in negative range include BDCs (BIZD) in last place with Financials (XLF) 2^nd to last below Health Care (XLV), Homebuilders (XHB) and Communications Services (XLC).

Energy has grabbed 3 of the top 4 slots with only Tech (XLK) splitting up the streak at #3. E&P (XOP) is #1, Diversified Energy (XLE) is #2, and Midstream (AMLP) is #4. The overall top tier mix might surprise with Transports (XTN) at #5 and Russell 2000 small caps at #6. NASDAQ in the top tier at #7 is logical as is Base Metals (DBB) with all of the Gulf disruptions.

The above chart details the YTD returns on the Tech Check list. We see a score of 18-14 with the semiconductor and an array of names tied to the AI infrastructure and data center expansion themes. The capex boom and “all the trimmings” that go with those fixed asset investments have fortified many investors to look past the Iran, oil, and yield curve chaos – for now. There is still a lot of revenue model evidence in the AI themes that will need to get tested.

The word “tech” is clearly not magic as the bottom quartile demonstrates with the returns on many software and SaaS-based service names deeply in the red. The bottom quartile bracket runs from -14.3% for IBM to -51.7% with Intuit (INTU). We have been covering those issues in the weekly Tech Check commentaries on LinkedIn and in earlier asset return comments.

The running LTM asset returns are a reminder of a great run in equity markets for many industry groups and broad benchmarks. We see only the BDCs (BIZD) in the red. We see 5 of the 8 in the bottom quartile comprised of bond ETFs. They join the BDCs (BIZD), who sit in last place, with Financials (XLF) and Homebuilders (XHB) in the bottom tier.

It took a very impressive 29.5% to make the top quartile but that jumped to 40.0% to be #7. Those results in the top tier are healthy multiples of the long-term return on the equity asset class. The LTM median return on the list is around +16.6%.

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