A lot has happened in just the past week. As of today, May 15th, we now have a new Federal Reserve Chairman in Kevin Warsh, President Trump is concluding his state visit to China, and inflation concerns moved back into focus after this week’s Producer Price Index (PPI) report came in hotter than expected. In simple terms, PPI measures the costs businesses are paying for goods and materials before they reach consumers. And when the report came in around 6% versus expectations closer to 5%, this caught investors somewhat off guard and immediately raised concerns about whether higher costs — especially energy-related costs — may eventually work their way further into consumer prices in the months ahead.
As it relates to the Fed, keeping tabs on inflation is critical because it has a direct impact on their policy. In simple terms, when inflation rises too much or too quickly, the Fed becomes less likely to lower interest rates and, in some cases, may even consider raising them again. Much of the recent concern has centered around energy prices, which have remained elevated with the continued Middle East conflict surrounding the Strait of Hormuz. Higher oil and transportation costs tend to affect many areas of the economy over time — from manufacturing to groceries to everyday consumer goods. The good news, at least for now, is that markets appear to believe much of this recent inflation spike may still be temporary and energy-driven, rather than broad-based across the economy. Like many people these days, though, I’m hopeful things begin to calm down soon, as I know we’re all feeling the impact at the pumps.
Despite all of this, stocks have continued moving higher, with the S&P 500 reaching more all-time highs after a strong recovery from the volatility we saw back in March (another good reminder of why it’s always good to maintain a long-term perspective). What’s been especially notable is how resilient the market has been. Even with barrage of headlines and inflation worries, investors have continued focusing more on corporate earnings, innovation, and long-term growth opportunities.
That does not mean we won’t see pullbacks along the way — those are normal — but for now, the overall trend continues to remain positive. Markets are also closely watching the conclusion of President Trump’s visit to China, as investors continue hoping for stability around trade, supply chains, and global energy markets. Overall, the economy and corporate earnings have held up better than many expected, which is one reason optimism has continued to build.
As always, our approach remains the same: we monitor the data, follow our tactical strategies, and allow our managers to adjust as conditions evolve. Headlines may continue to come fast, but discipline and perspective are especially important during times like these because, as we’ve already seen this year, markets can go up and they can go down. That’s why having a plan in place beforehand matters. And if your personal liquidity needs, retirement timeline, or long-term goals have changed, let’s reconnect and make sure your plan still reflects where things stand today. As always, we’re just an email or phone call away.
