Economic Update 4-27-2026

Economic data included gains in retail sales, as well as improvements in S&P Global PMI data for manufacturing and services. These offset further declines in consumer confidence.

Equities were mixed in the U.S. and emerging markets last week, as international developed market stocks fell back. Bonds were down globally as yields and inflation fears rose. Commodities saw gains led by another spike in crude oil prices.

U.S. stocks bounced around a bit last week, as concerns remained about the durability of the ease in Middle East tensions. By Wednesday morning, the U.S. administration extending the U.S.-Iran ceasefire “indefinitely” caused the positive boost in sentiment to continue in a muted fashion, although investors were also fixated on corporate earnings. Sector results were mixed, with gains of over 4^ in technology and energy, followed by consumer staples, while declines were most pronounced in health care, financials, and communications. Real estate also pulled back a few percent, along with a rise in yields.

Earnings season for Q1 is moving along, with nearly 30% of S&P firms having reported actual results, with nearly 85% reporting a positive earnings surprise and over 80% a positive revenue surprise. The blended earnings growth rate for the quarter remains at a robust 15.1%, over double the long-term average pace, with a profit margin of 13.4%, which is the highest in five years. Investor focus remains tied to AI demand, AI infrastructure spending, and consumer spending generally in light of higher costs caused by oil.

Economic Update 4-20-2026

Economic data included producer prices rising at a faster clip than expected, and declines in industrial production and existing home sales.

Equities earned positive returns globally as the easing of Middle East tensions elevated investor moods. Bonds fared well also as inflation expectations fell. Commodities were mixed, with metals higher, but energy falling back sharply with Iran tensions down.

U.S. stocks experienced gains for the third straight week. Conditions looked uncertain at the start of the week, with the U.S. announcement of their own blockade of the Strait of Hormuz and potential destruction of Iranian ships; however, signs of the Iran wanting to negotiate pushed stocks higher again. Despite the apparent escalation on the surface, the blockade itself has been seen by some observers as a shift away from a military action towards economic-centered counterattacks. The positivity continued through the week, with a 10-day ceasefire between Israel-Lebanon announced by early Fri., as well as the Strait of Hormuz being declared “completely open” to commercial traffic. On the subtler side, the investor return to risk-taking was coupled with a reduction in hedging activity and ‘short covering’ in institutional markets, which was also significant, as it drove cash flows at the margin. While March had been a largely negative month for equities, with the S&P 500 down -5%, yet April month-to-date returns are up 9%.

Economic Update 4-13-2026

Economic data from the week included U.S. GDP for Q4 being revised down further, mixed personal income/spending, consumer price inflation rising sharply due to oil prices, and weaker consumer sentiment.

Equities recovered sharply last week, with the Middle East ceasefire raising hopes for a reversal in energy prices and economic damage. Bonds were little changed along with minimal change in yields. Commodities were mixed, with energy prices falling back, while metals moved higher.

U.S. stocks began the week slightly higher as hopes for a ceasefire between the U.S.-Israel and Iran rose, in the midst of threats of escalation on power infrastructure. This came along with an ease in oil supply concerns, as selected rationing taking place for jet fuel in some countries. Escalating U.S. threats of Iranian destruction were toned down by later Tue. with a 2-week ceasefire put into place, which included free passage of vessels through the Strait of Hormuz. The latter was obviously critically important messaging from an energy and materials transportation standpoint, although flipping a switch from off to on for such transports was seen as difficult, coupled with the energy infrastructure damage in the region, which has raised additional supply concerns past the expected timeline of this conflict. The Wed. market response of several percent represented the near-term relief markets had been waiting for, although future actions remained tenuous. Possible ‘violations’ of the ceasefire led to more back-and-forth later in the week (while the weekend brought a U.S. naval blockade announcement, and unclear prospects for the ceasefire).

Economic Update 4-06-2026

During a short market week due to Good Friday, economic data included improvements in manufacturing and retail sales, continued decelerating home prices, while the employment situation report for March surprised on the upside.

Equities ended sharply higher to break a month-long negative streak with hopes for a near-term Middle East resolution. Bonds fared positively as well, with expectations for inflation pulling back leading to lower yields. Commodities remained strong with oil prices mixed to higher, as were metals.

U.S. stocks ended the shortened holiday week positively, up several percent, as the U.S. administration showed signs of optimism over the U.S.-Iran conflict, with the President hinting at flexibility on the Strait of Hormuz and Iran’s increased willingness to negotiate.

Economic Update 3-30-2026

Economic data for the week included a slight gain in manufacturing PMI, but a minor decline in services PMI, although both remained in expansionary mode. Construction spending also fell back, as did consumer sentiment.

Equities were mixed around the world last week, with declines in the U.S. but gains in developed Europe and Asia. Bonds fell back as well, along with rising interest rates. Commodities were led higher by energy and industrial metals prices.

U.S. large cap stocks fell back for yet another week, with the Nasdaq reaching -10% correction territory from the recent peak on Feb. 25. The S&P 500 is close to correction at just over -8%. By sector, energy again led (up 6%), followed by materials (4%) and utilities (3%); these were offset by declines in communications (-7%) and technology (-3%). Interestingly, small cap stocks saw gains, to trim their year-to-date declines to minimal.

(While -10% corrections can be unnerving at the time, from a historical perspective, they’ve tended to occur once every 1-2 years. More severe -20% corrections have happened every 5-7 years on average, coinciding with more extensive economic concerns, such as recessions.)

Markets started sharply higher Monday after the U.S. administration offered several back-and-forth announcements concerning the Iranian conflict, finally announcing a temporary pause on military strikes against Iranian energy infrastructure—seen as a positive to progress toward an end to the conflict but also the stoppage of taking additional oil off the market. The rest of the week echoed the market’s back-and-forth sentiment surrounding changing prospects for a more permanent end to the conflict. Thursday, for example, featured a warning from the U.S. administration to Iran, to “get serious” about a deal before it’s “too late,” which caused sentiment to drop, along with additional concerns in the technology space.

Economic Update 3-23-2026

Economic news for the week included the U.S. Federal Reserve keeping interest rates on hold, as expected. Producer prices rose more than expected, pointing to further inflation, while industrial production rose slightly, and housing data remained weak, although these were at least partially tied to weather conditions.

Equities fell back globally with the escalating conflict in the Middle East weighing on future prospects for inflation and economic growth, primarily due to the sharp rise in energy prices. Bonds also fell back as yields rose, for the same reasons. Commodities were mixed, with metals down, but oil prices higher, particularly for overseas contracts as opposed to U.S.

U.S. stocks started the week decently, until mid-week, when stronger-than-expected producer price inflation was taken negatively. Middle East news included a lack of NATO participation, continued attacks from Iran on oil and gas infrastructure and tankers, the death of the Iranian security chief, and Israel escalating attacks towards Iranian oil-gas assets (which had previously been avoided). By sector, energy stocks led the way again, up around 3% with the gains in oil prices. Laggards included the mixed group of utilities, materials, and consumer staples, all down over -4% based on unique assumed exposures to economic and inflation risks.

Economic Update 3-16-2026

Economic data for the week included consumer price inflation coming in moderate to slightly higher. Housing data improved, with gains in both existing home sales and housing starts. However, prior quarter GDP was revised down sharply, to below 1%.

Equities fell back around the world, as the Middle East conflict and inflation fears weighed on sentiment, especially abroad. Bonds also declined along with rising yields. Commodities continued to be dominated by volatility in oil prices, which reached near $100/barrel, due to the conflict.

U.S. stocks began the week with a fairly benign response on Monday after the prior weekend’s joint U.S.-Israel attacks on Iran. However, Tuesday saw a rapid deterioration in sentiment as attacks on both Iran and Lebanon intensified, along with Iran’s threats to close the Strait of Hormuz, which is one of their main remaining tactical threat tools (via stealthier means, as their navy was decimated). Economic data was mixed, with decent ISM results coupled with a weaker nonfarm payroll report. The key questions in a nutshell: (1) How much damage and/or disruption, at the very least, will be absorbed by oil infrastructure in the Middle East, (2) How long will the conflict last, and (3) What will the new reality look like?

Economic Update 3-09-2026

Economic data for the week included improvements in manufacturing and services surveys, flattish retail sales, and disappointing nonfarm payrolls. Several of these were influenced by weather and idiosyncratic factors.

Equities fell back strongly across the globe, more internationally than in the U.S., with the military actions in the Middle East weighing on sentiment.  Bonds also fell back along with rising yields as higher energy prices stoked inflation fears. Commodities saw strong gains, led by the most dramatic single-week move for crude oil in decades.

U.S. stocks began the week with a fairly benign response on Monday after the prior weekend’s joint U.S.-Israel attacks on Iran. However, Tuesday saw a rapid deterioration in sentiment as attacks on both Iran and Lebanon intensified, along with Iran’s threats to close the Strait of Hormuz, which is one of their main remaining tactical threat tools (via stealthier means, as their navy was decimated). Economic data was mixed, with decent ISM results coupled with a weaker nonfarm payroll report. The key questions in a nutshell: (1) How much damage and/or disruption, at the very least, will be absorbed by oil infrastructure in the Middle East, (2) How long will the conflict last, and (3) What will the new reality look like?

Economic Update 3-02-2026

Economic data for the week included a stronger-than-expected report for producer price inflation, moderate gains in housing prices and construction spending, as well as some improvement in consumer confidence.

Equities were mixed, showing weakness in the U.S., but strength internationally. Bonds gained as investors moved away from risk. Commodities also gained, continuing recent strong trends in metals.

U.S. stocks fell back last week, as tariff/trade announcements from the prior weekend and continued concerns over the impact of artificial intelligence on certain sectors and particular high profile companies continued to weigh on investor minds. By sector, defensives gained on a negative week, as would be expected, led by utilities, health care and consumer staples, all up over 2%, as well as energy, which benefited from recent geopolitical concerns about oil prices. Lagging were cyclicals financials and technology down by roughly -2% each. In tech, NVDIA’s earnings beat consensus, but not by enough to turn sentiment higher, as the bar had been set fairly high. An unmistakable trend has been a shift in investor sentiment away from AI-related tech software toward physical assets, and ‘value’ stocks, some of which has been related

Economic Update 2-23-2026

Economic data for the short week included fourth quarter U.S. GDP growth coming in slower than expectations, stronger personal income and spending as well as industrial production, while several housing metrics were mixed, but remained generally in a weak state overall relative to history.

Equities saw gains globally, with international stocks outperforming U.S. for the week. Bonds were little-changed in the U.S. and mixed abroad with a stronger U.S. dollar. Commodities saw continued gains across the board, especially in energy with intensified U.S.-Iran tensions.

U.S. stocks ended the week higher on a shortened week, with mixed economic data, rising tensions between the U.S. and Iran, and Friday’s judicial news regarding U.S. tariffs. By sector, returns were led by gains in communications (Alphabet/Google and Meta), industrials, and financials, with gains upwards of 2%. On the lagging side were more defensive areas such as consumer staples (mostly Walmart), health care, and consumer staples, as well as materials. Real estate ticked up slightly, even with interest rates up a bit for the week.

Economic Update 2-17-2026

Economic data for the week included a strong January jobs report, albeit with methodological nuances, flattish retail sales, and weaker weather-impacted existing home sales. Consumer inflation came in cooler than expected, mostly due to lower energy prices.

Equities were mixed, with tech-related declines in the U.S. offset a bit by continued strength in international stocks. Bonds fared positively from movement away from risk and a weaker U.S. dollar. Commodities were mixed, with gold strength and energy weakness.

U.S. stocks fell back again last week, as uncertainty over AI’s impact on software company revenues over time continued to weigh on sentiment for technology-related stocks, in a pattern of ‘sell now’ and ‘figure out the details’ later, not uncommon in equities. By Wed., a stronger-than-expected jobs report was taken favorably by markets, in that the economy remained in decent shape, until the realization of perhaps fewer Fed interest rate cuts, which dampened the mood a bit. Friday’s CPI report coming in cooler than expected helped the mood slightly, but not outweighing the AI concerns. By sector, utilities saw a sharp gain of over 7% as interest rates fell and investors sought save havens, followed by materials and energy. Financials declined by -5%, particularly in the areas of insurance and asset management, also thought to be under threat of being undermined by AI tools. Real estate fared positively, up a few percent, along with lower interest rates.

Economic Update 2-9-2026

Economic data for the week included ISM manufacturing moving back into expansion, ISM services staying in expansion, some improvement in consumer sentiment, but weaker job openings and claims data. Another partial government shutdown paused the release of the January employment situation report until this coming week.

Equities saw a volatile week, but ended mixed, with gains in U.S. value and small cap, as well as international. Bonds saw gains across the board along with the stock market’s volatility and lower rates. Commodities saw gains in precious metals but declines elsewhere.

U.S. stocks were mixed last week, with strong returns from value, where the S&P 500 Value Index gained over 2%, while growth stocks lost an equivalent amount. Sector results reflected that, with gains of 4-6% in consumer staples, industrials, and energy; these offset negative returns 4-5% returns in communications (Meta and Alphabet) and consumer discretionary (Amazon and Booking Holdings). As a sub-group, software suffered its worst week in about four years, down close to double-digits.

Economic Update 2-2-2026

Economic news for the week included the Fed keeping policy short-term interest rates steady. On the positive side, durable orders rose, as did housing prices to a lesser degree, while consumer confidence fell back sharply and producer prices rose more than expected.

Equities were mixed globally last week, with foreign outperforming U.S. Bonds were little-changed in the U.S., but some foreign were helped by a weaker U.S. dollar. Commodities were also mixed, with energy prices rebounding up, while precious metals fell back from recent strength.

U.S. stocks were mixed last week, with major large cap indexes moving in different directions, but weaker results from small caps. A potential government shutdown on Jan. 31 was in the news again, despite appearing as a non-issue for several weeks, having ramped up over concerns over funding for the Dept. of Homeland Security and ICE. By the end of the week, early optimism about the Warsh Fed Chair nomination had been replaced by some angst over potential Congressional delays in the process, as well as some uncertainty about what Warsh’s past comments may mean for Fed monetary policy ahead—as in will it be hawkish or dovish?

Economic Update 1-26-2026

On a holiday-shortened week, economic data included an upward revision for 3rd quarter U.S. GDP, gains in personal income and spending, expansionary showings for S&P manufacturing and services, and some improvement in consumer sentiment.

Equities were mixed globally, with slight declines in the U.S. offset by gains internationally, with help from a weaker U.S. dollar. Bonds were little-changed along with minimal change in yields. Commodities gained broadly, mostly in precious metals and especially natural gas, for weather-related reasons.

U.S. stocks fell back last week, largely due to the inability to fully recover from being down -2% early Tuesday, which represented the worst single day decline in several months. The focus was on the intensification of U.S. ambitions towards Greenland, with an initial announcement of a 10% tariff on imports from eight European countries (Denmark, Norway, Sweden, France, Germany, U.K., the Netherlands, and Finland) effective Feb 1, with an added 200% tax on French wine (which tends to be symbolic), coming after French president Macro rejected a seat on the ‘Board of Peace,’ created at the Davos World Economic Forum last week. How these would affect already-existing tariffs was less clear to markets. But, as with several other tariffs, they were viewed as bargaining chips as opposed to being set in stone. That appeared to indeed be the case by Wed., when a low-probability military invasion threat was taken off the table, along with the European tariffs, as the U.S. administration and NATO initiated the “framework of a future deal with respect to Greenland.” Decent economic data later in the week helped a bit, but didn’t make up the brunt of Tuesday’s activity.

Economic Update 1-20-2026

Economic data included consumer price inflation coming in steady, but still elevated, as did producer price inflation. Industrial production and retail sales came in positively. New and existing home sales rose, but homebuilder sentiment continued to weaken. Jobless claims fell, reflecting further normalization after year-end.

Equities fared positively around the world last week, with small cap and international outgaining U.S. core large cap. Bonds were largely down as interest rates ticked higher as inflation remained sticky. Commodities were mixed, with precious metals continuing to lead due to geopolitical considerations.

U.S. stocks fell back on net for the week, with better results from value and small cap stocks, which outperformed large cap growth. By sector, gains were strongest in consumer staples, industrials (defense stocks), and energy, while communications (Meta mostly) and financials (large banks) pulled back by a few percent. Real estate also gained several percent, despite a rise in interest rates across the yield curve.

Economic Update 1-12-2026

Economic data included improvements in ISM services, mixed results for housing starts and the December employment situation report. On the more lackluster side, ISM manufacturing and JOLTs job openings declined.

Equities gained globally last week as the New Year started with optimism and a lack of bad news. Bonds were higher in the U.S. and mixed abroad. Commodities gained in every segment last week, with oil markets in focus after the regime change in Venezuela.

U.S. stocks started the first trading week of the year positively, led by a rally in economically-sensitive small cap names. Economic data was mixed, but perhaps not strong enough to push off several expected Fed interest rate cuts in 2026. By sector, gains of 4-6% in consumer discretionary (Amazon and Home Depot, among others) and materials led for the week, while utilities fell by over a percent. Real estate was up slightly.

The release of the 2026 Tax Rate Schedule is more than a technical update — it’s an important reminder that smart tax planning is rarely about a single year. For investors, retirees, and advisors alike, the real value comes from understanding how evolving tax structures fit into a long-term financial plan.

While headlines often focus on marginal rate changes, the bigger opportunity lies in how tax brackets, income thresholds, and deduction rules influence multi-year decisions. Retirement income strategies, portfolio realization planning, and timing around distributions all become more effective when tax awareness is built into the process early.

For those approaching or already in retirement, 2026 highlights the importance of coordinating income sources — taxable, tax-deferred, and tax-free — in a way that preserves flexibility. Decisions around when to recognize income, how to manage capital gains, and how to align charitable or legacy goals can have a meaningful impact over time.

From an investment perspective, tax-aware portfolio construction continues to play a growing role. Asset location, turnover management, and the timing of realizations can help reduce unnecessary drag and support more durable outcomes across market cycles.

At LSA, we view the 2026 tax framework as an opportunity to reinforce disciplined planning — not reactive adjustments. The most effective strategies are built with intention, aligned across investment, tax, and retirement decisions, and revisited regularly as conditions evolve.

As always, thoughtful planning today can create greater clarity and confidence tomorrow.

Economic Update 1-05-2026

In a light year-end week, economic data included slight gains in home prices, lower jobless claims, and Federal Reserve minutes that again pointed to diverging points of view on the committee.

Equities were mixed for the week, with U.S. down and international higher. Bonds lost ground as yields ticked higher. Commodities were mixed as energy rebounded with geopolitical ties, and metals were mixed.

U.S. stocks fell back during the lighter-volume holiday week, although the full year 2025 provided the third straight year of double-digit above-average returns. By sector, energy led the way, with 3% gains along with stronger oil prices. Most other sectors were flattish, while consumer discretionary was down by -3% (mostly due to Tesla), and technology and financials down by over a percent each. As the year drew to a close, hopes for AI continued to boost sentiment for growth stocks, while cyclical and value stocks appeared to gain some additional traction upon hopes that fiscal tailwinds will keep the economy expanding at a decent pace into the new year, which is expected to flow through to earnings, at least in early estimates.

Economic Update 12-29-2025

Economic data included U.S. GDP for Q3 coming in stronger than expected, while industrial production was flattish, and durable goods and consumer sentiment weakened.

In a seasonally-light trading period, global stocks saw decent gains. Bonds ticked up slightly as yields fell. Commodities rose, led by precious and industrial metals.

U.S. stocks gained a bit during a lighter holiday trading week, with the S&P 500 and Dow reaching more record highs, and large cap stocks outperforming small caps. Every sector ended positively, led by a mixed bag of materials (with strength in metals for the year, boosting mining names), technology, and financials, although communications was not far behind, all with returns approaching or over 2% for the week. Lagging was the more defensive group of consumer staples, which was up just a few basis points. Real estate also gained about 1.5% for the week.

Economic Update 12-22-2025

Economic data last week included improved consumer inflation readings (albeit tainted due to a missing month), a stronger than expected employment situation report (also colored by the shutdown’s lack of data), and gains in retail sales, existing home sales, and consumer sentiment. These were offset by a pullback in manufacturing and services PMI data.

Equities were mixed last week by segment in both the U.S. and internationally. Bonds saw gains, as interest rates fell back along with slower inflation results. Commodities were also mixed, with strength in metals specifically and weakness in energy.

U.S. stocks ended the week mixed, with the S&P 500 and Nasdaq up slightly, while the Dow Jones large cap index and Russell 2000 small cap index down, all based on composition. By sector, conditions were mixed, with gains in consumer discretionary (Tesla and Starbucks) and technology (Nvidia and Microsoft) leading the way, while energy stocks fell about -3% in keeping with weaker pricing for crude oil and natural gas, along with high supplies. Real estate fell about a percent.

Economic Update 12-15-2025

Economic news for the week included another quarter-percent policy interest rate cut by the Federal Reserve, a seasonal rise in jobless claims, and stronger-than-expected job openings data.

Equities were mixed globally, with U.S. value and small caps among the strongest. U.S. bonds pulled back for the most part, along with higher interest rates across the yield curve. Commodities were mixed, with stronger metals and weaker energy.

U.S. stocks were mixed last week, with a pullback in the large cap growth segment, offset by gains in more cyclical value and small caps, in line with a less hawkish Fed than was initially expected. By sector, returns were strongest in materials and financials, each up over 2%, while communications and technology lagged, declining by -2% to -3% (mostly via negative contributions from Intel and Nvidia). In the latter, investors showed some nervousness after the announcement that the U.S. administration is easing export curbs on fairly high-end H200 semiconductors to China. Higher technology company valuations also appeared to be a bit of a concern, as AI favorite Oracle reported weaker revenue but also higher expected capex spending than markets anticipated.

Economic Update 12-8-2025

The economic data release schedule has begun to normalize, with last week showing gains in personal income and spending, ISM services, industrial production, and consumer sentiment. These offset the weaker ISM manufacturing and ADP employment reports.

Equities fared positively around the world, with Europe and Japan outperforming the U.S. Most bonds lagged as interest rates ticked higher, although there were pockets of gains. Commodities gained in both energy and base metals.

U.S. stocks gained last week, with slower pre-holiday trading, but continued hopes of a Federal Reserve interest rate cut this coming Wednesday. By sector, gains were led by technology (Nvidia, but even more so by firms like Salesforce and Adobe) and energy, up by over 1% for the week. Sentiment for artificial intelligence appeared to turn bullish again, in a continued back-and-forth lately between optimism about its productivity potential versus higher valuations for related firms and substantial cash flows spent on infrastructure. Laggards included more defensive sectors utilities, health care, and consumer staples, all of which lost several percent. Real estate also fell back by over -1% along with higher interest rates.

Economic Update 12-1-2025

On a short holiday week, economic data included gains in retail sales and durable goods orders, as well as higher producer price readings, decelerating home prices, and continued weak consumer confidence. However, the recent government reopening meant some data released was fairly stale at this point.

Equities rebounded into gains last week, led by the U.S. over international. Bonds also fared well as interest rates fell back amidst Fed member dovishness. Commodities also saw gains, mostly in metals.

U.S. stocks recovered back into positive territory last week, following negative performance the week prior, and wrapping up a more volatile November where the S&P 500 only gained 0.2%, but continued a string of seven straight positive months. Stocks gained sharply early in the week as odds of a December Fed rate cut were further absorbed by markets. These odds have been largely driven by dovish or hawkish comments from various FOMC members, with the voting odds now tilted again toward easing. The maxim of “Don’t Fight the Fed” can be powerful when markets are in the midst of rate cuts.

Economic Update 5-19-2025

Economic news last week included inflation metrics showing improvement on both a consumer and producer level. Also, data included slightly higher retail sales and housing starts, unchanged industrial production, but weaker consumer sentiment that continues a negative trend.

Equities gained globally, as U.S.-China trade negotiations lowered chances of economic slowing. Bonds were mixed, with yields higher but credit spreads tighter. Commodities were also mixed, with crude oil and industrial metals higher.

U.S. stocks earned strong returns last week, beginning with the S&P 500 rising over 3% on Monday with news from the prior weekend of substantial progress with China on a de-escalation of trade tensions. This included a suspension of earlier tariff rates for 90 days for a continuation of talks, with U.S. tariff rates on China falling from 145% down to 30% (and China-on-U.S. tariffs reduced from 125% to 10%). Cooler inflation also helped sentiment a bit, although many see those prior-month figures as being on borrowed time if/when tariff impacts creep through. Every sector ended positively last week, led by substantial gains of nearly 8% in both technology (led by Nvidia) and consumer discretionary (led by Tesla), while normally-defensive health care gained only a few tenths of a percent (completely due to weakness in UnitedHealth). Real estate also gained about a percent, despite higher yields.

Economic Update 10-28-2024

• Economic data for the week included a decline in overall durable goods, mixed results in housing sales, as well as higher continuing jobless claims, due to a variety of weather and labor issues.  
• Equities declined globally, with higher interest rates and less certainty about central bank rate easing looking forward. Bonds fell back along with rising yields at the longer end of the curve. Commodities gained, largely due to energy, despite a stronger dollar.

U.S. stocks lost ground for the first time in six weeks, as higher interest rates associated with an assumed more drawn-out Fed rate cut cycle and perhaps higher future deficits post-election weighed on sentiment. By sector, consumer discretionary experienced a percent gain (led by a 20%+ return for Tesla, upon better than expected earnings and vehicle sales projections) and a small gain for technology, while negativity was most pronounced in materials, industrials, and health care. Large cap fared better than small cap. Real estate fell about -2% upon the rise in yields.

At the September meeting, the U.S. Federal Reserve Open Market Committee decided to reduce the Fed funds rate by -0.50% to a new range of 4.75-5.00%. There was one voter dissent, where a member opted for only a quarter-percent cut.

The formal statement was updated to reflect the new easing bias, noting that inflation has simply “made further progress...but remains somewhat elevated.” Also noted was that the committee’s labor and inflation goals “are roughly in balance.” Later in the statement, labor was again mentioned in a reminder of the Fed’s dual mandate in “supporting maximum employment” in addition to its inflation objective. The new quarterly Summary of Economic Projections (SEP) put the Fed funds rate expectation at 4.4% for year-end 2024 (down from 5.1% in June), 3.4% for 2025, 2.9% for 2026 and 2027, while the anticipated long-term rate ticked up a tenth to 2.9%.

There hasn’t been this much mystery shrouding a policy change in some time, and surprise announcements have not been common in recent years. Before the meeting, CME Fed funds futures markets evolved toward the chances of a -0.50% cut at as high as 60%, and a -0.25% move at around 40%, after wavering between the two for much of the past month (wisdom of futures markets is correct again). Chances remain high for cuts in November and December, with odds pointing to a year-end rate of around 4.25%. The furthest-out estimate in Dec. 2025 shows the highest probabilities for Fed funds at around 3.00%.

Economic Update 6-03-2024

• For the short holiday week, economic data included U.S. GDP growth being downgraded a few tenths, continued improvement in lower PCE inflation, higher home prices, and improved consumer sentiment.
• Equities were mixed globally, with developed markets down a bit on net, while emerging markets fell further. Bonds were little changed domestically, while foreign markets saw mixed results. Commodities fell back across a variety of sectors.

U.S. stocks fell on the shortened week, but ended May with solid gains to offset weakness from the prior month. By sector, energy and utilities led the way with gains upward of 2%, while technology fell back by over -2% (as a positive week for some stocks was offset by weakness in Salesforce, Adobe, and Microsoft). Real estate also gained, with Friday’s ‘less bad’ inflation news providing a boost.