From the desks of Stanley Katz & Lauren Madera
TO THE BRAVE INDIVIDUALS WHO SERVE OUR COUNTRY TODAY AND HAVE SERVED IN THE PAST, WE THANK YOU.
Markets climbed for the week (DJIA: +2.13%, S&P 500: +0.88%, Nasdaq: +0.45%), led by the Dow Jones Industrial Average, which touched an all-time high. The S&P 500 notched its eighth consecutive weekly gain, its longest winning streak since 2023. Nvidia’s stronger-than-expected earnings were a key catalyst, reviving AI-related enthusiasm across markets. Further bolstering sentiment, reports from the Middle East suggested that U.S.-Iran peace talks may be progressing, though the picture remains fluid. Not all data cooperated though. The University of Michigan’s consumer sentiment index fell to a record low of 44.8, and Purchasing Managers’ Index (PMI) data showed input costs rising at their fastest pace since late 2022. Reflecting these broader pressures, the 10-year Treasury yield briefly touched 4.69% midweek — its highest level in over a year — and pushed 30-year mortgage rates to 6.51%, its highest level since last August. Federal Reserve meeting minutes indicated that a majority of policymakers believe further rate increases may be appropriate if elevated inflation persists, a position that has defined the Fed’s posture for several weeks running. The inflation data behind those concerns tells a complicated story; Argus Research’s latest economic commentary unpacks it.
April’s Consumer Price Index (aka CPI, which measures price changes for everyday goods and services) was in line with expectations at 3.8% year-over-year, but core CPI (excluding volatile food and energy prices) exceeded estimates. April’s Producer Price Index (aka PPI, which tracks what businesses pay for goods before they reach consumers) badly missed consensus, registering 6.0% year-over-year, the highest reading since December 2022. Argus points out that PPI captures pipeline prices that can take weeks or months to reach consumers. In other words, the April wave of higher costs may not fully hit household budgets until June or July. Argus warns that grocery prices also risk upward pressure in conjunction with elevated input costs. The primary culprit? Fertilizer, with 30% of the world’s fertilizer passing through the Strait of Hormuz. One potential counterforce, however, does not yet show up in full force: the AI productivity boom, which some analysts and business leaders believe may eventually help bring prices down.
Capital Group’s “Why AI Will Transform, Not Replace, Your Job” takes a long view, arguing that the technology is better understood as a job creator than a destroyer. Portfolio manager Chris Buchbinder draws a direct parallel to the late 1990s internet boom, when it was genuinely unimaginable that Amazon would become a retail giant, Netflix would reshape the media industry, or online advertising would eclipse traditional channels. The AI era, Buchbinder suggests, is likely to generate a similar wave of new companies and roles rather than simply eliminating the old ones. During a fascinating podcast interview with CNBC’s Andrew Ross Sorkin, Jeff Bezos, Amazon’s Founder and Executive Chairman, made a strikingly similar case. Addressing the anxiety many workers feel about AI, Bezos offered a direct reframe — someone who has been digging a basement with a shovel and is suddenly handed a bulldozer should be thrilled, not afraid. He argued that AI is poised to drive a surge in productivity that brings prices down and creates new kinds of work. He also noted that AI coding tools are unlikely to threaten software engineers. The work, in his view, simply shifts to a higher level. Whether that optimism proves warranted over time remains an open question, but the convergence of that view from a prominent portfolio manager and one of the architects of the modern technology economy is a perspective worth contemplating.
Below are links to a number of third-party research reports that we have read and analyzed over the past week. We hope you will find the information interesting, useful, and worthwhile.
Argus:
Capital Group:
J.P. Morgan Asset Management:
Franklin Templeton:
First Trust:
Stanley Katz & Lauren Madera, Financial Advisors
ClientFirst Financial Strategies, Inc.
937-293-5500
Source for weekly stock market returns: Barron’s.
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