Weekly Market Commentary

Lowering inflation may prove to be a challenge.

 Last week, inflation was on the minds of investors after one of the Federal Reserve (Fed)’s favorite inflation gauges showed inflation at a three-year high. Both headline and core inflation were well above the Fed’s two percent target.

Americans hope for a peace dividend – lower prices.

Last week, President Trump signed a memorandum of understanding between the United States and Iran. Stock and bond markets welcomed the news. “Investors are hopeful the 14-point framework will lead to the Strait of Hormuz reopening, which could drag down oil prices and help tame inflation,” reported George Glover of Barron’s.

It will take time for shipping through the Strait of Hormuz to resume and inflation to ease. Some of the challenges include:

Markets rarely move in a straight line.

 Investors had a lot to consider last week. Rising inflation, interest rate uncertainty, and ongoing conflict in the Middle East weighed on markets. Yet stocks finished the week higher amid hopes for peace, enthusiasm for a stock launch, and improved consumer sentiment. Here’s a recap:

There was some good news and some bad news last week.

 Let’s start with the good news: Employment gains exceeded expectations last month.

 Employers in the United States added 172,000 new jobs in May, similar to April’s 179,000 new jobs. The unemployment rate remained steady at 4.3 percent, the average work-week length was about 34 hours, and wages rose.

It was a record-setting month.

 “Sell in May and Go Away” was an investment strategy promoted by the Stock Trader's Almanac. The idea was based on historic research that suggested holding stocks, as represented by the Dow Jones Industrial Average (Dow), from November to April delivered better returns than holding stocks all year round.

Feeling the pinch of rising prices.

The cost of living is increasing in many places around the world. “The war has sent oil prices soaring and led to shortages of products like jet fuel. Coal prices have also risen as some power companies switch to coal from natural gas to generate electricity. Countries that depend on other fuel sources—from renewables to nuclear power—have been spared some of the economic hardship so far,” reported Avi Salzman of Barron’s

In April, prices in the United States rose at an annual rate of 3.8 percent, with energy prices up 17.9 percent year over year. That was a significant increase from the prior month when prices rose at an annual rate of 3.3 percent, with energy prices rising at a 12.5 percent pace.

The bond market was not happy last week.

 The bond market typically doesn’t get as much attention as the stock market does, but it is a powerful force in the financial world. When a government, company, or other type of organization needs financing, it may issue a bond. In return for borrowing money, the bond issuer promises to pay a set amount of interest for a certain period and then return the lender’s money.

 The United States government issues a lot of bonds. It sells U.S. Treasury bills (very short loans), notes (generally 2- to 10-year loans), and bonds (longer-term loans) to investors.

Looking beneath the surface of the rally.

 Stock markets in the United States moved higher last week on enthusiasm for artificial intelligence (AI), strong corporate earnings, and signs of resilience in the U.S. economy, reported Connor Smith of Barron’s and Michael Msika of Bloomberg.

 What makes this rally interesting is not just its momentum, but also how unusual it is from a historic perspective. It’s rare for the Standard & Poor’s (S&P) 500 Index to deliver four consecutive years of double-digit gains. “For stocks, such prolonged…advances only played out in World War II, the period of peace that followed a few years after that conflict and in the bubble of 1995-1999,” according to sources cited by Msika.

The stock market rally continued.

 April ended with the Standard & Poor’s 500 (S&P 500) and Nasdaq Composite Indexes at record-high levels, having delivered their best monthly returns since 2020, reported Connor Smith of Barron’s. In April, investors:

 It’s all about how you slice the index pie.

 Last week, the Standard & Poor’s 500 Index (S&P 500) closed at a new record high even though 329 of its 500 stocks lost value, reported Connor Smith of Barron’s.

 How is that possible? The S&P 500 is a capitalization-weighted index.

The market completes a 180.

 One of the most exciting driving sequences in movies may be the scene from Baby Driver when “Baby” (a reluctant getaway driver) slings a red Subaru into a narrow 180-degree turn, slides backward between obstacles, and immediately pivots into another 180-degree turn, all while perfectly in sync with the beat of his music.

Since mid-February, the U.S. stock market has offered a similarly exciting ride.

Sunny with a chance of rain.

 Last week, news of a two-week pause in the Middle East conflict was like a sunny day. Investors celebrated and the relief rally lifted U.S. stocks higher. “The cease-fire announced on Tuesday led to the best day for the stock market in almost exactly a year,” reported Avi Salzman of Barron’s.

 On Friday, though, some clouds appeared on the horizon. U.S. economic data and Middle East damage assessments gave investors pause, and the market’s advance slowed as they considered the potential impact of:

In summer school, students learn a lot in a short amount of time. A normal semester gives students about 15 to 17 weeks to learn, but summer classes cram all that information into 6 to 8 weeks. The lessons move quickly and it can be hard to keep up.

That’s what the markets felt like in the first quarter of the year. Investors had to take in a lot of new information very quickly to keep up with economic data, interest rate changes, and global events. Here is a brief recap:

U.S. stocks moved lower last week.

 The journey toward long-term financial goals is often interrupted by unexpected events that create stress and uncertainty. That’s one reason financial plans are built with a keen eye to risk tolerance. When disruptive events occur and financial markets lose value, even the most experienced investors have questions and concerns.

 Over the last few months, markets have traveled a particularly bumpy road. We’ve seen:

The interest rate outlook shifted.

 Last week, central banks around the globe met to set policy rates. While most chose to leave rates unchanged, many expressed concern about the potential economic consequences of the War in Iran, reported Holly Ellyatt of CNBC.

 “Central bankers in Japan, Indonesia and Taiwan opted to stay on the sidelines, as did their counterparts in the U.S., Canada, the U.K. and Europe. The notable exception was Australia, where policymakers narrowly voted to raise rates…,” reported Jihye Lee and Fabiana Negrin Ochoa in Morningstar News.

Stagflation worries rise.

 Over the past couple of weeks, the term stagflation has been popping up a lot. The United States experienced stagflation, which is a combination of high inflation, slow economic growth, and high unemployment, during the 1970s. The possibility of another round of stagflation is concerning because it’s difficult to fix, explained Denny Center Student Fellow Ian Stubbs at Georgetown Law.

Energy disruptions, rising prices, and a weak jobs report cloud the economic outlook.

 It would take a lot more space than we have here to discuss everything that happened last week and the many ways these events may affect financial markets and the economy. So, we are going to focus on energy, inflation, and employment.

Artificial Intelligence (AI) is the new Industrial Revolution.

 Last week, market volatility reflected uncertainty about how artificial intelligence will reshape the economy. Early in the week, a report titled “The 2028 Global Intelligence Crisis” alarmed investors by describing a hypothetical future where artificial intelligence tools greatly improve productivity, causing white-collar jobs to vanish, and unemployment to rise above 10 percent.

When it rains, it pours.

 People respond in different ways when they’re caught in a downpour without an umbrella or rain gear. Some walk as they seek shelter, others run. Occasionally, on warm days, people may celebrate the storm by dancing in the rain or stomping puddles.

 Last week, investors responded to a deluge of news and data in a variety of ways, making for a volatile week in the U.S. stock market. Here is a brief review of some of the issues they encountered:

AI is reshaping the world – and markets are jittery.

 Last week, investor attitudes continued to shift. Instead of celebrating AI as a growth engine, they focused on its potential as a business disruptor. The catalyst for this change was the introduction of AI tools that automate tasks in legal services, coding, financial research, and freight shipping. The news generated a wave of stock selloffs, reported Jeran Wittenstein, Ryan Vlastelica, Phil Serafino, and Charles Riley of Bloomberg.

 Investors are concerned about “creative destruction”. It’s a theory developed by Joseph Schumpeter, who wrote that historically waves of innovation have destroyed older business models and created new ones, according to Richard Alm and W. Michael Cox in The Library of Economics and Liberty.

Investor mood matters.

 Over the past month, we’ve seen five sharp stock market declines – and five rebounds, reported Charles Riley of Bloomberg. He pointed out that market declines often go hand-in-hand with a change in the economic outlook, but that’s not the case this time. The economy appears to be doing reasonably well.

 The declines and recoveries reflect investor sentiment and uncertainty, reported Carmen Reinicke, Alexandra Semenova, Vildana Hajric, and Michael MacKenzie of Bloomberg. For example, investors are worried that:

It was a busy, busy week.

 If you just looked at the weekly return for the Standard & Poor’s (S&P) 500 Index, you might assume the United States stock market was relatively calm last week. It was not. A lot happened last week – and some news moved markets. Here’s a brief recap:

Geopolitics roiled financial markets.

 Just a couple of weeks ago, many analysts and asset managers expressed broad optimism about the potential performance of United States stock markets in 2026 – and the stock market started the year strong. “The S&P 500 closed at new records three times in the first seven trading days of 2026, and isn’t far from its all-time high,” reported Teresa Rivas of Barron’s in mid-January.

 U.S. stocks moved lower last week

Investor appetite broadens.

 For a long time, investors have craved artificial intelligence (AI) related investments. Early in 2026, that’s begun to change. Paul R. La Monica of Barron’s reported:

A change in leadership.

 Last week, investors were presented with a stew of economic and policy developments. These included the surprising announcement that the United States would “run” Venezuela, disappointing jobs data, signs of improved consumer optimism, and a flurry of new policy proposals. Investors weighed what it all means for financial markets, and stocks moved higher.

 Here’s what happened:

Lots of people are willing to predict what’s ahead.

 If the past is prologue, few will be accurate. You don’t have to look far to find an example. In 2023, a majority of economists agreed recession was ahead. They were wrong. Tyler Cowen of Bloomberg explained:

 “Last year at this time, 85 [percent] of economists in one poll predicted a recession this year — and that was an optimistic take compared to the 100 [percent] probability of a recession forecast two months earlier…And yet none of this has happened…most economists expect the U.S. to avoid a recession in 2024.”

What is the most important principle of investing?

 People have different opinions, but these three tend to be at or near the top of the list:

Happy holidays!

 Over the past year, financial markets reminded all of us that progress is rarely linear. As markets gyrated higher and lower, one truth remained constant – building wealth is the result of diversification, discipline, and thoughtful planning.

 An important aspect of planning is the year-end review. If you haven’t yet taken steps to make sure your portfolio is well-positioned for 2026, here are some important things to consider as 2025 comes to a close:

Last week, the United States Federal Reserve (Fed) played “Would You Rather?”

 Would You Rather? is a board game that presents players with classic dilemmas and asks which options would be more palatable to them. For example, a game card might ask, Would you rather:

 Be able to run on your hands or write with your feet?

It’s beginning to look a lot like a rate cut…

 A lot of information about the economy arrived last week. Some was delayed by the government shutdown. Some was right on time. Investors took a look and decided their holiday wish could come true. The Federal Reserve (Fed) might deliver a cut rate cut this week. Here’s a brief recap of the information that landed just in time for the Fed to consider it.

A change of direction…

Stock markets in the United States reversed course last week, with two major indices eking out gains for the month, reported Callum Keown of Barron’s. There were some other important changes last week that also may affect markets and investors. Here’s a recap:

Uncertainty abounds.

 Investors were skittish last week. Share prices jolted higher and lower amid concerns about artificial intelligence (AI) data center spending, upcoming Federal Reserve rate decisions, and the strength of consumer spending, reported Phil Serafino and Natalia Kniazhevich of Bloomberg. These issues will affect the future performance of companies, and investors are trying to anticipate what may be ahead.

 In the third quarter, companies were profitable and sales were strong

 Overall, U.S. companies performed well in the third quarter of 2025. So far, 95 percent of companies in the Standard & Poor’s (S&P) 500 Index have reported on performance over the period. Almost three-fourths performed better than analysts expected. Overall, company profits were up 13.4 percent for the quarter, reported John Butters of FactSet.

It was another turbulent week.

 Investors cheered the end of the shutdown, pondered strong third-quarter earnings, and questioned the artificial intelligence (AI) spending spree. Some reduced their exposure to risky assets, while others bought the dip. Here are a few of the factors that influenced markets last week.

There were bearish undercurrents in the bullish sea.

 While there are many reasons to be optimistic about the long-term prospects for U.S. stocks, investor concerns about artificial intelligence (AI) spending and the possibility of a market correction roiled markets last week.

 “All eyes were on the parade of earnings reports from the technology behemoths this past week. But what grabbed the markets’ attention were the implications of their massive capital investments in artificial intelligence on their balance sheets and cash-flow statements,” reported Randall W. Forsyth of Barron’s.

Like walking on cobblestones…

 If you’ve ever walked down a road paved with cobblestones, you know the uneven surface can be challenging. Today, financial markets are paved with a variety of challenges and concerns. A recent survey from Charles Schwab found that its clients remain bullish; however, they have concerns about how the political landscape, market valuations, and geopolitical and macroeconomic issues will affect markets over the next three months. They also are considering the possibility of stagflation. (Stagflation is a rare confluence of slow economic growth, high inflation, and high unemployment.)

 Last week, markets were volatile. Rising and falling in response to a variety of different events, including: