Economy
The Kevin Warsh-led Federal Open Market Committee (FOMC) met this week and announced no change in interest rates, a decision that was widely expected. Since the war with Iran began a few months ago, surging oil prices led inflation higher and in the wrong direction for the Fed to continue to cut rates. The market's expectations for interest rate changes have shifted dramatically in the last few weeks. A month ago, the CME FedWatch tool was reflecting less than a 50% chance of a rate hike before the end of the year. Following Wednesday's FOMC meeting, it's now a 90% chance of an increase in rates in the next 6 months with markets betting on either 1 or 2 hikes (0.25% or 0.5%). On deck this week will be the Fed's favorite gauge of inflation, the personal consumption expenditures (PCE) index. The Fed's target for inflation is 2%, and last month's reading for core PCE was 3.29%, the highest level since October 2023.
Markets
The stock market was mostly positive this week with the S&P 500 rising 0.93%. There was optimism over a negotiated deal with Iran that led to a few oil tankers passing through the Strait of Hormuz this week. The peace deal seems to be on shaky footing that could get tripped up by the ongoing Israel-Lebanon fighting. Markets are going to have to deal with continued uncertainty in the Middle East. We're just a few weeks away from earnings season kicking off, and the S&P 500 is about 1.5% from all-time highs. Earnings growth has been incredible in 2026 and projected to remain high in the second half of the year.
What We're Reading
- A Sunday Thought About Money- Humble Dollar
- The Kiddie-Tax Pitfall- WSJ
Have a great weekend.
Dogwood Wealth Management