May 29, 2026
Constructive comments from the White House on a continuation of the cease fire with Iran supported moderately lower Treasury yields on the week and a positive backdrop for US equity markets. A deescalation between the US and Iran and a sustainable opening of the Strait of Hormuz will be cathartic for global markets in the short-term, however the Chandler team remains cautious over an intermediate time horizon based on our outlook for commodity prices and the potential implications to headline and core inflation. Global oil inventories have been drawn down significantly since the conflict began in late February, and the price of oil is poised to remain elevated relative to beginning of year expectations, as demand increases in the short term with the increase in supply and inventories are rebuilt back up to normalized levels over a longer time horizon.
Economic data releases during the past week were mostly constructive and supportive of a US economy that is poised to achieve trend GDP growth over the course of the year. Although survey-based data remains soft, with Consumer Confidence coming in at 93.1 in May compared to a revised 93.8 in April, the ‘hard’ data linked to employment remains constructive and above beginning of year expectations. The ADP (Automatic Data Processing) Weekly Employment Report remains strong, with the most recent four week moving average at 35.75k which compares quite favorably to the 4.25k number at the end of December 2025, illustrating the subtle strength in the labor market. Weekly Jobless Claims also remain low, with the most recent four week moving average at 209k. On Thursday, market participants received the monthly update from the Bureau of Economic Analysis on Personal Income, Personal Spending, and PCE Inflation, with the data releases accentuating the impact of the increase in the price of oil since the Middle East conflict began. On a monthly basis, Personal Spending came in at 0.5%, but Personal Income was flat, and the Personal Savings Rate declined to 2.6%, the lowest monthly reading since June 2022. Historically, the Personal Savings Rate is subject to larger revisions, and the Chandler team will be closely monitoring the ability of the US consumer to continue to support the growth of the US economy going forward. Both headline and core PCE inflation came in below consensus expectations on a month over month basis, at 0.4% and 0.2%, respectively, but both annualized numbers remain well above the Federal Reserve’s 2.0% policy objective with readings of 3.8% for headline inflation and 3.3% for core inflation. In Chandler’s opinion, it is likely the monthly PCE inflation readings will experience a moderate amount of upward pressure over the next few months, implying that the annualized inflation metrics will remain above 3.0% throughout 2026.
The next Federal Reserve Open Market Committee (FOMC) meeting is in two and a half weeks on June 17. Based on the officially released Federal Reserve speech calendar, new Fed Chair Kevin Warsh is not scheduled to speak next week, and it is likely his first public comments as Fed Chair will take place at the press conference following the June meeting. Given the tenuous backdrop for the inflation outlook, his comments at the press conference regarding the outlook for monetary policy will be closely scrutinized and will likely have more potential to move markets than is typical. Despite Fed Funds futures pricing that implies some probability of an increased in the Fed Funds rate in 2027, we believe the ‘hurdle rate’ for an increase in the Fed Funds rate remains quite elevated, and would require a combination of longer term inflation expectations becoming unanchored and the subtle strength in the labor market we are currently observing accelerating enough to increase risks of wage inflation. Our internal view remains the current settings for monetary policy are in the range of neutral, and as inflation reasserts its normalizing and downward trend outside of our six-month forecast horizon, the FOMC will have the ability to further normalize the target range.
Next Week: ISM Manufacturing, JOLTS, ADP Monthly Employment, ISM Services, Fed Beige Book, Challenger Job Cuts, Nonfarm Productivity, Unit Labor Costs, Weekly Jobless Claims, Monthly Employment Report, and Consumer Credit.
Written by William Dennehy, CFA, Chief Investment Officer