Per the summary below, while our PWA Index score remains negative, the underlying dynamics are notably mixed.
While the inflation and inflation expectations reads are -- or should be -- a serious drag on general conditions, the labor market continues to hold up remarkably well... The consumer -- despite abysmal sentiment readings -- seems to be hanging in there, although they're doing so at the expense of their savings (the rate now down to the lowest in 18 years). I.e., they're not panicking just yet, they're instead saving less in order to keep up their spending -- while paying ever-rising prices.
We maintain that a Mid-East resolution coming soon would likely give quite the boost to animal spirits, one that markets would initially cheer... The underlying inflation dynamic, however -- being a structural affair in our view -- will no doubt keep us on our toes going forward.
Here's your weekly read*:
PWA Index — Week of April 28, 2026 Score: −5.97 | Modest Deterioration
The PWA Index declined modestly this week, moving further into negative territory but remaining within the range it has held since the Iran conflict began. The overall picture has not changed materially: the economy continues to absorb a significant external shock, with genuine strength in some areas offsetting genuine weakness in others.
The positive news this week was notable. Unemployment insurance claims fell to 189,000 — the lowest weekly reading since 1969. Americans are simply not losing their jobs at any meaningful rate, despite the ongoing conflict and the disruption to energy markets. Business investment also surprised to the upside, with orders for core capital goods surging well above expectations in March — a signal that companies are still committing to equipment and expansion despite the uncertainty. Personal income recovered strongly in March after a weak February, and the Atlanta Fed's early estimate for second quarter GDP growth came in at a solid 3.5%.
The concern this week is inflation, which is not improving — it is worsening. The Federal Reserve's preferred inflation gauge, the PCE index, rose at its fastest monthly pace since November 2021 in March, pushing the annual rate to 3.5%. Within the quarterly GDP report, the embedded inflation measure came in at a 4.5% annualized rate for the first quarter — more than twice the Fed's 2% target. Market-based inflation expectations moved higher for the third consecutive week across all time horizons, with short-term expectations now pricing inflation above 3% annually.
What makes this particularly challenging for households is the savings picture. Americans are spending more than their income growth alone would support — the personal savings rate fell to 3.6% in March, its lowest level since the summer of 2008. Families are drawing down their financial cushion to absorb higher energy and grocery costs, which is not a sustainable pattern. Oil prices surged back above $100 per barrel this week, and the Bloomberg Commodity Index hit a new all-time high, suggesting the cost pressures are not yet easing.
The Federal Reserve held interest rates unchanged at its April meeting and faces a genuinely difficult choice. Inflation is running well above target and expectations are rising. Yet raising rates risks slowing an economy that is already absorbing a major external shock. Holding risks allowing inflation expectations to become entrenched. Markets are currently pricing no rate cuts for the rest of 2026, which means households and businesses should plan for borrowing costs to remain elevated.
The housing market this week illustrated the broader economic tension clearly. Home construction surged to its strongest pace in over a year in March — a positive signal for housing supply. But permits, which indicate future construction intentions, fell sharply — the largest single-month decline since November 2022 — suggesting builders are pulling back on future plans even as they complete current projects.
The April employment report arrives Friday, May 8 — the first full picture of the job market since the conflict entered its third month. It will be one of the most important data releases of the year. We will update you promptly.
*Prepared by Marty Mazorra, Chief Investment Officer, Private Wealth Advisors. Research synthesis and drafting assisted by AI tools under advisor review. All market views, analysis, and recommendations are those of the advisor.
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