As you'll note below, there are real positives in spots among the data, while the inflation picture is nothing but negative... On net, this is that stagflationary risk we've been signaling for months.
As I've mentioned in virtually every client review of late, if we're having the same geopolitical conversation six months from now, we will likely have made notable adjustments along the way... Thus far, as you've gleaned from the volume of transaction confirmations of late, we're already actively adjusting at the margin.
While we're sitting right near our year-to-date peak, representing a very nice four-month gain in our core portfolio -- validating our overall strategy thus far -- Friday was nevertheless a rough day, as global equity, currency, and commodity markets suddenly cared about rising yields (read inflation risk), and are, thus, legitimately beginning to wonder if indeed a Hormuz resolution is at hand.
The Economy Is Growing. Prices Are Growing Faster*
Private Wealth Advisors — Weekly Update | May 16, 2026
This week delivered one of the most data-rich stretches of the year, and the picture that emerged is one we have been describing for months: an economy with genuine momentum running directly into an inflation problem that is getting worse, not better.
Start with what is working. April industrial production rose 0.7%, its best month in over a year, with manufacturing output up broadly — computers and electronics, electrical equipment, machinery, aerospace, and a rebound in auto production all contributed. Capacity utilization recovered to 76.1%. The Atlanta Fed's real-time GDP tracker is running at 4.0% annualized for the second quarter. Business lending is expanding at a robust pace. The Empire State manufacturing index surged in May. Retail sales beat expectations for the month, building on an upwardly revised March. On the labor side, April payrolls came in at 115,000 — more than double what Wall Street had expected — and weekly jobless claims, while ticking up slightly, remain near their lowest levels in two years.
PWA Index — Week of May 11, 2026 | Score: −16.42 | Deterioration
Our proprietary PWA Index — a 67-field macro conditions oscillator we score weekly across consumer, business, inflation, and financial market indicators — moved to −16.42 this week from −8.96, its largest single-week decline in the current sequence. The score reflects precisely what the data shows: a handful of genuinely strong readings on the activity side co-existing with an inflation complex that is deteriorating across nearly every measure we track. When the index moves this sharply in a single week, it is worth paying attention to what drove it — and this week the answer is unambiguous. The inflation section of the index registered red across all eleven fields simultaneously for the first time in the current cycle. That has not happened before.
April consumer prices rose 3.8% year-over-year, the highest reading since May 2023. Producer prices — the wholesale costs that work their way into what consumers pay — surged 6.0% year-over-year, the highest since late 2022, with a monthly gain of 1.4% that was nearly three times the consensus estimate. Core measures of both CPI and PPI — stripping out food and energy — accelerated as well. The professional inflation markets that trade CPI swaps moved higher across every time horizon this week, which means institutional investors are not treating this as a temporary energy story. They are pricing in persistent inflation, and they are raising their estimates, not lowering them.
At the household level, the squeeze is becoming tangible. Average hourly earnings are now growing more slowly than consumer prices, meaning workers are losing purchasing power on a year-over-year basis for the first time in this cycle. The personal savings rate sits at 3.6%, its lowest since the summer of 2008, as families spend down savings to maintain their standard of living in a higher-price environment. The University of Michigan's consumer sentiment survey fell to an all-time low in its preliminary May reading — the second sub-50 print in the survey's 74-year history — with inflation expectations elevated across both the near term and the next five years. People are worried, and the data suggests they have reason to be.
The source of much of this pressure has not changed. The Strait of Hormuz remains effectively closed. Oil ended the week near $106 per barrel, up sharply from the prior week and roughly 46% above pre-conflict levels. Secretary of State Rubio this week described Operation Epic Fury as concluded while acknowledging that what the US now seeks is a framework for future negotiations — a significant step back from the comprehensive settlement the administration demanded in the spring. Iran's foreign minister said an agreement was "just inches away" while simultaneously rejecting the terms on offer. The ceasefire holds in the technical sense. The strait does not. As we have written for several months now, those are two different things, and the oil market is pricing the latter correctly.
US/China Summit
President Trump's summit with President Xi in Beijing this week generated constructive language but no breakthrough on Hormuz, no formal trade framework, and a Boeing aircraft order that came in well below what markets had anticipated. Stocks fell Friday as oil climbed and Treasury yields backed up, with the S&P 500 finishing the week essentially flat after touching an all-time high Thursday. The week's action — record highs Monday through Thursday, a meaningful reversal Friday — is consistent with a market that has priced in a lot of good news and is beginning to reckon with the inflation data it kept looking past.
This week delivered one of the most data-rich stretches of the year, and the picture that emerged is one we have been describing for months: an economy with genuine momentum running directly into an inflation problem that is getting worse, not better.
Start with what is working. April industrial production rose 0.7%, its best month in over a year, with manufacturing output up broadly — computers and electronics, electrical equipment, machinery, aerospace, and a rebound in auto production all contributed. Capacity utilization recovered to 76.1%. The Atlanta Fed's real-time GDP tracker is running at 4.0% annualized for the second quarter. Business lending is expanding at a robust pace. The Empire State manufacturing index surged in May. Retail sales beat expectations for the month, building on an upwardly revised March. On the labor side, April payrolls came in at 115,000 — more than double what Wall Street had expected — and weekly jobless claims, while ticking up slightly, remain near their lowest levels in two years.
Our proprietary PWA Index — a 67-field macro conditions oscillator we score weekly across consumer, business, inflation, and financial market indicators — moved to −16.42 this week from −8.96, its largest single-week decline in the current sequence. The score reflects precisely what the data shows: a handful of genuinely strong readings on the activity side co-existing with an inflation complex that is deteriorating across nearly every measure we track. When the index moves this sharply in a single week, it is worth paying attention to what drove it — and this week the answer is unambiguous. The inflation section of the index registered red across all eleven fields simultaneously for the first time in the current cycle. That has not happened before.
April consumer prices rose 3.8% year-over-year, the highest reading since May 2023. Producer prices — the wholesale costs that work their way into what consumers pay — surged 6.0% year-over-year, the highest since late 2022, with a monthly gain of 1.4% that was nearly three times the consensus estimate. Core measures of both CPI and PPI — stripping out food and energy — accelerated as well. The professional inflation markets that trade CPI swaps moved higher across every time horizon this week, which means institutional investors are not treating this as a temporary energy story. They are pricing in persistent inflation, and they are raising their estimates, not lowering them.
At the household level, the squeeze is becoming tangible. Average hourly earnings are now growing more slowly than consumer prices, meaning workers are losing purchasing power on a year-over-year basis for the first time in this cycle. The personal savings rate sits at 3.6%, its lowest since the summer of 2008, as families spend down savings to maintain their standard of living in a higher-price environment. The University of Michigan's consumer sentiment survey fell to an all-time low in its preliminary May reading — the second sub-50 print in the survey's 74-year history — with inflation expectations elevated across both the near term and the next five years. People are worried, and the data suggests they have reason to be.
The source of much of this pressure has not changed. The Strait of Hormuz remains effectively closed. Oil ended the week near $106 per barrel, up sharply from the prior week and roughly 46% above pre-conflict levels. Secretary of State Rubio this week described Operation Epic Fury as concluded while acknowledging that what the US now seeks is a framework for future negotiations — a significant step back from the comprehensive settlement the administration demanded in the spring. Iran's foreign minister said an agreement was "just inches away" while simultaneously rejecting the terms on offer. The ceasefire holds in the technical sense. The strait does not. As we have written for several months now, those are two different things, and the oil market is pricing the latter correctly.
US/China Summit
President Trump's summit with President Xi in Beijing this week generated constructive language but no breakthrough on Hormuz, no formal trade framework, and a Boeing aircraft order that came in well below what markets had anticipated. Stocks fell Friday as oil climbed and Treasury yields backed up, with the S&P 500 finishing the week essentially flat after touching an all-time high Thursday. The week's action — record highs Monday through Thursday, a meaningful reversal Friday — is consistent with a market that has priced in a lot of good news and is beginning to reckon with the inflation data it kept looking past.
What This Means for our Portfolio
Earlier this week we made a deliberate adjustment to our equity positioning. We trimmed our technology sector holding by 30% — locking gains that had reached approximately 20% year-to-date — and redeployed the proceeds equally into financials, healthcare, and communication services. Technology had drifted to an outsized share of the portfolio as it outperformed, and with the sector technically stretched, the discipline of trimming into strength and rebalancing into sectors with better entry points and distinct tailwinds is exactly what portfolio management requires. Financials benefit from a steeper yield curve and a supportive regulatory environment. Healthcare offers defensive value after a difficult stretch driven by policy noise that we believe is largely priced in. Communication services — dominated by companies like Meta and Alphabet — captures the part of the AI story where investment is beginning to translate into measurable earnings, rather than the infrastructure build that still requires patience to monetize.
We are also evaluating modest put hedge additions — defined-cost downside protection on both the broader US equity index and a portion of our European and Japanese equity exposure. The inflation data this week argues that the Fed's (as well as the European Central Bank's and the Bank of Japan's) path is narrower than markets have assumed, and a policy misstep in either direction carries real market consequences.
The broader portfolio — energy, real assets, grid infrastructure, international equity, and selective defensives — was built for precisely this environment, and this week's data reinforces rather than challenges that construction. We are not making dramatic changes. We are making the incremental adjustments that disciplined risk management requires when the macro picture confirms what you expected and the market begins to catch up to it.
The week ahead brings additional housing data and the next round of Fed commentary. We will continue monitoring the Iran diplomatic track closely. Any credible progress toward reopening the Strait of Hormuz would change the calculus meaningfully — and we remain positioned to respond when that signal arrives.
Earlier this week we made a deliberate adjustment to our equity positioning. We trimmed our technology sector holding by 30% — locking gains that had reached approximately 20% year-to-date — and redeployed the proceeds equally into financials, healthcare, and communication services. Technology had drifted to an outsized share of the portfolio as it outperformed, and with the sector technically stretched, the discipline of trimming into strength and rebalancing into sectors with better entry points and distinct tailwinds is exactly what portfolio management requires. Financials benefit from a steeper yield curve and a supportive regulatory environment. Healthcare offers defensive value after a difficult stretch driven by policy noise that we believe is largely priced in. Communication services — dominated by companies like Meta and Alphabet — captures the part of the AI story where investment is beginning to translate into measurable earnings, rather than the infrastructure build that still requires patience to monetize.
We are also evaluating modest put hedge additions — defined-cost downside protection on both the broader US equity index and a portion of our European and Japanese equity exposure. The inflation data this week argues that the Fed's (as well as the European Central Bank's and the Bank of Japan's) path is narrower than markets have assumed, and a policy misstep in either direction carries real market consequences.
The broader portfolio — energy, real assets, grid infrastructure, international equity, and selective defensives — was built for precisely this environment, and this week's data reinforces rather than challenges that construction. We are not making dramatic changes. We are making the incremental adjustments that disciplined risk management requires when the macro picture confirms what you expected and the market begins to catch up to it.
The week ahead brings additional housing data and the next round of Fed commentary. We will continue monitoring the Iran diplomatic track closely. Any credible progress toward reopening the Strait of Hormuz would change the calculus meaningfully — and we remain positioned to respond when that signal arrives.
This note is for informational purposes and is not a solicitation to buy or sell any security. Past performance is not indicative of future results.
*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.
*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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