Your Weekly Roundup

While our synopsis below implies that (as recent data suggest) inflation should abate some when oil begins flowing, as I've flagged herein and in client meetings, a go-forward scenario where geopolitical risk becomes less prominent, and animal spirits ignite, will see demand for things beyond just oil rise broadly -- essentially keeping price-pressure (read inflation) very much alive and well.

I.e., suffice to say, the setup late this year into next may very well be characterized by a notable renewal in the rising inflation/interest rate trend, which can pose a serious headwind for risk assets.

In the meantime, it was quite the week last week for stocks.

S&P 500 Index 5-day chart:

The first half was saddled with a hangover from the previous Friday (worst day in a year for the Nasdaq), punctuated mid-week by a not-cool inflation print (to go along with Friday's strong jobs print) and the threat of dramatic Mid-East escalation.

The latter got entirely quelled -- sparking a snapback rally -- by yet another announcement that a peace deal that would involve opening the Strait of Hormuz was imminent...  Stay tuned.

Digging below the headlines, here's the latest scoring of our PWA Index followed by your weekly macro roundup:

Client Note* — When the Headlines Get Loud and the Foundation Stays Quiet

This week handed us a clean example of why we pay more attention to underlying conditions than to any single headline. Inflation data landed at the hottest level in three years — consumer prices rose 4.2% from a year ago, the steepest reading since 2023 — and yet our internal conditions gauge actually improved, easing back to −7.46 from −10.45. That is its best level in six weeks. The two facts only seem to contradict each other.

While our go-forward thesis involves structurally higher inflation, the data suggest that this year's inflation spike is almost entirely an energy story, and energy is already turning. The jump in prices traces back to the oil shock from the conflict around the Strait of Hormuz, but oil has since fallen to its lowest level since March on growing hopes for a lasting agreement to reopen the waterway. That improvement is showing up where it matters first: consumers' inflation expectations rolled back meaningfully, consumer sentiment ticked up off a record low, and the market's own measures of future inflation softened across the board. In other words, the realized inflation number looks backward at a problem that the forward-looking signals suggest may now be peaking. If calmer energy prices hold, the heavy inflation readings -- our longer-term view notwithstanding -- should begin to ease over the coming months.

Underneath, the labor picture remains the familiar mix it has been for weeks: still-solid on the demand side, with job openings holding near multi-year highs, but cooling at the edges, with unemployment claims drifting up and hiring slow. One item we are watching more closely is business lending, where the pace of growth slowed sharply this week; it is the kind of quiet signal that tends to show up before the headlines do, and it fits a broader read of businesses growing more cautious about investment beneath a still-steady surface.

The market itself reinforced that caution. Even on a week of optimism around an energy deal, investors kept rotating toward steadier, more defensive areas rather than chasing the rally (Thursday's spike in growthy names notwithstanding) — a quieter vote for prudence that lines up with how the portfolio is positioned. None of this changes our overall stance. We remain set up for slower growth alongside persistent-but-likely-(short-term)-peaking inflation, with a portfolio built to hold up across a range of outcomes rather than leaning hard on any single one. The Federal Reserve meets next week, and while no change in rates is expected, we will be listening closely to how the new leadership frames the path ahead. 

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.