3 Things You Need to Know This Week | US Inflation, US Q1 GDP, Graduation Season

Transcript

Hello and welcome to Three Things You Need to Know this week, our regular series designed to help you sift through the noise across financial media, and understand what really matters for markets. To stay up to date with our latest market insights, subscribe to our YouTube channel or visit Fisher investments.com. And with that, here are three things you need to know this week. First, US PCE Inflation. On Thursday, we will get the latest reading of the Personal Consumption Expenditures Index or PCE. This is the Federal Reserve's preferred inflation gauge. That report should add another useful data point on inflation and the state of the US economy. Here's where things stand going into Thursday's release: Recent data from another inflation measure, the Consumer Price Index, or CPI, showed headline inflation rising 3.3% year over year in March and 3.8% in April. Meanwhile, March PCE rose 3.5% year over year. That matched expectations and marked the highest reading since May of 2023. Recent inflation increases have led to a growing perception that another wave of runaway inflation is on the way, fueled in part by higher energy prices tied to the ongoing conflict in the Middle East. We know rising everyday expenses create real stress for many families, especially when some of the most visible items in the household budget suddenly get more expensive. Regardless of which measure investors focus on, a larger or longer spike in inflation seems unlikely to us. Moderate money supply growth suggests inflation may ultimately turn out better than widely perceived, which is an opportunity for positive surprise. So far, inflation data aren't showing the effects from higher oil prices flowing into other categories. That means we're not seeing evidence of higher costs being passed along to consumers for goods that rely on oil or natural gas as inputs. For example, as highlighted in a recent Market Minder article, prices for chemical intensive household cleaning products actually fell 0.7% last month. While headlines warn that inflation spread is simply delayed, we doubt it. Businesses can pass along higher costs only when demand is strong enough to absorb them. That generally doesn't happen without a broad acceleration in money supply growth to lift demand. Next, a Q1 GDP update. On Thursday, the US Bureau of Economic Analysis will release its second estimate of first quarter US GDP. This should give investors a clearer view of economic growth as more complete data becomes available on consumer spending, business investment and net exports. The initial estimate released earlier this month, showed US GDP accelerating from 0.5% annualized growth in Q4 2025 to 2% growth in the first quarter of 2026. In recent quarters, the initial GDP reading was revised down, which may cause some to worry growth may have again been overestimated in Q1's initial reading. But we think the bigger point is that GDP looks backward while stocks look ahead. What happened in Q1 is already reflected in share prices. Markets have moved on, focusing on where growth goes next. Regardless of whether Q1 GDP gets revised up or down or stays the same, it's future economic growth that matters most for stocks today. Forward looking economic fundamentals like a steepening U.S. yield curve and positive purchasing manager indexes point to continued growth ahead. Finally, a reminder as we head into graduation season. Graduation season is here, and with it a reminder of how quickly one chapter ends and another begins. Importantly, as kids and grandkids cross the stage, it can prompt families and friends to take a fresh look at how they're preparing for the costs and responsibilities ahead. For those who have built wealth over time, financial planning often centers on preserving assets and making sure that wealth supports the people they love and reflects the values that matter most to them. If helping fund a future generation's education is a priority for you, it's important to plan ahead and consider the full cost, since tuition, housing and other related expenses can add up quickly. More broadly, it's also important to ensure all of the legal and financial pieces of your portfolio are in place. That may include reviewing how your portfolio is structured and coordinating with a financial planner and estate planner, if appropriate. For example, if you already have a will in place, consider how it works with the other parts of your estate plan and vice versa. When these elements are aligned, your wealth is better positioned to support the milestones you're celebrating today and the legacy you hope to leave over time. And that's it for this episode of Three Things You Need to Know this week. For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit Fisherinvestments.com. Thanks for tuning in and don't forget to hit like and subscribe.