Daily Commentary

MarketMinder’s View: Though often conflated, inflation—economywide price changes reported in the Consumer Price Index (CPI) or Personal Consumption Expenditures (PCE) price index—is different from your own cost of living. That is because your consumption basket probably differs substantially from the aggregate of what everyone buys. A college student, for example, likely weighs educational costs more than healthcare—and vice versa for a senior (not in school). Or consider homeowners versus renters. But that isn’t the only reason why you shouldn’t use inflation as a measure of living costs, as this article underscores. When the Bureau of Labor Statistics compiles CPI, it uses “hedonic” adjustments to account for changes in products’ qualities. “What if the camera or processor in my iPhone is better than last year for the same amount of money? ... And that’s how you get smartphones registering as 12% cheaper in April 2026, compared to April 2025, in the latest Consumer Price Index print—because, when adjusted for feature parity, they are. This leads to some pretty insane results. For example, according to the official CPI data for smartphones, prices (read: quality-adjusted prices) have dropped 65% since the start of 2020 in the United States.” Even though in dollar terms, a smartphone costs more than it did six years ago. Sure, you may be getting more (quality) for your money, but that in no way is ever reflected in people’s actual pocketbooks. On the flipside, this also enables CPI to capture annoyances like “shrinkflation,” where a company holds the price steady while decreasing size or quantity (think shrinking a bag of chips from 12 ounces to 10 while keeping the price at $5.79). When it comes to personal finance—and financial planning—taking your own living costs (current and future) into account is far more relevant than what could be making adjustments naively based on government measures of inflation, whose purpose is to track whether there is excess money in the system.

MarketMinder’s View: Are rising developed-market government bond yields cause for concern? Supposedly, from America and Japan to the UK and eurozone, bond vigilantes are stirring “to push borrowing costs in the Group of Seven (G7) advanced economies on aggregate to the highest in ‌more than 20 years.” But we find the thinking behind this muddy—and unpersuasive. The mish mash includes war-related energy shocks, inflation, profligate governments (perhaps under new leadership), rate hikes, corporate bond competition, aging demographics and the Fed unloading its long-term debt holdings. Then, to top off the sum of all these fears, it alleges this will cause “high-flying stocks” to topple. Whew. To cut through the clutter, think like a bond investor. First, remember bond markets are subject to sentiment-induced volatility in the short term. Second, when weighing longer-term considerations, can G7 governments make their debt payments? Yes. Tax revenues in the US cover interest costs by over five times, and more for the rest of the G7. They can easily meet their debt obligations. Third, bonds’ main drivers are inflation and inflation expectations—are those about to run away? We don’t think so. Inflation is caused by too much money chasing too few goods and services. Global energy supplies may be a tad tight, and while a key category, its importance has shrunk substantially—particularly in the developed world—since the 1970s and 1980s. More importantly, G7 money supply is growing at prepandemic rates—unlike during lockdowns, when central banks flooded financial systems with money while production idled. Since money growth isn’t out of hand and (most) output isn’t constricted, inflation can’t soar. As for Japan, which is experiencing faster inflation, that is a change the central bank was aiming for after many years of destructive deflation, and its yields are still low relative to the rest of the world. Again, sentiment can swing yields short term. Bonds may be less volatile than stocks, but that doesn’t mean they never get jittery, especially with headlines (like this) in overdrive. But these moments are when focusing on fundamentals best serves investors.

MarketMinder’s View: Here is a good look at how the global energy supply picture has changed in recent years, muting fears of shortages in the wake of Middle East disruption. For example, regarding natural gas, “U.S. output, which grew again in recent weeks with the opening of the Golden Pass LNG [liquefied natural gas] terminal on the Texas coast, has helped keep global prices much steadier than in 2022, despite the Hormuz closure. South Korea, Spain, Italy and France each bought at least 50% more U.S. LNG in March than they did in February before fighting broke out in the Persian Gulf, according to LSEG.” Look at the charts herein, and the same basic story holds for crude oil and other petroleum products like propane (widely used for home heating and cooking and restaurant kitchens in Asia). With the Persian Gulf no longer the world’s dominant energy supplier, its grip on global markets has also waned—even if many outlets continue peddling an outdated view of its importance. This gap between sentiment and reality is what we think stocks have been pricing since late March’s lows.