Economic Update 6/10/2026

I acknowledge that it’s unusual for me to send out two Economic Updates in quick succession, but as a follow-up to yesterday’s Economic Update, there are two critical new items that need to be discussed in relation to our investment outlook.

The first was the CPI (Consumer Price Index) release this morning and how it shows some restraint to inflation. For May, the CPI rose 0.5% on a month-over-month basis. This was actually slightly lower than the April increase of 0.6% and matched the consensus forecast. The primary cause for the increase was energy costs rising almost 4% for the month. Gasoline prices, alone, were up 7% during May. The gains in shelter, 0.3%, and in food, 0.2%, were relatively modest.

Overall, the CPI increase was the lowest in four months. On a trailing twelve-month basis, the CPI rose 4.2%. This matched the forecasted level but was the highest gain since April of 2023. Again, energy costs were the primary factor relative to the increase. Energy costs, in total, were up 23.5% during this period and gasoline prices shot up over 40% during the past year.

Core Inflation Rate

Another aspect of the CPI release has to do with the Core Inflation Rate. This measure excludes food and energy. The Core rate was up 0.2% during May and was significantly below the 0.4% rise in April. It was also below the forecasted level of 0.3%. Medical costs and airline fare increases were the two primary factors for the May number. On a year-over-year basis, the Core-CPI rose by 2.9%. This matched the forecasted rate but was the largest gain since September of last year. Shelter, medical costs, and apparel were the highest contributors to this inflation measurement.

From an overall perspective, the above inflation indicators are neither out-of-line nor unexpected. In fact, they are somewhat subdued given the continued volatility in the energy/gasoline market. The bond market is generally reacting somewhat positively to these releases and interest rates are marginally lower today.

Iran Conflict Continues

The other critical factor dominating today’s news cycle is a verbal and written pledge by President Trump that the U.S. will again attack Iran in a very hard and meaningful way. Most are interpreting this to mean we will return to full military actions against Iran and could result in up to 400 missile attacks a day. Most military analysts are expecting it will take about two weeks to finish the campaign we initially started against Iran. The administration related the renewed attacks on the downing of a U.S. helicopter, with two servicemen aboard, and the fact that Iran had taken too long to negotiate a deal and would “pay the price”. Not surprisingly, the price of oil is up again today, and the equity market is down somewhat.

From an investment perspective, this could result in a complete collapse of the Iranian government due to our military success or again force them to the negotiating table with a more reasonable long-term resolution. Regardless, we will obviously be watching closely the results of the next few days and weeks to the actions between the U.S. and Israel forces against the already weakened Iranian military. Hopefully, an immediate outcome will be the reopening of the Strait of Hormuz. This would allow oil tankers to navigate through this current blockade in a more efficient manner and begin to re-supply the world’s energy needs.

As we have seen from the recent inflation numbers, higher energy costs have been the primary cause of inflation since this conflict began in February. While we have our long-term investment priorities in place and ready to complete, we feel it is best to be cautious on a near-term basis and make any changes to our portfolios in a controlled manner.