Monthly Market Update

Momentum with Friction

• Gross Domestic Product ⁽¹⁾⁽²⁾ (2Q26): The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2026 is 3.0% on June 1, 2026, down from 3.1% on May 29.
• Employment (May): Total nonfarm payroll employment increased by 172,000 in May, and the unemployment rate was unchanged at 4.3%, the U.S. Bureau of Labor Statistics reported. Job gains occurred in leisure and hospitality, local government, and health care. Employment in financial activities declined. The change in total nonfarm payroll employment for March was revised up by 64,000, from 185,000 to 214,000, and the change for April was revised up by 64,000, from 115,000 to 179,000. With these revisions, employment in March and April combined is 93,000 higher than previously reported.
• Inflation ⁽⁴⁾ (April): The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6% on a seasonally adjusted basis in April, after rising 0.9% in March, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all items index increased 3.8% before seasonal adjustment. The index for all items less food and energy rose 0.4% in April, and 2.8% for the last 12 months ending in April.
• The Producer Price Index (PPI) (April): The Producer Price Index for final demand, seasonally adjusted, increased 1.4% in April, after rising 0.7% in March and 0.6% in February, the U.S. Bureau of Labor Statistics reported. On an unadjusted basis, the index for final demand rose 6.0% for the 12 months ended in April 2026.
• Retail and Food Services Sales ⁽⁶⁾ (April): Advance estimates of U.S. retail and food services sales for April 2026, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $757.1 billion, up 0.5% (±0.4%) from the previous month, and up 4.9% (±0.5%) from April 2025.
• Personal Income and PCE ⁽⁹⁾ (April): Personal incomedecreased less than $0.1 billion (less than 0.1% at a monthly rate) in April, according to estimates released by the U.S. Bureau of Economic Analysis. From the preceding month, the PCE price index increased 0.4%. Excluding food and energy, the PCE price index increased 0.2%. From the same month one year ago, the PCE price index increased 3.8%. Excluding food and energy, the PCE price index increased 3.3% from one year ago.

Fragile Resiliency

The most recent publication of The Beige Book was released for February 2026, with a summary of commentary on current economic conditions by the Federal Reserve district.

Highlights of the June 2026 Beige Book:

• Uneven Growth: “Economic activity expanded modestly overall, with a slight to moderate pace for ten of the twelve Federal Reserve Districts, though conditions remained uneven. Consumer spending was mixed across Districts and increasingly bifurcated across income groups, as higher-income households remained resilient, while middle-income consumers were “squeezing more life out of every dollar,” and lower-income groups faced greater financial strain. There were signs of tightening behavior, including increased credit card usage, fewer retail visits, and stronger demand for necessities. Auto sales weakened due to affordability constraints, while manufacturing showed relative strength, “increased at a modest to strong pace for nine of the Districts.” Financial conditions were broadly stable, but loan delinquencies were noted as rising, and overall sentiment was cautious, with elevated uncertainty and signs of weakening consumer spending weighing on the outlook.
• Flat Labor Market: Labor market conditions were largely stagnant, as employment showed little to no change across districts, reflecting a cautious hiring environment. The report described a “low-hire, low-fire environment,” with workers hesitant to switch jobs amid uncertainty. Hiring activity was selective and primarily focused on critical roles, while manufacturing stood out as a relative bright spot, supported by defense-related activity and rising data center demand. Wage growth remained contained, modest to moderate and largely in line with inflation, though firms increasingly implemented more frequent wage adjustments and cost-of-living increases. Demand for professional services labor was uneven, with mixed demand conditions tied to ongoing technological and operational shifts.
• Inflation Fueled by Energy Shocks: Inflationary pressures persisted, with prices increasing at a moderate to strong pace overall, and most Districts reporting an acceleration from the prior period. Energy costs (linked to geopolitical tensions) were identified as the primary driver of inflationary pressures, affecting a broad range of categories including shipping, packaging, groceries, and fertilizer. Rising input costs continued to outpace pricing power, as non-labor input costs continued to rise faster than selling prices, leading to concerns about margin compression. Firms’ ability to pass through costs was uneven, especially in consumer-facing sectors, prompting various mitigation strategies such as supply-chain optimization, product adjustments, reduced offerings, and temporarily absorbing higher costs.

Geopolitical Tensions to Pressure Global Growth

The OECD released their 2026 Economic Outlook, Volume 2026 Issue 1, on June 3, 2026. The report highlights the current state of the global economy, including the main drivers and risks going forward.

Highlights of the June 2026 OECD Economic Outlook Book:

• Energy Shock and Inflation Pressures: The conflict in the Middle East has become the dominant force shaping the global economic outlook, with disruptions that have triggered a sharp rise in energy prices and input costs. These increases are feeding into inflation pressures, pushing up consumer prices and eroding confidence, while inflation expectations have moved higher. The shock is broad-based, as rising energy costs spill into fertilizers and other critical industrial inputs, reinforcing the risk of more persistent and widespread inflation.
• Growth Slowdown: Global growth is expected to moderate in 2026 before picking up in 2027, as the earlier resilience gives way to weaker momentum. Higher costs and uncertainty are weighing on activity, and if disruptions persist, growth could weaken further and push some economies into or close to recession.
• Policy Constraints: With exceptionally uncertain conditions, flexible and agile public policies are needed to ensure macroeconomic stability, but policy space is constrained by the need to balance inflation, growth, and debt. Key priorities include establishing a credible fiscal path to debt sustainability and enhancing energy security and resilience.

Monthly and YTD returns

Source: Morningstar and Bloomberg asset class screening total return 1 month USD and total return YTD as of May 31, 2026 ⁽¹¹⁾

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Definitions:

• ⁽¹⁾ Gross Domestic Product (GDP): A comprehensive measure of U.S. economic activity. GDP is the value of the goods and services produced in the United States. The growth rate of GDP is the most popular indicator of the nation’s overall economic health. Source: Bureau of Economic Analysis (BEA).
• ⁽²⁾ GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 and social mobility beyond their impact on GDP source data and relevant economic reports that have already been released. It does not anticipate their impact on forthcoming economic reports beyond the standard internal dynamics of the model.
• ⁽³⁾ The Current Employment Statistics (CES) program produces detailed industry estimates of nonfarm employment, hours, and earningsof workers on payrolls. CES National Estimates produces data for the nation, and CES State and Metro Area produces estimates for all 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, and about 450 metropolitan areas and divisions. Each month, CES surveys approximately 142,000 businesses and government agencies, representing approximately 689,000 individual worksites. Source: Bureau of Labor Statistics (BLS).
• Initial Claims: An initial claim is a claim filed by an unemployed individual after a separation from an employer. The claimant requests a determination of basic eligibility for the UI program. When an initial claim is filed with a state, certain programmatic activities take place and these result in activity counts including the count of initial claims. The count of U.S. initial claims for unemployment insurance is a leading economic indicator because it is an indication of emerging labor market conditions in the country. However, these are weekly administrative data which are difficult to seasonally adjust, making the series subject to some volatility. Source: US Department of Labor (DOL).
• ⁽⁴⁾ The Consumer Price Index (CPI):Is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available. Source: Bureau of Labor Statistics (BLS).
• ⁽⁵⁾ The national unemployment rate: Perhaps the most widely known labor market indicator, this statistic reflects the number of unemployed people as a %age of the labor force. Source: Bureau of Labor Statistics (BLS).
• The number of people in the labor force. This measure is the sum of the employed and the unemployed. In other words, the labor force level is the number of people who are either working or actively seeking work. Source: Bureau of Labor Statistics (BLS).
• ⁽⁶⁾ Advance Monthly Sales for Retail and Food Services:Estimated monthly sales for retail and food services, adjusted and unadjusted for seasonal variations. Source: United States Census Bureau.
• ⁽⁷⁾ Federal Open Market Committee (FOMC): Responsible for implementing Open market Operations (OMOs)–the purchase and sale of securities in the open market by a central bank—which are a key tool used by the US Federal Reserve in the implementation of monetary policy. Source: Federal Reserve.
• ⁽⁸⁾ The Federal Funds Rate: Is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity. Source: Federal Reserve Bank of St. Louis.
• ⁽⁹⁾ The “core” PCE price index: Is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends. Source: Bureau of Economic Analysis (BEA).

Sources: U.S. Bureau of Economic Analysis (BEA), Bureau of Labor Statistics (BLS), ADP Research Institute, U.S. Department of Labor (DOL), Federal Reserve, Federal Reserve Economic Database (FRED), Federal Reserve Bank of Atlanta, U.S. Census Bureau, Department of Housing and Human Development (HUD), U.S. Department of Agriculture, U.S. Energy Information Administration (EIA), U..S Department of the Treasury, Office of the United States Trade Representative (USTR), U.S. Department of Commerce, data.gov, investor.gov, usa.gov, congress.gov, whitehouse.gov, U.S. Securities and Exchange Commission (SEC), Morningstar, The International Monetary Funds (IMF), The World Bank (WB), European Central bank (ECB), Bank of Japan (BOJ), European Parliament, Eurostats, Organization for Economic Co-operation and Development (OECD), National Bureau of Statistics of the People’s Republic of China, Organization of the Petroleum Exporting Countries (OPEC), World health organization (WHO). The White House, Tariff FactSheet.

⁽¹¹⁾ Financial Markets – Monthly and YTD returns (Table): Asset class performance is in USD and refers to the following indices: Equities: US Large Caps (S&P 500), Emerging Markets (MSCI EM), Europe (MSCI Europe), Japan (MSCI Japan). Fixed Income: 10-Yr. US Treasuries (BofAML US Treasury Current 10-Yr.), Emerging Markets Sovereign (USD) (JPM EMBI Global), US High Yield (BofAML US HY Master II), US Investment Grade (BarCap US Aggregate Bond), and Developed Markets Sovereign (excl. US) (JPM GBI Global Ex US). Source: Morningstar.