Monthly Market Update

Looking for a Balance

• 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 1.2% on July 1, 2026, down from 2.5% on July 7, 2026.
• Employment (June): Total nonfarm payroll employment increased by 57,000 in June, and the unemployment rate changed little at 4.2%, the U.S. Bureau of Labor Statistics reported. Employment continued to trend up in professional and business services, social assistance, and health care. Leisure and hospitality lost jobs. The change in total nonfarm payroll employment for April was revised down by 31,000, from 179,000 to 148,000, and the change for May was revised down by 43,000, from 172,000 to 129,000. With these revisions, employment in April and May combined is 74,000 lower than previously reported.
• Inflation ⁽⁴⁾ (May): The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5% on a seasonally adjusted basis in May, after rising 0.6% in April, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all items index increased 4.2% before seasonal adjustment. The index for all items less food and energy rose 0.2% in May, and 2.9% for the last 12 months.
• The Producer Price Index (PPI) (May): The Producer Price Index for final demand, seasonally adjusted, increased 1.1% in May, after rising 1.1% in April and 0.7% in March, the U.S. Bureau of Labor Statistics reported. On an unadjusted basis, the index for final demand rose 6.5% for the 12 months ended in May 2026, the largest 12-month rise since moving up 7.4% in November 2022.
• Retail and Food Services Sales ⁽⁶⁾ (May): Advance estimates of U.S. retail and food services sales for May 2026, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $763.7 billion, up 0.9% (±0.4%) from the previous month, and up 6.9% (±0.5%) from May 2025.
• Personal Income and PCE ⁽⁹⁾ (May): Personal incomeincreased $181.6 billion (0.7% at a monthly rate) in May, 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 0.3%. From the same month one year ago, the PCE price index increased 4.1%. Excluding food and energy, the PCE price index increased 3.4% from one year ago.

Rewriting the Fed Playbook

The last FOMC meeting took place on June 17, 2026. The Committee decided to hold federal funds to the target range of 3.50% to 3.75%. As of this writing, markets are pricing a 72.7% chance of a hold on July 29, 2026, with a 27.3% chance of cutting rates by 25 bps. ⁽⁷⁾⁽⁸⁾

Highlights of the Charman Warsh’s Press Conference:

• Focused on Inflation: “We recognize that inflation has been running well ahead of the Fed’s long-stated inflation goal of 2 percent… Persistently high prices are a burden for the American people. But the recent past need not be prologue. I am pleased to report that members of the FOMC are unambiguous and unanimous: This Committee will deliver price stability.”
• Taking Away Forward Guidance: “Absent, also, is so-called forward guidance—which we agreed was not well suited to the current policy conjuncture… I can’t give any forward guidance about what we’re going to do next… Financial markets perform best when they react to incoming data.”
• Structural Changes: “I’m appointing a task force in each of five areas that are central to the broad conduct of monetary policy… Fed communications, the Fed’s balance sheet, our use and reliance on existing data sources, productivity and jobs in an era of transformation, and the Fed’s inflation frameworks… a Federal Reserve that is clear eyed about its mission, fit for purpose, and focused on the future.”

Finding Steady Footing

OPEC released their world oil market prospects for the second half of the year on June 2026.

Highlights of the OPEC publication:

• Economic Growth Resilience: “The global economic growth forecasts for 2026 and 2027 remain unchanged at a healthy 3.1% and 3.2%, respectively. The US economic growth forecasts remain unchanged at 2.2% for 2026 and at 2.0% for 2027.”
• Demand Conviction: “Global oil demand is forecast to grow by a healthy 1.0 mb/d in 2026, y-o-y. The OECD is forecast to grow by about 0.1 mb/d, while the non-OECD is forecast to grow by about 0.9 mb/d. Global oil demand in 2027 is forecast to grow by about 1.7 mb/d, y-o-y.”
• Supply Rebalancing: “Non-DoC liquids production is forecast to grow by about 0.6 mb/d, y-o-y, in 2026, unchanged from last month’s assessment. The main drivers of liquids production growth are expected to be Brazil, the US, Canada, and Argentina. In 2027, non-DoC liquids production is forecast to grow by about 0.6 mb/d, also unchanged from last month’s assessment.”

Monthly and YTD returns

Source: Morningstar and Bloomberg asset class screening total return 1 month USD and total return YTD as of June 30, 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.