Macro & Market Musings – 5/15/2026

Comments based on information available as of 5:15 am CT on 5/15/2026

Growth: Something’s Got to Give

Retail sales rose +0.5% in April, but excluding gasoline, sales only rose 0.3%. During that same period, inflation excluding energy was +0.4%, so real spending shrank. When gasoline prices rise, it can start crowding out other spending. The result is a consumer who appears resilient in nominal terms but is increasingly constrained in real terms. Spending is still happening, but it’s shifting toward necessities. Something doesn’t have to give immediately, but if energy stays elevated, the tradeoffs will become harder to avoid.

Inflation: Pipeline Pressure

Not only did inflation re-accelerate at the consumer level, keeping it well outside the Fed’s comfort zone, the more important development may be upstream, where the Producer Price Index surged +1.4% month-over-month and +6.0% year-over-year. That was the largest monthly increase since 2022.  While energy was the catalyst, the breadth of the increase signals that inflation pressure may be hard for producers to absorb for long. That’s the essence of pipeline pressure: higher input costs move through production, distribution, and ultimately into consumer prices unless demand breaks or margins compress. For now, neither appears to be happening in a meaningful way, but that could change if high gasoline and diesel prices persist into the summer.

Policy: A New Chair at an Awkward Time

The Senate confirmed Kevin Warsh as the next Federal Reserve Chair, marking a leadership transition at a moment when inflation is re-accelerating and policy tradeoffs are becoming more difficult.  The Fed, as an institution, doesn’t change overnight and the Chair is just one of 12 who votes on monetary policy. But leadership does influence communication. That’s something Warsh has pledged to transform, just at a time where inflation is moving the wrong way. He will have his work cut out for him if he wants to argue for rate cuts. He’ll have to hope for a major turn in the oil markets to make a credible case for cuts anytime soon that reflects the views of the consensus on the committee and not just his own.

Looking Ahead: Trimming Risk

Earnings beats have been fueling the bull market lately, but we’re now towards the tail-end of earnings season. Geopolitical headlines and economic anxieties are likely to push markets around now. To us, it looks like markets have pushed into overbought territory. The fundamental story—growth supported by a durable economy—remains intact, but the path is unlikely to be smooth. Periods like this call for discipline more than hope. Staying invested still makes sense, but so does maintaining flexibility. In this environment, a little dry powder isn’t a sign of doubt, it’s a recognition that opportunities often reveal themselves in volatility.

This material is provided for general information and educational purposes only.   It should not be construed as any investment, legal, tax or other professional advice, and does not constitute an attorney/client relationship. All investments carry some level of risk.  Past market performance is no guarantee of future results.