The Fed’s Inflation Problem Just Got More Complicated, The Market Continues To Flash Warning Signs Beneath The Surface, Consumers Say They’re Worried But They Keep Spending, How are your Rental Properties Performing? & More

The Fed’s Inflation Problem Just Got More Complicated

U.S. inflation accelerated sharply in April, with CPI rising 3.8% year-over-year, the highest reading in nearly three years, as the Iran conflict continued to ripple through global energy markets. Core CPI, which excludes food and energy, also rose to 2.8%, up from 2.6% in March, suggesting inflation pressures are beginning to broaden beyond energy alone.

The biggest driver was oil. Ongoing disruptions around the Strait of Hormuz — one of the world’s most critical oil shipping routes — pushed crude prices sharply higher over the past two months. Gasoline prices surged again in April and are now up 28.4% compared to a year ago. Diesel, jet fuel, utilities, and transportation costs also moved higher. Analysts estimate energy alone accounted for more than 40% of the monthly CPI increase.

Food inflation also remained elevated, rising 3.2% year-over-year. Some categories saw especially sharp increases, including tomatoes (+39.7%) and fresh vegetables (+11.5%). Airline fares were another major outlier, jumping 20.7% from last year as higher fuel costs filtered through the travel industry.

The April inflation report complicates the Federal Reserve’s outlook. Markets had expected rate cuts later this year, but stronger inflation and resilient consumer spending are now pushing those expectations further out. Treasury yields moved higher immediately after the CPI release as investors repriced the likelihood of rates staying elevated for longer.

That said, it’s important not to overreact to a single report. In roughly two weeks, investors will get the PCE (Personal Consumption Expenditures) report, which is the inflation gauge the Federal Reserve watches most closely. Unlike CPI, PCE captures a broader view of consumer spending and adjusts more dynamically as spending habits change.

There are several key differences between the two reports. CPI primarily measures out-of-pocket spending by urban consumers, while PCE also includes rural households and purchases made on behalf of consumers, such as employer-sponsored healthcare and government programs like Medicare and Medicaid. As those costs rise, consumers still feel the impact indirectly.

PCE also better reflects substitution effects — meaning it captures when consumers shift from higher-priced goods to lower-cost alternatives during inflationary periods. The weighting differences are significant as well. Housing makes up 44.5% of CPI but only 18.1% of PCE. Meanwhile, healthcare represents just 8.4% of CPI compared to 20.6% of PCE.

While the upcoming PCE report will likely also show inflation accelerating, the bigger question is whether this energy shock proves temporary or becomes more persistent. If oil prices remain elevated, energy could continue to be the primary driver behind inflation data for the next several months — and that would make the Fed’s path forward significantly more difficult.

The Market Continues To Flash Warning Signs Beneath The Surface.

The semiconductor sector, as measured by the Philadelphia Semiconductor Index, has only been this extended above its 200-day moving average twice before in modern history: 1995 and early 2000.Those are not random comparisons. In 2000, semiconductors peaked alongside the final stages of the dot-com bubble, marking a generational top in speculative growth stocks.

In 1995, the outcome was different but still instructive: semiconductor stocks entered their own bear market even as the broader indexes continued grinding higher. Given that semiconductor stocks are now such a large part of the market, I believe it would be hard for the market to rally if this sector entered a bear market.

There was also another warning sign you should be aware of. Last week, the S&P 500 hit another record high while an unusually large number of individual stocks simultaneously registered fresh 52-week lows. Historically, that kind of divergence has rarely occurred outside of major topping periods.

As Bespoke Investment Group noted: “Since 1996, the only other period where we saw the S&P at record highs with fewer than 60% of stocks above their 50- and 200-day moving averages was from late 1998 to early 2000.” That matters because healthy bull markets are typically characterized by broad participation. When indexes rise while fewer stocks carry the advance, it often signals deteriorating internal strength masked by mega-cap concentration.

Today’s market has become increasingly dependent on a handful of AI and semiconductor names to sustain index performance. Valuations across those leadership stocks are being justified by near-perfect expectations: uninterrupted earnings growth, sustained AI capex expansion, and continued multiple expansion despite elevated rates and slowing macro conditions. That combination leaves very little room for disappointment.

None of this guarantees an immediate crash. Markets can remain overextended longer than expected, especially during periods of technological enthusiasm and liquidity-driven momentum. But history suggests these types of extremes tend to appear late in cycles, not early. The key issue isn’t simply that valuations are expensive. It’s that market breadth, positioning, and sentiment are all increasingly disconnected from the underlying participation beneath the indexes. That’s usually when risk becomes hardest to see — and most dangerous to ignore.

Consumers Say They’re Worried, But They Keep Spending

The latest U.S. retail sales report continues to tell a very different story than consumer sentiment surveys. According to the latest Census Bureau retail sales data, overall retail and food service sales remained resilient, with strength in online retail, restaurants, electronics, and discretionary categories. Even after adjusting for slowing momentum from March’s surge, spending activity continues to hold up far better than many expected. Compared to last year, sales climbed 4.9% and even if we back out the gasoline stations where sales climbed 20.9%, sales were still up 3.7%. If we exclude another volatile category in motor vehicle & parts dealers it was up 4.9%.

This divergence matters. Consumers say they feel pessimistic and sentiment surveys confirm it. The University of Michigan consumer sentiment index recently fell to record lows of 48.2 as households reacted to inflation and higher gas prices. It’s important to point out this survey has been around for close to 75 years.

Ultimately, I believe behavior is more important than survey as that is what drives the economy. Behavior still shows people are traveling, eating out, and shopping online. Employment and wage growth continue to support consumption and until the labor market weakens materially, I believe that will remain the case.

Part of the disconnect is psychological. Consumers are reacting to inflation, geopolitical uncertainty, and higher living costs. But at the same time, household balance sheets, labor markets, and asset prices have remained supportive enough to keep consumption moving. As long as spending continues, the broader economy remains on firmer footing than sentiment surveys alone would imply.

Financial Planning: How are your Rental Properties Performing?

Rental properties should be reviewed over time just like an investment portfolio, yet many owners focus on a few attractive details rather than critically evaluating the full picture. Looking only at the rent coming in or calculating “net cash flow” using just the mortgage, property taxes, and insurance can create a very different impression than what is actually happening financially. Maintenance, repairs, vacancies, turnover costs, property management, capital improvements, and recurring “one-time expenses” can significantly reduce actual returns over time. That $1,000 per month of cash flow may sound attractive, but it becomes far less impressive if the property has $1 million of equity that could potentially be invested elsewhere. While many real estate investors benefited from rapid appreciation between 2019 and 2022, property values in many areas have recently remained stagnant, causing overall returns to slow considerably. After fully accounting for the true cost of ownership and the opportunity cost of the equity invested, many rental properties have likely underperformed the stock market in recent years despite continuing to generate rental income.

Get out of your S&P 500 index fund now!

For the past several years, experts have warned that the S&P 500 may be significantly overvalued due to its heavy concentration in technology stocks. Despite those warnings, many investors continue pouring money into index funds based largely on past performance. But investing solely on past returns is like driving while looking only in the rearview mirror. Investors need to understand valuations rather than assume that strong past performance guarantees future results.

Legendary investor Paul Tudor Jones famously studied the similarities between the 1987 market crash and the 1929 crash before betting against the market in 1987. When the Dow Jones Industrial Average plunged 22% in a single day — still the largest one-day percentage drop in history — he reportedly earned around $100 million.

Today, he is not necessarily predicting another major market crash. What he is warning about, however, is the possibility that investors in the S&P 500 could experience negative returns over the next decade based on current valuations.

Think about what that could mean. If you are in your 50s and planning to retire within the next 10 years, you could wake up a decade from now with little to no growth in your retirement account — or potentially even less than you started with. That could force many people to delay retirement altogether.

Jones also points out that U.S. stock market capitalization, driven in large part by massive technology exposure, is now roughly 252% of GDP. By comparison, at the peak of the dot-com bubble in 2000, that figure was closer to 170%. He is not suggesting that investors sell everything and move entirely into money market funds. Instead, he recommends looking for investments with more reasonable price-to-earnings ratios. It may also make sense to focus on companies that pay strong, reliable dividends while maintaining solid underlying fundamentals.

Are Private Trade Schools Worth $60,000?

With the rise of AI, many college graduates and prospective students are reconsidering traditional four-year degrees and looking toward skilled trades instead. Trade school revenue nationwide surpassed $5 billion in the last quarter of 2025, an increase of more than 40% compared to the last quarter of 2021.

Depending on the occupation, tuition at private vocational schools can range from around $10,000 for basic trade programs to nearly $70,000 for specialized automotive technology programs focused on high-end brands such as BMW and Mercedes-Benz.

Community colleges also offer trade programs at a much lower cost. However, these programs often take two years to complete, and many have long waiting lists. Before committing to the high tuition costs of private vocational schools, students should consider speaking with companies that offer apprenticeships, allowing them to earn while they learn.

It is also important to note that for-profit trade schools generally operate with limited government oversight and have faced federal scrutiny over the years. In addition, these schools spend heavily on marketing and advertising, which may contribute to their high tuition costs.

Research also suggests that for-profit vocational schools tend to attract more lower-income families, with average household incomes around $62,000 compared to approximately $81,000 for other respondents. Many students pay for tuition through savings, personal loans, credit cards, or government-backed student loans. Before taking on debt, students should realistically evaluate what they are likely to earn after graduation and whether the loan payments will make financial sense. For some students, it may be wiser to wait for an opening at a community college or pursue an apprenticeship program where they can gain experience and income at the same time.

Wholesale Inflation Is Heating Up Again… Consumers May Feel It Next

April’s Producer Price Index (PPI) came in much hotter than expected, signaling that inflation pressures are building again upstream in the economy.

According to the Bureau of Labor Statistics, wholesale prices rose 1.4% in April and are now up 6.0% year-over-year, the biggest annual increase since late 2022. Energy prices were a major driver, with gasoline prices surging sharply, but the increases were broad-based across transportation, warehousing, chemicals, retail margins, and industrial goods. Even if we look at the index less food, energy, and trade services, it climbed 4.4 percent, which is the largest 12-month increase since February 2023.

The major concern is this could flow through to consumer inflation in the coming months, especially as businesses begin passing higher input and shipping costs onto consumers. The concern isn’t just oil prices though as “core” producer inflation also accelerated, suggesting inflation pressure is spreading beyond energy. The PPI is important because it measures what businesses pay before products reach consumers. Historically, sustained increases in wholesale costs tend to show up later in CPI through higher prices for food, transportation, household goods, insurance, and services.

If producer costs remain elevated through the summer, there are several issues to keep an eye on. Consumers could see another wave of price increases, the Fed may delay interest rate cuts, and businesses could face margin pressure if they can’t fully pass costs through to the consumer. Today's PPI report suggests inflation may not cool as quickly as markets had hoped and consumers could start feeling the impact over the next several months.

Whatever happened to Fannie Mae and Freddie Mac?

They’re still around. Back in 2008, when the government took over the companies during the financial crisis, they were placed into conservatorship. Since then, common shareholders have largely been left out, as profits have not been directed toward shareholders.

With President Trump now serving a second term, some investors believe his administration could eventually move to release Fannie Mae and Freddie Mac from conservatorship. If that were to happen, shareholders could potentially see billions of dollars in gains from the stocks.

It’s not just shareholders who could benefit. The U.S. government also holds warrants that would allow it to acquire nearly 80% of the common stock. A stock warrant gives the holder the right to purchase shares at a fixed price. If exercised, this could create another major windfall for the government, similar to the position it currently holds with Intel.

If you’re considering speculating on these stocks, traditional fundamentals may not tell you much. This is largely a political and regulatory speculation based on whether the government eventually releases the companies back to the public markets. That said, President Trump currently has a full agenda, including tensions with Iran, immigration issues, and other major priorities, so any action on Fannie Mae and Freddie Mac may not happen anytime soon.

Surprise: People Are Going Back to the Movie Theaters

I myself haven't been to a movie theater in quite a while, but it seems things are changing. Last weekend's domestic box office came in at $172.5 million, which was18% higher than the same period in 2025. Year-to-date, total domestic box office sales have reached $2.79 billion, an increase of 14% over 2025. If the trend continues, it could surpass the summer of 2023, when Barbie and Oppenheimer helped push summer box office sales past $4 billion.

Two hits currently drawing crowds are The Devil Wears Prada 2 and the Michael Jackson biopic Michael. The Devil Wears Prada 2 has already topped $433 million globally after just two weekends. Meanwhile, Michael opened with a domestic debut of $97.2 million, by far the biggest ever for a music biopic, and is expected to close out its third weekend with a cumulative global total of around $570 million.

The 18-week stretch from early May through Labor Day is critical for the movie industry, accounting for roughly 40% of annual domestic box office sales. I think it's time I headed back to the theater with my wife to see what all the fuss is about. How about you, have you been going to the movies this year?

Cerebras’ IPO felt less like a market debut and more like a time machine back to 1999

The AI chipmaker surged 68% in its Nasdaq debut Thursday, closing at $311.07 after pricing shares at $185 — already above its expected range. The stock opened at $350, touched $386 intraday, and finished the day with a valuation near $95 billion. For context: Cerebras generated $510 million in revenue last year.

That’s the kind of disconnect between narrative and fundamentals that defined the dot-com bubble. To be fair, Cerebras is not Pets.com. Revenue grew 76% year over year, and the company swung to an $88 million profit from a $481.6 million loss the year before. This is a real company selling real infrastructure into a real technological shift. But the psychology surrounding the IPO is what matters.

In the late 1990s, investors convinced themselves the internet would reshape everything and they were right. The mistake was assuming every company connected to the trend deserved an infinite valuation multiple. Today, “AI” has replaced “.com.”

Any company tied to AI infrastructure, chips, data centers, or model training is attracting extraordinary capital flows. Cerebras just raised $5.55 billion selling 30 million shares, making it the biggest U.S. tech IPO since Uber in 2019. If underwriters exercise their option for another 4.5 million shares, proceeds could reach $6.38 billion.

And just like during the dot-com era, concentration risk is hiding beneath the excitement. Cerebras disclosed that 24% of last year’s revenue came from G42, which is an Abu Dhabi-based artificial intelligence and cloud computing holding company. This was down from 85% in 2024, but now the Mohamed bin Zayed University of Artificial Intelligence accounted for 62% of revenue last year.

That’s not broad enterprise adoption yet, instead it’s a company still heavily reliant on a narrow set of strategic relationships. The market appears to be giving the company grace due to announcements that have been made. OpenAI signed a cloud deal with Cerebras in January reportedly worth more than $20 billion through 2028 and Amazon Web Services announced in March it would deploy Cerebras chips in its data centers. Both Amazon and OpenAI hold warrants to buy Cerebras stock.

This is exactly how bubbles form: a revolutionary technology collides with legitimate growth stories, massive TAM projections, celebrity partnerships, and fear of missing out. The important distinction is that bubbles are often built around technologies that actually change the world. The internet did. Mobile did. Cloud computing did. AI probably will too. But transformational technology and rational valuations are not the same thing.

In 2000, investors weren’t wrong about the future. They were wrong about the price they were willing to pay for it. Cerebras may eventually justify a $95 billion valuation. But when a company with half a billion in annual revenue debuts at nearly $100 billion because investors fear missing the next Nvidia, it’s hard not to hear echoes of the dot-com era getting louder.