AI, inflation, and oil prices remain top of mind as we head into America’s 250th birthday.
Taking a closer look…
- Inflation has been top of mind for consumers since the US economy emerged from the COVID-related recession. Inflationary pressures don’t always move in unison. In fact, they can often move in opposition. For example:
- After months of elevated prices caused by the closure of the Strait of Hormuz, ship traffic has increased. As a result, oil prices fell back to pre-conflict levels.1 This price reduction may temper some energy-related inflation.
- At the same time, upward inflationary pressure is starting to garner more attention in the AI space. Resources and inputs are facing ongoing constraints. For instance, memory chips are used in many different products, including gaming systems and phones, and increased demand has led to elevated prices.2
- Inflation rose in May to levels not seen since 20233 and may stay elevated through the back half of the year. While there has been some relief in oil prices, non-energy related inflation, which includes core services, has ticked higher (think hospitality, transportation, and education). The potential for higher-for-longer inflation underscores the benefits of a diversified portfolio which may help manage risk from unexpected inflation surprises.
- For America’s 250th birthday, here’s a snapshot on consumer behavior outlook related to the 4th of July:
- Expected consumer sales of 4th of July fireworks: $2.5 billion4
- Expected spending on food per person: $94.415
- Percentage of Americans purchasing decorations, mementos, or other patriotic items: 33%5
Portfolio Manager, Strategic Advisers
"While markets continue to digest last week’s Federal Open Market Committee meeting, one thing seems clear — Federal Reserve Chair Warsh is skeptical of forecasts and will likely have a much more empirical (versus theoretical) approach to central bank policy than we have seen in recent years."
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