May PCE and Politics ?3

08:51 25-Jun-26


May PCE numbers headlined at +0.4%, a tenths lower than most forecasts, and the Core was +0.3% as expected.  Spending and Income were both +0.7% which may be viewed as positive by some pundits.  However, there was not much immediate reaction in index futures, and this report is likely to be written off since, with WTI below $70, future inflation readings are bound to be lower simply because they will be compared to higher historical numbers.  Republicans have been counting on this going into the midterms, and those remain crucial for Trump's influence in that Democrats look set to copy his playbook, which unfortunately means we can look forward to more populist politics no matter what.

Micron earnings have also put some spring in the AI bounce, as anticipated below, but this is trailing data.  The price competition cited below won't be good for indexes over the long term.

On 6/24/26 8:15 AM, Esekla wrote:
A word about quantum computing, before swinging back to the subject, and moving on to PCE tomorrow...  My guess is that quantum computing will eventually change the world in profound ways, but not in any current lifetime.  Right now it mostly serves as impetus for new products like this one, from STMicro, and of course, the latest source of distraction for the White House.  When even the market yawns at the latter, I take it as a sign that we're approaching the steepest stages of the peak Trump decline, pending SCotUS opinions on Cook and birthright citizenship, which are almost certainly coming before Independence Day and quite possibly tomorrow at 10AM.  The former is likely to provide more certainty about the near term rate path than anything we'll get directly from the Fed.

On 6/22/26 10:12 AM, Esekla wrote:
This week should be dominated by PCE on Thursday morning, as I doubt we'll be able to confirm much immediate real world progress in the Middle East.  Markets continue to believe the war will ebb, as shown Brent and WTI below $79 and $75 respectively.  The real question is to what extent the Fed will continue paying attention to it and the quality of its new data sources, but we'll get no answers on that in the short term either.  All that can be said with certainty is that we've come full circle from Greenspan candidly commenting on the economy and government policy, to an environment where market exuberance is now a thing political incumbents are conspiring to extend.

Consequently, markets should remain more concerned with the AI trade for the moment, making Google's commitment $3.2b to a third-party data center project that will use its TPUs the most impactful corporate news.  Although software is Google's forte, as shown by it embedding six AI agents in Nokia's networking platform, I'm ready to believe it can design better chips than Apple, and price competition is exactly what the industry needs, not more government mandated circular investment.