Market Commentary June 29, 2026

June 29, 2026

The Markets

Lowering inflation may prove to be a challenge.

Last week, inflation was on the minds of investors after one of the Federal Reserve (Fed)’s favorite inflation gauges showed inflation at a three-year high. Both headline and core inflation were well above the Fed’s two percent target.

Personal Consumption Expenditures (PCE) Index	May 2026 Price Increase (year over year)
Headline inflation	+ 4.1 percent
Core inflation (excludes volatile food and energy prices)	+3.4 percent

This was the third consecutive month of accelerating price increases, reported Megan Leonhardt of Barron’s. Prices have been rising, in part, due to the energy shock created by the Iran conflict, but inflation is not just an energy story, anymore. Other factors are creating price pressures, including:

Inflation expectations are changing. When consumers believe that prices will keep rising, they ask for higher wages and spend sooner, pushing prices higher still. The Fed likes to keep expectations anchored with its 2 percent inflation goal. Right now, that anchor is less secure than the Fed would like. Americans who participated in the most recent University of Michigan Consumer Sentiment survey expect inflation to average 4.6 percent over the next year.

AI is making devices more expensive. The AI build-out requires a lot of advanced memory chips, the same chips inside your phone, laptop, and car. Demand has been outpacing supply, pressuring prices. Last week two major tech companies raised prices on consumer electronics and software. Industry leaders warn chip shortages could persist beyond 2028, reported Don Forbes of Dow Jones Newswires.

Tariffs effects are rippling through. Import taxes don’t hit prices immediately. The effects are realized over months as inventories turn over and companies reset prices. Ron Mau and Tucker Smith of the Dallas Fed found that core inflation in March 2026 (3.2 percent) would have been lower (2.3 percent) if there were no tariffs.

Another complication in the Fed’s inflation fight is the national debt, which stands at about $39.3 trillion. This year, the annual interest payment on the debt is expected to exceed $1 trillion. Some economists are concerned that deficit-driven spending will make it more difficult for the Fed to fight inflation because higher rates will increase the interest owed, reported Maria Eloisa Capurro of Bloomberg.

Last week, the Dow Jones Industrial Average eked out a gain, while the Standard & Poor’s 500 and Nasdaq Composite Indexes fell. Yields on U.S. Treasuries generally moved lower over the week.

Data as of 6/26/26	1-Week	YTD	1-Year	3-Year	5-Year	10-Year
Standard & Poor’s 500 Index	-2.0%	7.4%	19.8%	19.3%	11.4%	13.9%
Vanguard Total Intl Index (Foreign Stocks)	-2.9	12.3	26.3	18.7	8.1	10.1
10-year Treasury Note (yield only)	0.5	1.1	4.2	4.1	0.2	1.6
S&P GSCI Gold Index	-3.5	-5.6	22.4	28.4	18.1	12.0
Bloomberg Commodity Index	-3.1	12.1	19.9	6.7	5.7	3.6

S&P 500, Vanguard Total International Stock Index, Vanguard Total Bond Market Index, Gold, and Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized. Sources: Yahoo! Finance; MarketWatch; morningstar.com; djindexes.com; London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

WILL ARTIFICIAL INTELLIGENCE (AI) MAKE US MORE PRODUCTIVE? There is a broad belief that AI will deliver a productivity boom, reinvigorating economic growth in countries around the world, but the path to productivity remains uncertain.

While AI is unquestionably changing the way many people work, not everyone uses it in the same way. Jue Wang, Anne Hoecker, Ann Bosche, Tamara Lewis, and Peter Bowen of Bain & Company wrote, “A small percentage of people at every level have had the visceral ‘this is it moment’…The rest (i.e., most) are still at ‘I tried Copilot a few months ago; it didn’t work well.’”

There are many different theories about where AI will lead us. Here are some possibilities:

AI increases productivity. According to a 2026 Deloitte report tracking the adoption and impact of AI in companies, two-thirds of participating organizations reported productivity and efficiency gains. Deloitte’s U.S. head of AI Jim Rowan stated, “The organizations succeeding with AI aren’t just investing in automation and algorithms, they’re investing in their people. As AI continues to spark new ways of working, this dual focus – advancing both the capabilities of their talent and AI tools – empowers teams to embrace reimagined business models and sets the foundation for competitive advantage.”

AI increases costs. AI subscription and token costs have been increasing. (Tokens are units of data that determine how much companies pay for AI compute power.) “[AI] Agents consume significant tokens on multistep reasoning, error correction, and context loading, which add up fast on complex workflows…Net-net: The models get less expensive per token, the usage gets heavier per task, and the bill stays stubbornly high,” reported Bain.

AI increases efficiency. Tracy Alloway of Bloomberg recently wrote about the Bank of Korea’s study exploring the effect of AI on productivity and output. Korea’s central bank discovered a productivity disconnect. AI reduced the time required to accomplish tasks, but the extra time was not used to do more high-value work. The technology improved efficiency but not productivity.

AI increases administrative work. There is also the possibility that AI will increase administrative burdens rather than relieve them, according to Alloway. “In the U.S., for instance, you hear stories now of insurance companies using AI to reject claims. At the same time, there are startups dedicated to using AI to fight back against insurance claim rejections…You can imagine a future where AI doesn’t lead to productivity gains but instead generates an endless stream of bots interacting with bots.”

Whether AI delivers productivity gains will depend on how the technology develops and how organizations deploy it.

WEEKLY FOCUS – THINK ABOUT IT

“Life is a series of natural and spontaneous changes. Don’t resist them; that only creates sorrow. Let reality be reality. Let things flow naturally forward in whatever way they like.”

– Lao Tzu, Philosopher

Best regards,

“Waterford Advisors

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* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.

* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.

* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.

* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.

* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.

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* Asset allocation does not ensure a profit or protect against a loss.

* Consult your financial professional before making any investment decision.

Sources:

https://www.bea.gov/sites/default/files/2026-06/pi0526.pdf

https://www.barrons.com/livecoverage/pce-inflation-report-fed/card/pce-inflation-hits-4-1-in-may-c3snOQgwlhywtAVijNdO or go to https://resources.carsongroup.com/hubfs/WMC-Source/2026/06-29-26-Barrons-Infation-Hits-in-May%20-%202.pdf

https://www.federalreserve.gov/newsevents/pressreleases/monetary20260617a.htm

https://www.clevelandfed.org/center-for-inflation-research/inflation-explained-your-guide-to-inflation-basics/what-causes-inflation

https://www.sca.isr.umich.edu

https://www.barrons.com/livecoverage/stock-market-news-today-062626?mod=hp_LEDE_C_2 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2026/06-29-26-Barrons-AI-Boom-Risks-Driving-Up%20-%206.pdf

https://www.bea.gov/news/2026/personal-income-and-outlays-march-2026

https://www.dallasfed.org/research/economics/2026/0505-mau

https://fiscaldata.treasury.gov/datasets/debt-to-the-penny/debt-to-the-penny