The Peak Is In.
Now Comes the Wait.

Thursday's PCE report landed above estimates, below fear, and almost precisely where the analysts who read the CPI and PPI tea leaves had predicted. Core PCE rose to 3.4% year-over-year in May — a tick above the 3.3% forecast and higher than April's 3.3% — while headline PCE hit 4.1%, matching expectations and extending its run as the highest reading in three years. On any other month, those numbers would be alarming. In June 2026, they feel like the last chapter of a story that is already ending. WTI crude closed Thursday below $70 per barrel for the first time since before the Iran war began. The Strait of Hormuz is open. Gas at the pump is at $3.90 and falling. The energy shock that drove this inflation spike is reversing in real time. The data that will confirm that — June CPI and July PCE — hasn't arrived yet. The market is trading the anticipation. This week, that meant rotating out of tech and into everything else.

The Week, Day by Day

The PCE That Changes Nothing — and Everything

Core PCE at 3.4% is above the Fed's 2% target and above last month's 3.3% — that much is unambiguously hawkish. But the context is what matters. The energy component of May PCE alone added a full 1.5 percentage points to headline inflation. WTI has now fallen more than $40 from its 2026 peak and is trading below $70 — a level not seen since before the Iran war began in February. By Edward Jones's calculations, the energy contribution to CPI should moderate to around one percentage point by July and fall further through summer and fall. The peak of the 2026 inflation spike is almost certainly May's data. What arrives next is disinflation — and Warsh's Fed is patient enough to wait for the data to confirm it.

The more revealing number in Thursday's release was the monthly core PCE increase: 0.37% in May after 0.24% in April. That monthly acceleration is the detail the Fed will watch most closely. If June's monthly core prints at 0.2% or below — consistent with the Hormuz-driven energy relief — the annual rate will begin to roll over even before the summer's end. Services inflation ex-energy has not shown signs of reacceleration, which is the single most important structural signal for whether this is a demand-driven or supply-shock inflation regime.

GDP, Claims, and the Economy That Won't Break

The Q1 GDP revision from 1.6% to 2.1% — driven largely by a downward revision to imports — is meaningful not just as a data point but as a context setter. The economy that the Warsh Fed is managing is not fragile. Growth at 2.1% with unemployment at 4.3% and consumer spending running at trend pace is an economy that can absorb a hold without risk of recession. That makes the Fed's job easier in one direction — it doesn't need to rush to cut — and harder in another: there is no growth-risk argument for cutting into 3.4% core PCE.

OpenAI, AI Costs, and the IPO Window

Friday's OpenAI IPO delay report — citing a preference for a $1 trillion valuation over a faster listing — is a significant signal for the AI capital cycle narrative. If Sam Altman is willing to wait until 2027 rather than accept a lower valuation, it tells you two things: he believes the $1T floor is achievable given the pace of AI adoption, and he's watching what SPCX's post-IPO trajectory has done to enthusiasm for AI public market debuts. SpaceX's 31% drawdown from its all-time high — in under two weeks — is the cautionary data point every other AI company's bankers are now modeling. The window that SpaceX opened, as Nasdaq's Greifeld predicted, remains open. It is just more selective than it looked on June 12.