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CIO Macro Trends – Running on Fumes

ekiser on June 1, 2026

Tax season gave American consumers one last gift, and now the credit card statement has arrived in the form of gasoline averaging $4.25 a gallon nationwide. This week’s data told the story of an economy with a split personality: business investment humming along like a well-tuned engine, while the consumer starts to sputter. The Conference Board’s confidence measure fell for the first time since the onset of the US/Israel-Iran war and savings rates sank to levels not seen since 2022, yet the labor market continues to hold firm. Understanding which of these signals matters most is the challenge of the moment.

Executive Summary

  • The Conference Board’s consumer confidence index fell to 93.1 from 93.8 in April, the first decline since the war began, while year-ahead inflation expectations held at an elevated 6.2%.
  • April consumer spending rose 0.5% in nominal terms but only 0.1% in real terms, with gasoline accounting for roughly a quarter of the nominal increase. The personal savings rate fell to its lowest level since 2022.
  • Headline durable goods orders jumped 7.9%, driven by Boeing, while underlying capital goods shipments rose 0.4%, pointing to business equipment investment growth near 7% annualized in Q2.
  • Initial jobless claims edged up 5,000 to 215,000, and continued claims rose 15,000 to 1.786 million, suggesting claims may have found a floor after months of trending lower.
  • The S&P CoreLogic Case-Shiller national home price index held at 0.7% year-over-year growth in March, while the Federal Housing Finance Agency (FHFA) index rose 0.1% month-over-month and 1.7% year-over-year.

The Consumer: When the Sugar High Fades
For the past few months, a historically generous tax refund season acted as a kind of financial aspirin, masking the headache of higher energy costs. That aspirin has worn off. The Conference Board’s consumer confidence index slipped to 93.1 in May from an upwardly revised 93.8 in April, the first outright decline since the US/Israel-Iran war began. Year-ahead inflation expectations held at 6.2% for a third consecutive month, up from 5.5% in February, and the gap between consumers calling jobs plentiful versus hard to get narrowed to 6.9 points from 7.5 in April.

The April spending data filled in the picture. Nominal consumer spending rose 0.5%, but gasoline accounted for roughly a quarter of that increase, which is a bit like celebrating a raise that goes entirely to your landlord. In real terms, spending edged up just 0.1%. The personal savings rate fell to its lowest level since 2022, a sign that some households are dipping into savings to keep up with the cost of filling the tank and buying groceries.

Through the end of May, individual income tax refunds ran $51 billion, or 18%, above last year, reflecting the boost from the One Big Beautiful Budget Act (OBBBA). That tailwind is now behind us. Oxford Economics pegs consumption growth at 1.9% for 2026, down from 2.6% in 2025, though a sharp rebound in equity markets over recent months cushions the blow for higher-income households. The K-shaped split that has defined this cycle is deepening, with upper-income consumers propped up by portfolio gains while lower-income households absorb the gasoline tax that nobody voted for.

  • Key Takeaway: The tax refund cushion has run its course, and higher gasoline prices are now hitting consumer spending where it counts. The divide between upper- and lower-income households continues to widen.

Business Investment: The Economy’s Bright Spot
If the consumer is the economy’s worried passenger, business investment is the driver with both hands on the wheel. Headline durable goods orders surged 7.9% in April, with a strong month of Boeing net new orders pushing transportation and the headline measures higher. The more meaningful signal came from non-defense capital goods orders excluding aircraft, which dipped 1.1% after two consecutive months of solid gains, while shipments in the same category, which feed directly into GDP, rose 0.4%.

Oxford Economics’ tracker points to business equipment investment rising close to 7% annualized in Q2, a step down from the blistering 17% gain in Q1 but still a pace that most economies would envy on their best day. Think of it as downshifting from fifth gear to fourth; the car is still moving fast.

Two forces are doing the heavy lifting. The continued rapid buildout of artificial intelligence (AI) infrastructure, along with associated data center and power-grid spending, keeps order books full. The OBBB provisions for full upfront expensing of equipment investment give firms a strong incentive to pull capital expenditures forward. The energy shock and Iran war uncertainty have trimmed some froth from the edges of capital goods orders, but neither has dented the fundamental appetite for investment spending. That said, if the conflict drags on and energy costs remain elevated, even the most eager capital spenders may start to reassess their timelines.

  • Key Takeaway: Business equipment investment remains one of the fastest-growing components of the economy, fueled by AI demand and tax incentives, though the pace has moderated from Q1’s exceptional clip.

The Labor Market: Steady Hands on a Shaky Table
Initial jobless claims rose 5,000 to 215,000 in the week ended May 23, a shade above the consensus estimate of 213,000 but hardly cause for alarm. On an unadjusted basis, claims tracked 9.1% below year-ago levels, a gap that suggests employers are still reluctant to hand out pink slips despite three months of war, elevated inflation and lingering tariff uncertainty.

Continued claims rose 15,000 to 1.786 million in the week ended May 16, though the prior week saw an 11,000 downward revision. After trending lower for several months, both initial and continued claims appear to have found a floor and may move sideways from here. That is not a sign of deterioration; it is more like a car that has coasted downhill and reached flat ground. The labor market is no longer improving at the margins, but it is not rolling backward either.

Looking ahead to next week’s May employment report, Oxford Economics looks for a gain of 80,000 in nonfarm payrolls, a slowdown from April but still a healthy number. One wrinkle worth watching: household employment, which captures self-employment and agricultural jobs, has declined by an average of 158,000 per month over the last three months. That divergence between the payroll and household surveys bears monitoring. Oxford Economics sees the unemployment rate hovering in the 4.3% to 4.4% range through year-end, held in check by slower labor-force growth from reduced immigration and an aging population.

  • Key Takeaway: The labor market remains healthy enough to give the Federal Reserve cover to hold policy steady, but the divergence between payroll and household employment data warrants close attention.

Housing: A Tale of Two Zip Codes
National home price data for March told a story of stabilization with an asterisk. The S&P CoreLogic Case-Shiller national index slipped 0.2% month-over-month, while year-over-year growth held at 0.7%, unchanged from February. Among the 20 metros tracked by the 20-city index, annual price changes ranged from a decline of 2.5% in Seattle to a gain of 6.1% in Chicago, a spread wide enough to make the national average almost meaningless. The FHFA house price index edged up 0.1% month-over-month and 1.7% year-over-year.

Looking ahead, base effects that dragged on annual price growth over recent months have shifted and should support modestly stronger year-over-year figures through early summer. The more interesting development is happening at the regional level. Markets in the South and West that saw the biggest inventory buildups are now correcting. Florida’s housing supply fell 12% year-over-year in April, a dramatic reversal from the 35% increase recorded a year earlier. That kind of swing suggests the worst of the oversupply pressure in those markets may be passing.

New-home sales, meanwhile, came in on the soft side, and the near-term outlook remains constrained by elevated mortgage rates and builders’ gradual pullback from price concessions. The housing market resembles a bathtub with the faucet barely running and the drain partly open: not emptying, not filling, just sitting at a tepid level that satisfies nobody.

  • Key Takeaway: National home price growth has stabilized, and regional oversupply pressures are beginning to ease, but elevated mortgage rates continue to keep the housing market in a holding pattern.

Inflation and the Fed: Still Sitting in the Waiting Room
The headline Personal Consumption Expenditures Price Index (PCE) deflator crept up to 3.8% in April, while core PCE continues to track close to 3%. Neither number gives the Federal Reserve much to celebrate. First-quarter GDP growth took a revision down to 1.6% from the initial estimate of 2.0%, reflecting weaker consumer services and business software spending than the advance release had assumed. The economy is growing, but at a pace that feels like walking uphill in sand.

On the energy front, oil prices have fallen more than 20% from their recent peak, but it looks like it could take through the end of the year for traffic through the Strait of Hormuz to return to pre-war levels. That means households should brace for elevated gasoline prices through the summer driving season and into the fall, a longer stretch of pain than earlier estimates suggested.

The Fed, for its part, appears content to sit and wait. The claims data and broader labor indicators give the committee enough comfort to hold policy steady while it focuses on the inflation side of its dual mandate. Financial markets continue to price in a rate hike, but that seems unlikely as the Fed would need to see a meaningful acceleration in services inflation to justify tightening. In other words, the Fed is still sitting in the waiting room, but the magazine selection just got a little better.

  • Key Takeaway: Inflation remains sticky, but recession odds are easing and the Fed has enough labor market support to remain patient. The bar for a rate hike remains high, and the bar for a cut is not getting any lower.

Final Thoughts
This week’s data drew a clear line between two very different stories playing out in the same economy. On one side, businesses continue to invest aggressively, drawn by AI demand and generous tax provisions. On the other, the American consumer is starting to feel the pinch as the tax refund cushion evaporates and gasoline costs remain stubbornly high. The savings rate falling to its lowest level since 2022 is not a statistic to dismiss lightly; it signals that households are stretching to maintain their standard of living.

The labor market, once again, sits at the center of the story. Claims data suggest a floor has formed rather than a springboard for further improvement, and the divergence between payroll and household employment measures adds a layer of ambiguity to what otherwise looks like a healthy picture. The Conference Board confidence decline, modest as it was, reminds us that consumer perception can shift quickly once the real-world effects of higher prices start to bite.

Recession odds have eased and the corporate investment cycle has legs, but the consumer is the swing factor. If spending slows more than the current trajectory suggests, the feedback loop into hiring and confidence could tighten faster than the aggregate data implies. The two-speed economy has room to run, but how long the weaker engine can keep up with the stronger one is the question that matters most heading into the summer months.

Oxford Financial Group, Ltd. is a SEC-registered investment adviser. Registration does not imply a certain level of skill or training. The information provided is for general informational purposes only and should not be considered investment, tax, or legal advice. Opinions are those of the author and are subject to change based on market, regulatory or economic conditions. Forward-looking statements are opinions and/or estimates and are not guarantees of future results. Data and opinions are based on sources believed to be reliable, including unaffiliated third parties such as Oxford Economics, but their accuracy cannot be guaranteed. Past performance is not indicative of future results. See important disclosures and disclaimers at https://ofgltd.com/home/disclaimers.OFG-2606-1

CIO Macro Trends – Caught Between a Rock and a Hard Rate

ekiser on May 27, 2026

The Federal Reserve finds itself in a monetary policy escape room where every door leads to a different problem. Inflation will not cooperate, consumer confidence just cratered to another record low and the labor market stubbornly refuses to crack. This week’s data reinforces a picture we have been watching for months: an economy that is too warm for rate cuts and too fragile for rate hikes, leaving policymakers pinned in place with nothing to do but talk tough.

Executive Summary

  • The April Federal Open Market Committee (FOMC) minutes struck a decidedly hawkish tone, and while some economists are still calling for a first rate cut in December, the risks seem to keep tilting later. Financial markets now price rate hikes over the next 12 months.
  • The University of Michigan consumer sentiment index plunged to 44.8, a fresh record low, while year-ahead inflation expectations jumped to 4.8% and long-run expectations climbed to 3.9%, both the highest readings so far in 2026.
  • Oxford Economics’ supply-chain stress tracker hit a three-year high as air freight rates surged, and the firm now forecasts core Personal Consumption Expenditures (PCE) inflation to average 3.0% in 2026.
  • Housing starts fell 2.8% to a seasonally adjusted annual rate (SAAR) of 1.465 million in April, buoyed by a 10.3% jump in multifamily starts even as single-family starts dropped 9%. The National Association of Home Builders (NAHB) sentiment index rose three points to 37, still firmly below the 50 point threshold signifying lackluster conditions in housing.
  • Initial jobless claims edged down to 209,000, with the four-week moving average settling at 202,500, reinforcing the picture of a labor market that employers remain reluctant to trim.

The Fed’s Escape Room Has No Exit

Think of the Federal Reserve as a chess player who has run out of good moves. The April FOMC minutes laid out a laundry list of preconditions before the committee will consider easing policy. Most participants noted that tightening could be appropriate if inflation remains above 2%, while several indicated cuts could be warranted only if the conflict in the Middle East resolved quickly and the effects of higher tariffs and energy prices dissipated. That is a long wish list, and it amounts to a conditional ceasefire on rate cuts.

Financial markets have taken the message to heart, now pricing in rate hikes over the next 12 months. The bar for actually raising rates seems to remain high. The claims data and the broader labor market picture suggest the Fed would rather rely on hawkish rhetoric to do some of the heavy lifting, a kind of verbal tightening that costs nothing but credibility if it fails. The April minutes also pushed odds higher that the Fed stays on hold into next year.

Oxford Economics’ baseline remains a single 25-basis-point cut in December, bringing the federal funds rate to 3.375% by year-end. But if inflation prints continue to surprise to the upside, that December move starts looking more like a wish than a forecast. The Fed, for now, is doing its best impression of a parent counting to three: everyone knows the number keeps resetting.

  • Key Takeaway: The Fed will likely hold rates steady through at least December, relying on tough talk rather than tough action, while financial markets price in a hike that at present is unlikely to materialize.

Inflation: The Houseguest Who Will Not Leave

Inflation has become that dinner guest who keeps finding one more reason to stay. Oxford Economics’ supply-chain stress tracker climbed to a three-year high, driven by a jump in air freight rates, though it remains well short of the 2022 peak. Supplier delivery times and order backlogs are rising, and the longer the Strait of Hormuz closure persists, the more likely these frictions will feed through into broader goods and services prices.

The combination of the energy price shock and strong demand from the artificial intelligence (AI) infrastructure buildout will keep core inflation sticky. Oxford Economics forecasts core PCE inflation to average 3.0% for 2026, with supply-chain stress adding upside risk. That number alone should give the Fed pause before reaching for the rate-cut lever.

Consumer inflation expectations tell a similar story. Year-ahead expectations jumped to 4.8% and long-run expectations rose to 3.9%, both the highest readings of 2026, though still below the peaks that followed the Liberation Day tariff announcements. A sustained drift higher in long-run expectations would limit the Fed’s ability to treat the oil price shock as a one-off event, effectively locking the committee into a more hawkish posture. If inflation expectations become unanchored, the Fed moves from being boxed in to being walled off.

  • Key Takeaway: Core PCE inflation will likely average 3.0% in 2026, and supply-chain pressures plus rising consumer inflation expectations leave the Fed with little room to maneuver on the dovish side.

The Consumer: A Tale of Two Tax Brackets

The University of Michigan revised its May consumer sentiment reading sharply lower, to 44.8 from 48.2 in the preliminary release, marking another record low for the survey. Gas prices continued to rise despite the ceasefire, and that pain lands disproportionately on lower-income households. Equity markets, by contrast, have shrugged off the conflict, and sentiment among higher-income consumers dipped only marginally. The top 20% of households by income account for 40% of all consumer spending, so the economy keeps moving forward even as its lower gears grind.

Oxford Economics expects consumption growth to decelerate to 1.9% this year, down from 2.6% in 2025. The tax refund season provided a temporary sugar high earlier in the spring, but that cushion is now spent, and we are heading into peak driving season with gasoline prices acting like a slow leak in household budgets. Lower- and middle-income families will bear the brunt of this squeeze, widening the K-shaped divide that already defines this cycle.

Meanwhile, roughly $160 billion in IEEPA tariff refunds are flowing back to importers, with about $20 billion already out the door and another $80 billion expected in May and June. Before anyone celebrates, these refunds will flow almost entirely to corporate profits, with firms unlikely to alter hiring, spending or pricing decisions. Think of it as a check written to the building owner, not the tenants. The consumer will not feel it.

  • Key Takeaway: The American consumer is running on two very different engines: upper-income households buoyed by stock market gains, and everyone else squeezed by gasoline, with the gap widening as tax refund season fades.

Housing: Treading Water in a Rising Tide of Rates

The NAHB housing market index rose three points to 37 in May, beating expectations of an unchanged 34 reading, but that improvement is relative. A score of 37 still signals poor conditions, like a student celebrating a D-plus after a string of Fs. Builders cited higher mortgage rates, rising gas prices and uncertainty around the Iran conflict as ongoing headwinds.

April housing starts fell 2.8% to a SAAR of 1.465 million, which actually landed well above the below-consensus forecast of 1.355 million. The upside surprise came entirely from multifamily, where starts jumped 10.3%; single-family starts fell 9%. Single-family permits slipped to their lowest level since August 2025, reinforcing the view that the bigger driver of residential Gross Domestic Product (GDP) continues to soften while the smaller multifamily sector carries the headline.

Pending home sales posted a 1.4% gain in April, led by the Northeast and Midwest, but there is little momentum behind the move. Interest rates have risen nearly 25 basis points since the end of April, and that fresh headwind should keep a lid on sales in the months ahead. Builders continue to offer incentives; in May, 32% offered price cuts, down from 36% in April, as they balance the need to clear inventory against the desire to protect margins. The supply of unsold completed homes remains near levels not seen since mid-2009.

  • Key Takeaway: Housing will tread water until the Fed delivers actual rate cuts. Until then, expect more sideways movement with multifamily papering over single-family weakness.

The Labor Market: Boring in the Best Possible Way

In a week of record-low sentiment and hawkish Fed minutes, the labor market delivered something almost refreshing: nothing dramatic. Initial jobless claims fell 3,000 to 209,000 in the week ended May 16, and the four-week moving average dipped 1,500 to 202,500. On an unadjusted basis, claims tracked 6.4% below year-ago levels. Claims have remained in a narrow band between 200,000 and 215,000 since mid-February, a stretch of stability that reads like a flat heart monitor in the best possible way.

Continued claims rose 6,000 to 1.782 million in the week ended May 9, but the modest increase kept the downward trend in the four-week moving average intact. Florida’s claims remain elevated following the Spirit Airlines closure, which affected roughly 17,000 workers, but the broader picture remains one of few layoffs. Employers are holding on to their workers the way a hiker holds on to a water bottle in the desert; even if they are not drinking much, they know letting go would be a mistake.

Oxford Economics’ latest immigration tracker reinforces its forecast for net immigration of roughly 160,000 per year for the foreseeable future, well below historical norms, pointing to near-zero labor force growth over the next two years. The combination of cautious hiring and limited labor supply growth creates a floor under wages but also limits the economy’s potential growth rate. The labor market, in short, is giving the Fed just enough comfort to sit still.

  • Key Takeaway: The labor market’s quiet stability gives the Fed cover to keep its focus squarely on inflation, but the absence of meaningful deterioration also removes the growth scare that might force earlier rate cuts.

Final Thoughts

This was the week the Fed’s dilemma came into sharpest focus. The April FOMC minutes drew a line in the sand on rate cuts, consumer sentiment cratered to a level not seen in the survey’s history, and yet employers kept writing paychecks as though nothing had changed. The economy is sending mixed signals the way a car might flash its check-engine light while still accelerating; something is off under the hood, but the wheels have not come off yet.

The core tension remains the same one that has defined 2026: inflation fueled by energy disruption and AI-driven demand will not cool fast enough to give the Fed permission to ease, while the real economy has not weakened enough to force the committee’s hand. Supply-chain stress at a three-year high, core PCE tracking 3% and long-run inflation expectations drifting toward 4% all argue for patience. On the other side of the ledger, record-low sentiment, a K-shaped consumer split and a housing market stuck in neutral all argue that patience has a cost.

It seems possible that we could still get one rate cut in December, but the margin for error on that call narrows with every hawkish data point. The labor market’s remarkable stability is the fulcrum on which everything balances. If claims stay in their current band and payrolls hold, the Fed can afford to wait. If either crack, the calculus changes quickly. For now, the economy bends but does not break, and the Fed counts to three without ever reaching it.

Oxford Financial Group, Ltd. is a SEC-registered investment adviser. Registration does not imply a certain level of skill or training. The information provided is for general informational purposes only and should not be considered investment, tax, or legal advice. Opinions are those of the author and are subject to change based on market, regulatory or economic conditions. Forward-looking statements are opinions and/or estimates and are not guarantees of future results. Data and opinions are based on sources believed to be reliable, including unaffiliated third parties such as Oxford Economics, but their accuracy cannot be guaranteed. Past performance is not indicative of future results. See important disclosures and disclaimers at https://ofgltd.com/home/disclaimers. OFG-2604-23

 

 

 

Oxford’s Chief Wealth Planning Officer Published in NAEPC Journal of Estate & Tax Planning

ekiser on May 22, 2026

Tax and Planning Considerations for Private Placement Insurance

We’re proud to share that Oxford’s Chief Wealth Planning Officer, Russell DeLibero, PhD, CFP®, ChFC®, CLU®, AEP®, has been published in the National Association of Estate Planners & Councils’ Journal of Estate & Tax Planning.

Private Placement Insurance is a topic that has received growing attention in the wealth planning community, and for good reason. For qualified purchasers and accredited investors, these structures can offer meaningful tax advantages, access to institutional investment options and planning flexibility not available through retail insurance products. At the same time, they carry important considerations around structure, fees, ownership and regulatory compliance that require careful evaluation.

In his feature, Russ examines the full landscape of Private Placement Insurance, including both Private Placement Life Insurance and Private Placement Variable Annuities. He covers the key structural and tax distinctions between the two, investment allocation options including insurance dedicated funds and separately managed accounts, ownership considerations and their transfer tax implications, fee structures and how to evaluate them and the regulatory scrutiny the space has attracted in recent years.

For families and advisors navigating complex wealth planning, understanding the nuances of these instruments, and where they fit within a broader estate and tax strategy, is increasingly relevant.

Russ is a national speaker and author whose work has been presented at leading institutions including Heckerling, NAEPC, USC and Emory. This publication is a reflection of his continued commitment to advancing the conversation around sophisticated wealth planning strategies.

Read the article.

CIO Macro Trends: Inflation at Six Percent, and the Economy Just Shrugs

ekiser on May 19, 2026

Producer prices hit 6%. Consumer prices hit 3.8%. And the economy, like a marathon runner who has not yet noticed the blister forming at mile 18, kept right on going. This week’s data painted a picture of an inflation pipeline running at full pressure and an economy too resilient for its own good, at least from the Federal Reserve’s perspective.

Executive Summary

  • Headline Consumer Price Index (CPI) inflation climbed to a multiyear high of 3.8% year-over-year in April, while core CPI held at a stubborn 2.8%. The Producer Price Index (PPI) surged to 6.0% year-over-year, its highest since December 2022.

  • Electronic components prices rose 27% year-over-year on artificial intelligence (AI) driven demand for memory chips. Import prices jumped 1.9% month-over-month to 4.2% year-over-year, the strongest since October 2022.

  • Our Personal Consumption Expenditures (PCE) inflation nowcast points to headline inflation of 3.8% year-over-year and core of 3.3%, the hottest reading since May 2023.

  • Retail sales rose 0.5% in April, and real consumer spending is tracking close to 2% annualized in the first half of the year. Tax refunds offset the gasoline burden two-to-one through April, though that support is now fading.

  • Industrial production surged past expectations, inventories jumped in March to reinforce a positive contribution to First Quarter Gross Domestic Product (GDP), and the National Federation of Independent Business (NFIB) reported that hiring intentions and unfilled positions both rose in April.

  • Existing home sales edged up 0.2% to 4.02 million, but housing no longer drives the business cycle the way it once did; equities now matter more for household wealth than real estate. Kevin Warsh took the reins at the Federal Reserve with ambitions to lower rates and shrink the balance sheet, but inflation leaves little room to act.

The Inflation Pipeline: Full, and Getting Fuller

Headline CPI inflation climbed to 3.8% year-over-year in April, a multiyear high, while core CPI edged up to 2.8%. The April core reading carried more noise than signal: a statistical quirk from last fall’s government shutdown artificially boosted the shelter component (a one-time correction with no bearing on the trajectory of housing inflation), and used vehicle prices flattened after months of declines partly because outsized tax refunds from the One Big Beautiful Bill Act (OBBBA) generated a temporary burst of demand for used cars. Like a sugar high, that boost will not last. Apparel prices kept climbing on tariff passthrough, while airlines passed along higher jet fuel costs through rising airfares (think of it as an oil surcharge that is slowly spreading from the pump to the boarding gate, to the grocery aisle).

Further up the supply chain, the picture looks worse. The PPI surged 1.4% month-over-month to 6.0% year-over-year, its highest since December 2022, with core producer prices jumping 1.0% as diesel costs (up 60% since the war began) drove transportation and warehousing services up 5% in a single month. The AI buildout continues to turbocharge electronics inflation; producer prices for electronic components rose 27% year-over-year on a global shortage of Dynamic Random-Access Memory (DRAM) semiconductor chips that shows no sign of abating. Import prices added to the chorus, rising 1.9% month-over-month to 4.2% year-over-year, the strongest since October 2022.

Taking all the incoming price data together, Oxford Economics’ PCE nowcast points to headline inflation of 3.8% year-over-year and core of 3.3%, the hottest since May 2023.

  • Key Takeaway: The inflation pipeline is full and still pressurizing. Energy passthrough, AI chip shortages and tariff residue will keep core inflation near 3% this year, but this is cost-push pressure in an economy that does not have the overheated labor market or pandemic-era fiscal impulse that turned 2022 into a sustained inflation event.

The Consumer Refuses to Buckle

Retail sales rose 0.5% in April, matching expectations, with Oxford Economics’ nowcast showing consumer prices rising by a similar amount, which means volumes held roughly flat after March’s solid gain. Beneath the headlines, online sales and spending at bars and restaurants continued to post healthy gains, while furniture remained the conspicuous laggard, weighed down by a housing market that refuses to thaw.

The consumer’s staying power through this oil shock has a specific explanation: income tax refunds from the OBBBA offset the gasoline burden by a ratio of approximately two to one through March and April. That ratio is about to flip. With refund season in the rearview mirror and gas prices still creeping higher, it is likely that spending on other goods and services will slow in the months ahead. For now, the numbers remain encouraging. Upward revisions to earlier months lifted first quarter consumer spending to a 1.8% annualized pace, and the second quarter nowcast tracks close to 2%, above a baseline forecast of 1.6%.

  • Key Takeaway: The consumer entered the oil shock with a government-issued shock absorber in the form of tax refunds. Now that the absorber is spent, the real test begins. If spending holds up through the summer without fiscal support, it will say something important about the economy’s resilience; if it does not, a December rate cut will arrive right on time.

Factories, Firms and the AI Freight Train

Industrial production surged past expectations in April, with manufacturing driving the rebound and the prior month’s decline revised to be shallower than initially reported. Motor vehicles and parts posted a substantial gain, lifted by a stock market rally that has boosted consumer wealth and appetite for big-ticket purchases, while computers and electronics production continue in the fast lane as the AI buildout pulls defense, space and electrical equipment output along for the ride.

Not everything looked rosy: chemicals, plastics and rubber output weakened, an early signal that petroleum-based manufacturing is beginning to feel the war’s gravitational pull. Small businesses echoed the improving tone, with the NFIB optimism index rising marginally in April, hiring intentions inching higher, and unfilled positions reaching their highest level since May 2025. Planned price increases ticked moderately upward, though businesses are still absorbing much of the energy cost increase rather than passing it along to customers already exhausted by years of inflation. Business inventories jumped in March, reinforcing the positive contribution of stock building to first quarter GDP, and with inventory-to-sales ratios declining and manufacturers reporting that customer stockpiles are too low, restocking could become a meaningful tailwind for the remainder of the year.

  • Key Takeaway: The AI freight train is hauling the factory sector forward, but it is also the primary source of the goods inflation that keeps the Federal Reserve pinned to the sidelines. That tension will define the second half of the year.

Housing: Down, but No Longer the Business Cycle

Existing home sales edged up just 0.2% in April to a seasonally adjusted annual rate (SAAR) of 4.02 million, below some estimates. Sales are likely to hover near the 4 million mark until late this year if the Federal Reserve holds off rates cuts until December. The supply of homes for sale rose 5.8% to 1.47 million, but for April, when the spring selling season normally kicks into high gear, that increase fell well short of the 10-year average of 9%; higher mortgage rates and war-related uncertainty continue to keep both buyers and sellers on the sidelines. Median prices rose 0.9% year-over-year, with the familiar regional pattern intact: the Northeast and Midwest posting gains while the South held flat and the West remained slightly negative.

The more important observation, however, is that housing no longer plays the role in the business cycle that it once did. Equities now account for a larger share of household wealth than real estate, and the wealth effects from financial assets are also larger in magnitude, which means AI-driven stock market gains matter more for consumer spending than a frozen housing market. With the homeowner vacancy rate near historic lows, structural undersupply places a floor under prices even as mortgage rates discourage activity.

  • Key Takeaway: Think of housing as the economy’s appendix: still there, occasionally painful, but no longer essential to the body’s survival. The AI-and-equities engine has taken over as the primary vehicle for household wealth, and that changes the playbook for reading this cycle.

The New Fed, the Old Problem

Kevin Warsh took the reins at the Federal Reserve this week, confirmed by the Senate with two self-imposed mandates: lower interest rates and shrink the central bank’s balance sheet. Inflation running well above the 2% target and labor market conditions that are stabilizing, if not improving, leave little support for rate cuts in the near term. Shrinking the balance sheet will prove equally stubborn, as further runoff risks pushing up Treasury and mortgage rates, straining repo markets and increasing funding volatility; assuming Warsh can build consensus among Federal Open Market Committee (FOMC) members, the process would likely take years.

On the trade front, President Trump’s summit with President Xi steadied bilateral relations and reduced the tail risk of further tariff escalation, with Boeing orders, agricultural purchase commitments and NVIDIA chip clearances among the announced deals, though Phase One-style pledges from China have a checkered track record.

The federal budget posted a surplus of $215 billion in April, smaller than the $258 billion a year earlier as OBBBA tax cuts reduced individual income tax receipts by 4.1% and corporate receipts by 11.8%. Oxford Economics estimates the fiscal year 2026 deficit will total $2.085 trillion, or 6.5% of GDP, with risks tilted toward a larger shortfall as war costs mount and tariff refunds accelerate.

  • Key Takeaway: Warsh inherits a Federal Reserve that wants to cut but cannot, a balance sheet that should shrink but will not, and an economy that inflation hawks and growth doves can both point to as vindication. December will likely be the first real test of how the new chairman steers a deeply divided committee when the incoming data refuse to send a clear signal.

CIO View

If the economy were a patient, the diagnosis this week would read: vital signs strong, temperature elevated, prognosis favorable but requiring monitoring. Producer prices at 6%, consumer prices at 3.8%, and a labor market that is quietly tightening do not describe an economy in need of emergency intervention. They describe one that can afford to let inflation burn off naturally as the energy shock fades, even if the process is slower than anyone would like. It is more likely now that we will get a rate cut in December, later than consensus but more dovish than market pricing. The May baseline confirms GDP growth of 2.2% for the year, with consumer spending at 1.9% and the inventory restocking cycle providing an upside surprise.

The deeper tension in the data sits between the inflation that AI is creating and the productivity it will eventually deliver. Electronics prices are up 27% year-over-year. Memory chip shortages show no sign of resolving. And yet productivity is running near 3%, business formation is historically strong, and the capital deepening from the AI buildout will, in time, generate the efficiency gains that bring inflation back toward target. The question is whether “in time” means one year or five.

For the consumer, the next few months represent the hardest stretch of the cycle: the tax refund cushion is spent, gasoline prices are still climbing, and sentiment sits at a 75-year floor. If spending holds up through the summer without fiscal support, it will tell us the labor market is strong enough to carry the load alone. If it does not, a December rate cut could arrive right on time. Either way, the economy’s growth potential remains intact, and the Warsh Fed will inherit a foundation that bends but does not break.

Oxford Financial Group, Ltd. is a SEC-registered investment adviser. Registration does not imply a certain level of skill or training. The information provided is for general informational purposes only and should not be considered investment, tax, or legal advice. Opinions are those of the author and are subject to change based on market, regulatory or economic conditions. Forward-looking statements are opinions and/or estimates and are not guarantees of future results. Data and opinions are based on sources believed to be reliable, including unaffiliated third parties such as Oxford Economics, but their accuracy cannot be guaranteed. Past performance is not indicative of future results. See important disclosures and disclaimers at https://ofgltd.com/home/disclaimers. OFG-2605-27

CIO Macro Trends – Running to Stand Still: AI Built the Growth, Then Shipped the Bill

ekiser on May 4, 2026

The first quarter Gross Domestic Product (GDP) report confirmed what the weekly data had been hinting at: the economy grew at a respectable 2% pace, underpinned by an artificial intelligence investment surge that added more than a full percentage point to growth. The punch line is that artificial intelligence (AI)-related imports subtracted just as much from the other side of the ledger, leaving the net contribution at zero and inflation as the only lasting residue of the boom.

Executive Summary

  • First quarter gross domestic product grew at a 2.0% annualized rate, in line with consensus. Real final sales to private domestic purchasers, a better gauge of underlying activity, rose 2.5%, with information technology (IT) equipment and software adding more than 1 percentage point to growth, more than double the pace of last year.
  • Consumer spending rose 1.6% annualized, held back by weather early in the quarter. The Personal Consumption Expenditures (PCE) price index rose 0.7% in March and 3.5% year-over-year, while the personal saving rate fell to 3.6%, its lowest since October 2022.
  • On a net basis, AI-related categories added nothing to first quarter GDP, as the surge in imports fully offset the investment gains. Imports of AI-related equipment have nearly doubled over the past year, while non-AI imports have fallen nearly 28%.
  • The Federal Reserve held rates steady at the April Federal Open Market Committee (FOMC) meeting with a hawkish tilt: the statement upgraded inflation to “elevated” from “somewhat elevated,” and three members dissented over language implying the next move would be a cut. We now expect the next rate cut in December, not June.
  • The Institute for Supply Management (ISM) manufacturing index held steady in April, with broadening new orders and low customer inventories, but price pressures from the AI buildout and energy passthrough continue to build.
  • Consumer confidence rose for a third straight month to 92.8. Initial jobless claims plunged to 189,000, well below expectations, with no sign of labor market deterioration from the war.
  • Housing starts jumped 10.8% to 1.502 million in March, but building permits fell sharply, pointing to a reversal in April.

The GDP Report: Solid on Paper, Fragile Underneath
First quarter GDP grew at a 2.0% annualized rate, matching consensus, but the core of the economy held up better than the headline suggests. Real final sales to private domestic purchasers, which strips out inventories and trade, rose a stronger 2.5%, with IT equipment and software investment alone adding more than 1 percentage point, more than double the pace of its contribution from 2025. Consumer spending rose 1.6% annualized, held back by weather at the start of the quarter; the March personal spending data showed a solid rebound in real terms at quarter-end.

That strength owed much to the tax refund windfall, which through March and most of April outpaced the increased gasoline burden by a ratio of two to one. With refund season winding down and gas prices still climbing, the hit to consumer spending will become more evident starting in May.

The PCE price index rose 0.7% in March and 3.5% year-over-year, and with incomes not keeping pace, the personal saving rate dropped to 3.6%, its weakest since October 2022. The other GDP components were noisy: federal spending rebounded sharply from the record-long government shutdown, while a surge in AI-driven imports dragged net exports by more than a full percentage point.

  • Key Takeaway: The core economy is growing at or above trend, but the composition is fragile. Strip away the government rebound and the tax refund boost, and you find a consumer running on fumes and a saving rate that cannot fall much further.

The AI Paradox: Adding Everything, Netting Nothing
The most striking detail in the GDP report had nothing to do with the headline number. AI-related categories, taken together, added nothing to first quarter growth on a net basis. Investment in IT equipment and software surged, contributing more than a full percentage point, but AI-related imports surged by an equal amount, as most chips and electrical equipment are sourced abroad. The scale of the divergence is remarkable: imports of AI-related equipment have nearly doubled over the past year, while imports of everything else, excluding pharmaceuticals and gold, have fallen nearly 28% since “liberation day.”

For now, the AI boom appears inflationary rather than disinflationary, as rampant demand for memory chips and semiconductors has created a global shortage that is pushing up consumer electronics prices. Unless AI begins feeding through to productivity gains quickly enough to bring down unit labor costs, the Federal Reserve may need to keep policy settings tighter for longer to contain the goods inflation that the buildout is generating.

  • Key Takeaway: The AI buildout is the economy’s most powerful investment engine and its most persistent source of inflationary pressure. Until productivity gains catch up to spending gains, the Federal Reserve will treat the boom as a reason to wait, not a reason to cut.

The Fed Goes Hawkish: December, Not June
The Federal Reserve left interest rates unchanged at the April FOMC meeting, as expected, but the details of the accompanying statement tilted in a hawkish direction. The statement upgraded inflation from “somewhat elevated” to “elevated,” and noted the increase was only “in part” due to energy prices, a signal that officials see broader forces at work. Three members dissented over language implying the next rate move would be a cut —further evidence of the deep split on the committee around the policy outlook. It is now more likely that the next rate cut will be in December rather than June, reflecting a stickier inflation outlook driven by the AI buildout, the passthrough of energy costs to core prices and lingering tariff effects.

This was almost certainly Jerome Powell’s last meeting as Federal Reserve chair, with the Senate Banking Committee advancing Kevin Warsh’s nomination; Powell has vowed to stay on the board as a governor until the Department of Justice investigation is “fully over.” It is likely that rampant AI-related demand for electronics and related equipment will keep core PCE inflation close to 3% over most of this year. The Employment Cost Index (ECI) offered some comfort, with year-over-year growth in compensation costs holding steady at 3.4%, the slowest pace since the second quarter of 2021 and a rate that remains consistent with the Federal Reserve’s 2% inflation target when paired with strong productivity growth.

  • Key Takeaway: Three hawkish dissenters and a rewritten inflation assessment signal that the bar for cutting has risen. December, rather than June, is not just a timing change; it reflects a Federal Reserve that seems to increasingly view AI-driven goods inflation as structural rather than transitory.

The Consumer: Still Spending, but the Cushion Is Gone
The Conference Board’s measure of consumer confidence rose for the third consecutive month in April, reaching 92.8, buoyed by the ceasefire and the rebound in equity markets. Consumers’ year-ahead inflation expectations edged down to 6.1% from 6.2% in March, though they remain well above the 5.5% registered before the war.

The labor market differential, measuring the gap between those saying jobs are plentiful and those saying they are hard to find, improved to 7.5 points from 5.8. Yet beneath the improving headline, consumers reported fewer plans to purchase big-ticket items or spend on services, a signal that the oil price shock is beginning to alter spending behavior. The labor market remains the economy’s shock absorber. Initial jobless claims plunged 26,000 to 189,000 in the week ended April 25, well below expectations, and continued claims declined 23,000 to 1.785 million, with the four-week moving average at its lowest since May 2024. The March consumer spending rebound was genuine, but the tax refund tailwind that powered it is fading; with gas prices still rising, the drag on consumer spending will become visible starting in May.

  • Key Takeaway: Consumer confidence and the labor market both improved this week, but the underlying story has not changed. The tax refund buffer is gone, gas prices keep climbing and a personal saving rate at 3.6% leaves almost no cushion for what comes next.

Housing and Manufacturing: Mixed Signals, Persistent Constraints
Housing starts jumped 10.8% in March to a seasonally adjusted annual rate (SAAR) of 1.502 million, far above consensus, though building permits fell 10.8% to 1.372 million, signaling that the March pace will not repeat. Builders still need to work through an overhang of completed unsold homes that stood at 2009 levels earlier this year; mortgage rates have retraced about half the increase that followed the onset of the war, which should support some sales but will not unlock a sustained recovery in starts. Home price growth continued to decelerate, with the S&P CoreLogic Case-Shiller national index posting its slowest annual gain since June 2023 at 0.7% year-over-year, though base effects are set to turn more favorable starting with the March data.

On the manufacturing side, the ISM manufacturing index held steady in April, with broadening new orders and low customer inventories providing a constructive backdrop for future production. Factory employment, however, fell further into contraction, reinforcing signs of a nascent productivity upswing, while slower supplier deliveries pointed to supply chain bottlenecks forming around the closure of the Strait of Hormuz.

  • Key Takeaway: Housing is caught between a weather-driven bounce in starts and a structural overhang in unsold inventory. Manufacturing is holding steady for now, but the combination of falling employment and rising prices tells a productivity story that the Federal Reserve will watch closely.

Final Thoughts
The first quarter confirmed what the weekly data had been suggesting: the economy is growing at trend, the AI buildout is both supporting and complicating the picture and the Federal Reserve has no reason to move until the data force its hand. It is now more likely to see a single rate cut in December, later than consensus but more dovish than current market pricing, which implies little change in rates over the coming years. Consumer spending is on track for growth of nearly 2% this year, but the composition makes it unusually fragile, with an outsized reliance on high-income households who benefit from tax cuts and wealth effects; a sustained stock market correction would hit spending harder than normal.

The Middle East situation is the primary source of uncertainty, though hard data signals remain benign. The deeper question is whether the AI boom that is keeping the Federal Reserve on hold will eventually deliver the productivity gains that make its own inflation manageable. That is a question measured in years, not quarters. In the meantime, the economy faces a summer stretch where the tax refund tailwind has faded, gas prices remain elevated and the labor market, while stable, is beginning to feel the leading edge of AI adoption through rising layoffs in the information sector. The consumer, running on fumes and a saving rate of 3.6%, will be the first to tell us if something has broken. So far, the answer is no. But the margin of safety is thinner than it has been in years.

Oxford Financial Group, Ltd. is a SEC-registered investment adviser. Registration does not imply a certain level of skill or training. The information provided is for general informational purposes only and should not be considered investment, tax, or legal advice. Opinions are those of the author and are subject to change based on market, regulatory or economic conditions. Forward-looking statements are opinions and/or estimates and are not guarantees of future results. Data and opinions are based on sources believed to be reliable, including unaffiliated third parties such as Oxford Economics, but their accuracy cannot be guaranteed. Past performance is not indicative of future results. See important disclosures and disclaimers at https://ofgltd.com/home/disclaimers. OFG-2605-2

CIO Macro Trends: The Refund Ran Out Before the Gas Bill Did

ekiser on April 28, 2026

March retail sales beat expectations, consumer sentiment found a floor (even if the floor is a 75-year low) and pending home sales surprised to the upside. Read the fine print, though, and the picture is less encouraging. A blockbuster tax refund season carried the consumer through the first quarter, but that windfall has nearly run its course, and gasoline prices north of $4 a gallon are not going anywhere soon. 

Executive Summary 

  • Retail sales rose 1.7% in March, beating consensus forecast, with control group sales up 0.7%. Income tax refunds surged 22.4% year-over-year in March, driving much of the upside. It is estimated that more than 80% of expected refunds have already been distributed. 
  • The final April release from the University of Michigan revised the consumer sentiment index to 49.8 from the preliminary 47.6, still the lowest reading in the survey’s nearly 75-year history. Year-ahead inflation expectations settled at 4.7%, confirming the largest one-month jump since April 2025. 
  • First quarter real consumer spending now tracks roughly 1% annualized, above the prior 0.7% baseline, but growth may fall in the second quarter as the refund tailwind fades. 
  • Pending home sales surprised to the upside in March, rising 1.5%, but the increase does not likely signal the start of a trend. Business inventories broke a three-month stretch of no growth, rising 0.4% in February. 
  • Initial jobless claims rose to 214,000; seasonal noise, not deterioration, drove the increase. 
  • The Federal Reserve will almost certainly hold rates steady at next week’s Federal Open Market Committee (FOMC) meeting, which now looks likely to be Jerome Powell’s last as chair. Rate cuts will probably arrive later than previously assumed, as inflation is likely to stay elevated longer than anticipated, due largely to the artificial intelligence (AI) buildout. 
  • AI-driven layoffs are accelerating in the technology sector, with an estimated 10,000 job cuts announced through mid-April, and the information sector layoff rate has diverged sharply from the overall private sector. 

The Consumer Spent the Windfall. Now What? 
The March retail sales report delivered a headline that looked better than it was. Sales rose 1.7%, beating the consensus forecast, but gas station receipts accounted for much of the jump as pump prices surged in the wake of the war. More telling was the 0.7% gain in control group sales, the subset that feeds directly into the broader Personal Consumption Expenditures (PCE) measure, which came in well above consensus.  

The strength owed much to a 22.4% year-over-year surge in income tax refunds issued during March, with middle- and upper-income households filing later and reaping the retroactive provisions of the One Big Beautiful Bill Act (OBBBA). That windfall is nearly spent. It is estimated that more than 80% of expected refunds have already been distributed, with only $40 to $45 billion more to flow by the end of May.  

First quarter real consumer spending now tracks roughly 1% annualized, an improvement from the prior 0.7% baseline, but growth might very well fall below 1% in the second quarter as the refund boost fades and the drag from high gasoline prices continues to build.  

  • Key Takeaway: The consumer made it through Q1 on borrowed time and borrowed money. With the refund check cashed and gasoline still north of $4 a gallon, Q2 will test whether the labor market alone can keep spending afloat. 

Record-Low Sentiment, Record-High Expectations 
The ceasefire and the equity market rebound that it triggered managed to lift consumer sentiment from the abyss, but not by much. The final April release from the University of Michigan revised the consumer sentiment index to 49.8 from the preliminary 47.6, still the lowest in the survey’s nearly 75-year history.  

Gas prices stabilized in the second half of April and stocks rallied, easing some of the anxiety among low-income consumers who are most sensitive to pump prices. Year-ahead inflation expectations settled at 4.7%, confirming the largest single-month increase since April 2025, driven by average gas prices exceeding $4 per gallon throughout the month.  

Long-run inflation expectations rose to 3.5% from 3.2%, a move that bears watching given the Federal Reserve’s sensitivity to this anchor. The hit to real disposable income from higher gas prices is likely to slow consumption growth to around 2% this year, down from 2.6% in 2025, with low- and middle-income households absorbing the heaviest blow as a larger share of their spending goes toward gasoline. 

  • Key Takeaway: A 2-point upward revision from the preliminary reading offers cold comfort when the revised number still sets a 75-year low. The gap between sentiment and spending has widened, but real income erosion from gasoline will eventually close it from the wrong direction. 

Housing and Inventories: Treading Water, Awaiting a Thaw 
Pending home sales surprised to the upside in March, rising 1.5% against flat forecasts, with gains in the Northeast and South offset by declines in the Midwest and West. The increase points to a modest improvement in existing home sales in April, but we do not view it as the beginning of an upward trend. With mortgage rates elevated and consumer confidence depressed, we expect sales to move sideways until later in the year, when declining oil prices should bring mortgage rates down with them.  

On the inventory side, business stockpiles broke a three-month stretch of no growth, rising 0.4% in February. Oxford Economics still estimates that stockbuilding dragged first quarter gross domestic product (GDP) by 0.4 percentage points, but expects inventory investment to swing into a positive contribution over the remainder of the year as restocking gains momentum. Inventories have become leaner in recent quarters, and business surveys corroborate the picture, with manufacturers increasingly reporting that customer inventories are too low. 

  • Key Takeaway: Housing will remain frozen until mortgage rates thaw. The better news sits on the inventory side, where lean stockpiles and improving lending conditions set the stage for a restocking cycle that should support growth in the second half. 

The Fed at a Crossroads: Later Cuts, a New Chair and the AI Wildcard 
The Federal Reserve will almost certainly hold rates steady at this week’s FOMC meeting, and the focus will fall squarely on any signal about the future path of policy. It is likely that any rate cuts will arrive later than prior June and September assumptions. The shift reflects two developments: more stable conditions in the Middle East have slightly reduced the downside risks to the labor market, and inflation is likely to stay higher for longer, due largely to the AI buildout that continues to drive up prices for electronics, capital goods and related services.  

This week’s meeting now looks almost certain to be Powell’s last as Chair, after the Department of Justice announced it would drop its investigation. That should clear the way for Kevin Warsh’s confirmation. Warsh articulated familiar views at his Senate hearing: he believes AI-driven productivity gains will allow for more economic growth without stoking inflation, he favors slashing the Federal Reserve’s balance sheet and he prefers less public communication from the central bank. The bigger question for Federal Reserve independence is whether Powell will resign from the board entirely; his term as governor runs through January 2028, and he has indicated he will not leave until the investigation concludes with “transparency and finality.” 

  • Key Takeaway: The Federal Reserve’s next move will be shaped less by oil prices and more by how persistent AI-driven inflation proves to be. If Warsh brings the conviction about AI productivity he expressed at his hearing, the central bank’s reaction function could shift in ways markets have not yet priced. 

The Labor Market: Still Standing, But AI Is Thinning the Ranks 
Initial claims for jobless benefits rose 6,000 to 214,000 in the week ended April 18, above the 210,000 consensus; however, seasonal adjustment noise rather than deterioration in labor market conditions drove the increase. On an unadjusted basis, claims continue to track below year-ago levels. Continued claims rose 12,000 to 1.821 million, though the pattern of downward revisions persists and the four-week moving average ticked up only slightly. The broader claims picture shows no evidence of war-related damage to the labor market, though it is likely the spillover from higher oil prices will arrive with a lag.  

One emerging fault line deserves attention: AI-driven layoffs in the technology sector. Tech firms announced an estimated 10,000 job cuts through mid-April, with several companies explicitly tying the reductions to investment in AI. The layoff rate in the information sector has risen sharply since late 2025, even as the overall private sector rate has held steady, making it one of the first tangible signs that AI adoption is reshaping the labor market from the inside out. 

  • Key Takeaway: The labor market is stable in aggregate, but the AI layoff signal in the information sector is worth heeding. If technology is the leading edge of a broader reallocation, the transition will create pockets of pain even as the macro numbers hold. 

Final Thoughts 
This week brings the FOMC meeting, first quarter GDP, the PCE inflation report and quite possibly the final Powell press conference. It is a consequential stretch. GDP is likely to rebound above 2% annualized in the first quarter, driven by a sharp reversal of the government shutdown drag, with consumer spending moderate and business equipment investment strong on the back of the AI buildout.  

The consumer made it through Q1 on refund fumes and pre-war momentum, both of which are fading. The second quarter will be weaker, and the Federal Reserve seems to know it, which keeps rate cuts on the table this year even if they arrive later than previously expected. Markets have begun to price in a few more basis points of rate relief following the Warsh news, but they may very well be too conservative on the timing and magnitude of cuts. The Warsh confirmation adds a chairman who believes in AI-driven productivity and smaller balance sheets; the implications for monetary policy will unfold gradually rather than through any sudden pivot. The deeper question facing the economy is whether the AI buildout that is keeping inflation elevated is also generating enough productivity gains to support growth on the other side of the energy shock.  

The refund tailwind is spent. Gasoline prices remain high. And the labor market, while stable in aggregate, is beginning to sort winners from losers as AI adoption accelerates. The economy’s underlying growth potential remains north of 2%, driven by productivity. But the transition will be uneven, and the second quarter will test how much of Q1’s resilience was real and how much was borrowed. 

Oxford Financial Group, Ltd. is a SEC-registered investment adviser. Registration does not imply a certain level of skill or training. The information provided is for general informational purposes only and should not be considered investment, tax, or legal advice. Opinions are those of the author and are subject to change based on market, regulatory or economic conditions. Forward-looking statements are opinions and/or estimates and are not guarantees of future results. Data and opinions are based on sources believed to be reliable, including unaffiliated third parties such as Oxford Economics, but their accuracy cannot be guaranteed. Past performance is not indicative of future results. See important disclosures and disclaimers at https://ofgltd.com/home/disclaimers. OFG-2604-45

CIO Macro Trends: Open Straits, Open Questions: Peace Takes Shape While the Scars Set In

ekiser on April 21, 2026

Iran reopened the Strait of Hormuz this week (only to close it again the next day), crude oil futures dropped toward $80 a barrel and the S&P 500 touched a record high. The data, however, told a different story — one of an economy still absorbing the hit from a war whose effects will linger long after the last ceasefire provision is signed.

Executive Summary

  • Iran declared the Strait of Hormuz fully open to commercial traffic then reimposed “strict control” the next day, crude oil futures fell near $80 per barrel and the S&P 500 reached an all-time high. The Geopolitical Risk Index (GRI) jumped two standard deviations in the first quarter, however, and the drag on business investment and hiring will likely peak two to three quarters from now.

  • The Producer Price Index (PPI) climbed to 4.0% year-over-year, its highest reading since February 2023, even as core producer prices rose a mere 0.1% month-over-month. Artificial intelligence (AI) demand has driven electronics components prices 19% higher year-over-year, fueled by a shortage of Dynamic Random-Access Memory (DRAM) semiconductor chips.

  • Oxford Economics Personal Consumption Expenditures (PCE) tracking nowcast points to headline inflation of 3.4% year-over-year, the hottest reading since September 2023.

  • The National Federation of Independent Business (NFIB) optimism index tumbled to its lowest level since “liberation day,” and plans to raise selling prices dropped to their lowest point since mid-2024.

  • The Federal Reserve’s Beige Book showed the economy holding steady, with the in-house Beige Book Activity Index (BBAI) improving to 0.48, well clear of recession territory, even as businesses cited the war as the dominant source of uncertainty.

  • The National Association of Home Builders (NAHB) Housing Market Index fell to 34, its lowest since September, while existing home sales slipped 3.6% to a seasonally adjusted annual rate (SAAR) of 3.98 million.

  • Industrial production fell 0.5%, driven by declines in mining and utilities rather than manufacturing. Initial jobless claims dropped to 207,000, and the labor market shows no sign of deterioration from the war.

The Ceasefire Turns Real — But the Damage Clock Is Ticking
The two-week ceasefire between the United States and Iran expires on April 22, but momentum toward a lasting agreement accelerated this week. President Donald Trump announced a separate ceasefire between Israel and Lebanon, directly linked to the broader peace framework and Iran declared the Strait of Hormuz fully open to commercial traffic but then did an about face on Saturday morning reimposing “strict control” of the waterway.

Markets responded emphatically: crude oil futures dropped near $80 per barrel and the S&P 500 reached an all-time high. The retreat in energy prices and the recovery in equities remove two of the biggest near-term drags on the outlook, the real income squeeze from gasoline and the negative wealth effect on upper-income spending that a deeper selloff would have triggered. But the damage from elevated geopolitical risk will not heal on the ceasefire’s timeline. Federal Reserve research shows the peak drag from a geopolitical shock on business investment (roughly 1.2%) and private weekly hours worked (approximately 0.6%) arrives two to three quarters after the event, meaning the worst of the economic impact from the first quarter’s volatility still lies ahead.

  • Key Takeaway: The ceasefire rewrites the risk distribution, not the damage function. Businesses that froze hiring and investment plans during the conflict will not unfreeze them the moment diplomats shake hands.

The Inflation Pipeline — From Producer to Consumer
The March PPI climbed 0.5% month-over-month, lifting the annual rate to 4.0%, its highest since February 2023. Energy prices surged 8.5% and diesel fuel costs spiking an extraordinary 42%. Core producer prices told a different story, rising a mere 0.1% as the annual rate actually ticked down to 3.7% from 3.8%. The stubborn outlier remains electronics: AI demand has created a shortage of DRAM semiconductor chips, driving components prices 19% higher year-over-year and damage to Middle Eastern natural gas and helium production facilities threatens to tighten supply further.

Import prices showed similar broadening, rising 2.1% year-over-year, the strongest gain since December 2024, with nonfuel imports driving the bulk of the monthly increase and signs emerging that foreign exporters have stopped cutting prices to absorb tariff impacts. With both the Consumer Price Index (CPI) and PPI data now in hand, our PCE tracking nowcast points to headline inflation of 3.4% year-over-year, the hottest since September 2023, with headline PCE expected to average 3.7% in the second quarter before easing to 3.0% by year-end.

  • Key Takeaway: The energy shock dominates the headlines, but core inflation and the producer pricing pipeline are not flashing the kind of alarm that would force the Federal Reserve to choose between its mandates.

Small Business Under Siege, Big Picture Holding
The NFIB Small Business Optimism Index fell to its lowest reading since “liberation day” in April 2025, with broad-based declines across capital expenditure plans, inventory intentions and the share of firms reporting positive earnings. Uncertainty surged to its highest point since September as owners struggled to gauge the future cost of energy and the war’s knock-on effects on demand. These firms absorbed the blow through thinner margins rather than higher prices. Plans to raise selling prices actually declined, dropping to their lowest level since mid-2024.

The Federal Reserve’s Beige Book painted a steadier picture at the macro level: the BBAI improved to 0.48 from 0.27, with eight of twelve Federal Reserve districts (67%) reporting growth, a reading well clear of recessionary territory. Yet beneath that surface stability, firms described a “no-hire, no-fire” labor market where AI-driven productivity gains are reducing the need for new headcount and input costs continue to outrun selling prices, squeezing margins further.

  • Key Takeaway: Small businesses are the canary for second-round inflation effects, and their decision to eat the cost rather than pass it on supports the view that core price pressures will remain contained, but their margins cannot absorb this indefinitely.

Housing — Frozen by Rates, Haunted by Inventory
The NAHB Housing Market Index dropped four points to 34 in April, below consensus, with the sharpest decline coming in the component measuring expectations for home sales six months from now. Builders cited declining consumer confidence, rising mortgage rates and higher material costs tied to oil prices as the primary culprits, and they pulled back on incentives to protect their margins. The share of homebuilders offering any form of buyer incentive fell to 60% from 64% in March.

The overhang of completed but unsold homes, which sat at 2009 levels in January, must shrink before any meaningful pickup in starts can materialize. On the resale side, existing home sales fell 3.6% in March to a SAAR of 3.98 million, with supply rising to 1.36 million units. This equates to 4.1 months at the current selling pace though inventory growth of 2.5% year-over-year marked the smallest annual increase since April 2022. Price growth continues to diverge sharply by region: the Northeast and Midwest posted gains, the South held roughly flat, and the West remained in negative territory for several consecutive months.

  • Key Takeaway: Housing will not lead the recovery, it will follow, and only after mortgage rates give builders and buyers a reason to come off the sidelines, which requires oil prices to fall further and the Federal Reserve to act.

The Factory Floor and the Labor Market — Patience Required
Industrial production fell 0.5% in March, the first reading to cover the war period, but the decline concentrated in mining and utilities rather than manufacturing, where output barely dipped and February’s estimate earned an upward revision. Motor vehicles and parts stood out as a drag and remain one of the segments most vulnerable to an oil price shock, since surging gasoline prices lead consumers to defer big-ticket purchases and automakers to cut assemblies.

The broader risk: the Global Reporting Initiative (GRI) has surged four standard deviations since the war began, which historically translates to roughly a 1% drag on the level of industrial production. The labor market, by contrast, has not flinched. Initial claims fell 11,000 to 207,000 in the week ended April 11, with the four-week moving average steady at 209,750 and claims running 3.2% below year-ago levels. Continued claims rose to 1.818 million, but the trend remains downward, with the four-week moving average at its lowest point since June 2024.

  • Key Takeaway: The labor market’s calm is real but borrowed. Oil shocks hit employment with a lag, and the geopolitical risk drag on investment and hiring has not yet peaked.

Final Thoughts
The narrative shifted decisively this week. A month ago, markets priced in an open-ended energy war with no clear exit. By last week’s end, Iran has reopened the Strait (only to close it again on Saturday), oil dropped to $80 and the S&P 500 has printed a record high. That is a remarkable reprieve, but it is not an all-clear.

The Federal Open Market Committee (FOMC) faces a delicate balancing act: inflation runs hot on the headline but cool at the core, and the labor market remains stable but increasingly exposed to the lagged effects of a shock whose full economic damage has not yet materialized. Markets have completely priced out a Federal Reserve rate cut this year. President Trump’s threat this week to remove Federal Reserve Chair Jerome Powell drew headlines, but the ongoing Supreme Court case over the dismissal of Governor Lisa Cook carries greater weight. A ruling against the White House would meaningfully limit its ability to reshape the board.

The path from here depends less on the ceasefire text and more on how quickly confidence recovers, among consumers, small businesses and corporate investment committees. Potential gross domestic product (GDP) growth remains north of 2% over the coming decade, almost all of it powered by productivity, and this is anything but stagflation. If history is any guide, that recovery will be measured in quarters, not weeks. The economy entered 2026 with genuine momentum, and nothing in this week’s data says that momentum has broken. But the war bent it, and the scars will shape the trajectory long after the headlines move on.

Oxford Financial Group, Ltd. is a SEC-registered investment adviser. Registration does not imply a certain level of skill or training. The information provided is for general informational purposes only and should not be considered investment, tax, or legal advice. Opinions are those of the author and are subject to change based on market, regulatory or economic conditions. Forward-looking statements are opinions and/or estimates and are not guarantees of future results. Data and opinions are based on sources believed to be reliable, including unaffiliated third parties such as Oxford Economics, but their accuracy cannot be guaranteed. Past performance is not indicative of future results. See important disclosures and disclaimers at https://ofgltd.com/home/disclaimers. OFG-2604-35

Oxford Managing Director Named Advisor of the Year Finalist by InvestmentNews

ekiser on April 16, 2026

Oxford Financial Group, Ltd. is pleased to announce that Managing Director Charles R. Carter, CFP®, CEPA has been named a finalist for Advisor of the Year (Midwest region) in the 2026 InvestmentNews Awards.

The InvestmentNews Awards recognize professionals and firms who exemplify high standards in wealth management, honoring those whose resilience, integrity and dedication are reshaping the future of the industry. Being named a finalist is a distinction reserved for advisors whose work stands apart at a national level.

Charles has spent more than 20 years advising entrepreneurs, wealth creators and multigenerational families through some of the most consequential transitions of their financial lives: business exits, succession planning, estate strategy and the evolution of family governance. He is known for his ability to bring clarity and long-term perspective to complexity, coordinating across legal, tax and investment advisors to help ensure that strategies are not only sound but precisely executed.

As a Managing Director at Oxford, Charles works within the firm’s family office model, integrating estate planning, tax strategy, investment management and generational decision-making into a single cohesive framework. His approach is relational and deeply client-specific, grounded in a genuine understanding of each family’s values, priorities and vision for what comes next.

This recognition is a reflection of the standard Charles holds himself to and the standard Oxford is built on. We congratulate him on this well-deserved honor.

Oxford Financial Group, Ltd. (“Oxford”) is a Registered Investment Advisor (“RIA”) with the U.S. Securities and Exchange Commission (“SEC”) and is headquartered in Carmel, Indiana. Registration with the SEC does not imply a certain level of skill or training. Additional information about Oxford, including our Form ADV and Privacy Policy, is available upon request by calling 800.722.2289 or emailing info@ofgltd.com. The content of this presentation is intended for educational and illustrative purposes only. It should not be construed as investment, tax or legal advice, nor as a recommendation or offer to buy or sell any security or investment product. Tax and legal counsel should be engaged before taking any action. This material has been prepared using original sources believed to be reliable, but no representation is made as to its accuracy or completeness. The views expressed are those of Oxford as of the date of the presentation and are subject to change based on market, regulatory or economic conditions, which may not occur as anticipated. Finalist for the InvestmentNewsAwards are chosen through open nominations and a diverse and unbiased judging panel of experts. Oxford nor its employees paid to participate or be included in the rankings. The 2026 InvestmentNews Awards will be held later this year. View important disclosures and disclaimers at https://ofgltd.com/home/disclaimers/ OFG-2604-20