Core inflation actually ticked lower on a three-month annualized basis. Then the University of Michigan dropped the lowest consumer sentiment reading in its 74-year history. One-year inflation expectations surged a full point to 4.8%. The ceasefire between Iran and Israel held for a second day, and Brent fell roughly $13 on the week, but only Iranian-linked ships are transiting the Strait of Hormuz. The S&P 500 closed at 6,816.89, up 7% on the week. Something doesn't add up.
March headline CPI rose 0.9% month-over-month and 3.3% year-over-year, the highest annual rate since April 2024. Gasoline surged 21.1% in a single month, the largest increase on record, accounting for nearly three-quarters of the headline advance. Energy overall rose 10.9%.
University of Michigan consumer sentiment fell to 47.6 in April, the lowest reading in the survey's 74-year history. One-year inflation expectations jumped to 4.8% from 3.8%; five-year expectations rose to 3.4% from 3.2%.
The Iran-Israel ceasefire held for a second consecutive day, and yesterday was the first day of the war without any Iranian attacks against Israel and the UAE. Brent crude futures fell roughly $13 per barrel on the week on ceasefire hopes. But only Iranian-linked ships are passing through the Strait of Hormuz; no one else is transiting.
The SaaS index has fallen 40% from its October 28 all-time high, while the S&P 500 is down only 1% over the same period.
Let's sit with this for a second. Truman was president. The Korean War was on.
Over 70% of Americans said the government is doing a poor job on economic policy. That's not a partisan split. That's a consensus.
The number that should keep the Fed up at night: one-year inflation expectations surged a full percentage point to 4.8%, and five-year expectations climbed to 3.4%. The entire Bernanke-era playbook for looking through supply shocks depends on long-run expectations staying anchored. When they start moving, the Fed loses the luxury of patience.
Here's the disconnect that matters for your portfolio. The S&P 500 just posted seven straight days of gains. Consumer sentiment just posted the worst reading in human memory. Either sentiment is overshooting because war fear dissipates with ceasefire progress, or equities are undershooting because the consumer is about to crack. One of these is wrong. You're making a bet either way.
The headline number looks terrifying. The core number looks fine. Both are true, and which one you focus on determines your entire macro outlook.
The three-month annualized headline CPI is running at 5.3%, while core's three-month annualized rate actually ticked down to 2.86% from 3.02%. That divergence is the entire story. If you strip out energy, the Fed can tell itself inflation is moderating. If you don't strip out energy, you're staring at a number that screams rate hike.
The odds of a Fed rate cut this month are zero. Fed economists estimate that tariff pass-through raised core PCE by 0.8 percentage points through February and that the pass-through is effectively complete. So the tariff hit is baked in. The question is whether the energy shock stays contained to the headline or bleeds into everything else.
There are reasons to worry it bleeds. Used car and truck prices declined 0.4% in March, the fourth consecutive monthly drop, but wholesale auction prices have been climbing, which means this disinflation source likely reverses in Q2. The February personal savings rate dropped to 4.0% from 4.5%, and February personal income was negative in real terms. Consumers were already dipping into savings before gas prices jumped. That's not a cushion. That's a warning light.
The ceasefire is holding. Everything is fine, right?
Only Iranian-linked ships are passing through the Strait of Hormuz. Everyone else is staying away. North Sea Forties crude closed at a record $147 per barrel on April 9, with prices having doubled since before the war. Mass production shut-ins across the Gulf total approximately 13 million barrels per day. That's not a market adjusting. That's a market broken.
Record US jet fuel exports last week show the market desperately reshuffling available barrels. Empty VLCCs are heading to the US Gulf Coast to pick up crude for Hormuz-starved markets. The reshuffling helps at the margins, but US exports don't create new supply.
The key question is what Trump is willing to concede: domestic enrichment, sanctions relief, Hormuz control, versus $6-8 per gallon pump prices. The oil market is saying immediate danger reduced while simultaneously saying summer spike risk is more probable than ever.
Gas prices rose to $4.12 per gallon as of April 6, up 3.3% on the week. The speed of this move is what hurts: your paycheck doesn't adjust in six weeks.
The 30-year fixed mortgage rate edged down to 6.37%, a modest 9 basis point decline on the week.
Initial jobless claims rose to 219,000, up 16,000 from the prior week. Continuing claims fell to 1,794,000, a decline of 38,000, suggesting that while more people filed new claims, those already unemployed are finding work. The labor market remains firm despite the sentiment collapse, which is the one thing keeping this from feeling like a recession.
The 401(k) check: the S&P 500 closed at 6,816.89, up 7.0% on the week. Enjoy it, but read the next section before you get too comfortable.
Signal:
The SaaS index has fallen 40% from its all-time high while the S&P 500 is down only 1% over the same period. That's not a correction. That's a regime change in how the market values recurring software revenue versus physical infrastructure.
One institutional trader is actively trading the SMH-long, IGV-short spread and explicitly warned against bottom-fishing in software. Follow the money, not the narrative.
Commodities are at new highs per the Bloomberg Commodity Spot index, with 83% of components in uptrends. Commodities outperforming stocks tends to be a feature of secular bear markets, not bull markets.
In the first six months of fiscal year 2026, the US federal government took in $2.5 trillion and spent $3.7 trillion. That gap is structural, not cyclical.
Noise:
After seven straight days of gains, more S&P 500 stocks are now overbought (21.8%) than oversold (14.4%). A week of relief rallies doesn't resolve anything when the Strait is still effectively closed.
Brent falling $13 on ceasefire hopes. The ceasefire stopped the shooting. It didn't reopen the shipping lane.
Pakistan talks this weekend. The ceasefire held for a second day, and negotiations move to Pakistan. If talks stall, the $147 Forties price becomes the floor, not the ceiling.
When that gap closes, core CPI loses one of its few remaining disinflationary offsets.
I believe the energy shock is the dominant macro risk and that the market is underpricing the possibility that the Strait stays functionally closed through summer.
I also believe consumer sentiment is directionally correct, even if the level overshoots. Right now, with real incomes negative and savings rates falling, I don't see where the rebound comes from.