Market Pulse

Global equities advanced this week after softer U.S. inflation data reshaped rate expectations. Headline CPI slowed to roughly 2.4 percent year over year, with core inflation easing toward 2.8 percent. The S&P 500 rebounded toward 5,310, recovering losses from last week’s rate driven pullback. The Nasdaq outperformed as lower real yields supported long duration growth equities.

Treasury markets reacted decisively. The U.S. 10 year yield declined toward 3.95 percent after briefly trading above 4.10 percent last week. The 2 year yield fell closer to 4.20 percent as markets increased the probability of a second rate cut in late 2026. The move reflected renewed confidence that inflation is trending toward target without a sharp slowdown in activity.

European equities also gained, with the STOXX 600 approaching fresh highs as disinflation trends appeared across major economies. The dollar index weakened modestly toward 102. Oil held near $82 per barrel amid steady demand forecasts, while gold rebounded above $2,060 as falling real yields boosted demand.

For you, the combination of easing inflation and stable growth reinforces a constructive but selective risk environment.

Deep Dive

This week’s inflation report strengthens the soft landing narrative. Price pressures are moderating across goods and shelter components, while services inflation shows gradual deceleration. Importantly, the decline in inflation occurred without a deterioration in employment or spending data. That balance supports equity valuations by reducing policy uncertainty.

The key metric for you is real yields. As inflation cooled, nominal yields fell and real yields moved lower from recent highs above 2 percent. Lower real yields reduce the discount rate applied to future earnings, supporting sectors such as technology and communication services. This explains the renewed outperformance in growth equities following the CPI release.

However, inflation remains above the Federal Reserve’s 2 percent target. Policymakers are unlikely to pivot aggressively without sustained evidence of convergence. Markets now price roughly one to two cuts for the year, but expectations remain data dependent. This creates episodic volatility around each inflation and labor release.

Earnings trends continue to support the broader market. Consensus forecasts call for mid single digit revenue growth in 2026, with margins stabilizing as input costs ease. If inflation continues trending lower, corporate profitability may benefit from improved cost predictability and steady consumer demand.

For your allocation decisions, the environment favors balanced exposure. Growth sectors benefit from falling real yields, while cyclicals remain supported by stable economic momentum. Avoid over concentration in either direction. The opportunity lies in earnings consistency rather than speculative positioning on policy shifts.

If disinflation persists without a growth contraction, equity markets can sustain elevated valuations. Your focus should remain on companies with strong pricing power, disciplined capital allocation, and visibility into cash flow generation in a gradually normalizing macro backdrop.

Quick Insights

• U.S. headline inflation slowed to roughly 2.4 percent year over year, supporting renewed easing expectations.

• The 10 year Treasury yield declined toward 3.95 percent as real yields fell from recent highs.