Should the Fed still use the PCE as its inflation guide?

I’ve talked a lot about the shelter index being misleading when it comes to inflation, especially when looking at the CPI, but the PCE has its flaws as well. The Federal Reserve has a 2% inflation target and uses monetary policy, which includes adjusting the Fed Funds rate, to tackle its dual mandate of maximum employment and stable prices. A big problem I see with the PCE is that healthcare now accounts for roughly 16% to 17% of index. This comes as an aging population led healthcare spending to be the single largest contributor to consumer spending in 2025. It surpassed housing and utilities in early 2023 as the fastest growing category in the PCE and by Q3 of 2025, it contributed nearly a full percentage point to overall economic expansion and accounted for nearly half of all spending growth. While it’s…

Even with all the noise, the consumer remains strong

March retail sales showed a nice increase of 4.0% compared to last year and while gas stations were a large contributor growing 18.1% due to higher gas prices, excluding them from the report still would have resulted in a good increase of 2.9%. The only areas that saw declines in the report were motor vehicle and parts dealers, which were down 2.1%, and furniture and home furnishing stores, which were down 0.8%. Areas of strength included nonstore retailers, which were up 10.1%, electronics and appliance stores, which were up 5.2%, and clothing and clothing accessories stories, which were up 7.2%. Food services and drinking places saw growth slow, but there was still a positive increase of 2.4%. It’s not just the retail sales report that showed strength, Bank of America pointed…

Can the new Apple CEO keep the stock gains coming?

With the stock trading at a forward price/earnings ratio of around 32 times, I’ve got to say it’s going to be a very difficult task. Keep in mind over the last 50 years the average forward P/E ratio for the S&P 500 has been between around 15 to 19 times, nowhere near 32. I’m also reminded of a similar situation where a prominent company with such great stock success was taken over by a new CEO and the 16-year return was only 27% including dividends. That company I’m referring to is General Electric when Jack Welch retired and the new CEO Jeffrey Immelt who was handpicked by Jack Welch took over. Things could be different this time when the new CEO of Apple takes over on September 1st but again given the current valuation it will be difficult. John Ternus is…

Your annuity may not be as safe as you think!

Many people that are sold annuities are told by the broker that they are 100% safe and to be frank they would probably say almost anything to collect their big 7% or 8% commission. But the Treasury department has concerns and is talking to state insurance regulators about the large amount of private loans that insurance companies are using in their portfolios. Back in 2024 even the National Association of Insurance Commissioners, which is also known as the NAIC and is the organizing body for regulators for every state in the US, had stated ratings that insurers had on private credit and investments were consistently overinflated. They have since…

Financial Planning: Traditional or Roth

Choosing between traditional and Roth contributions comes down to one key question: will you be able to withdraw or convert that money at a lower tax rate than your rate today? Traditional contributions work best if the answer is yes, since you get a tax break now and pay less later, while Roth contributions are better if your future tax rate will be the same or higher. Many people enter a lower tax bracket starting at retirement and lasting until required minimum distributions (RMDs) begin at age 75, but this low-tax window is limited. There’s only so…

Companies Discussed: Abbott Laboratories (ABT), PepsiCo, Inc. (PEP) & Avis Budget Group, Inc. (CAR)