Inside Markets — Roadmap

The ‘soft’ survey data may be overstating the magnitude of an eventual tariff-induced slowdown. To put this in perspective, consider this week’s Conference Board consumer confidence survey had 1-year inflation expectations of 7%. A more realistic picture of inflation expectations comes from 1-year inflation breakeven yields that currently sit at 3.14%. We expect the tariffs will have an impact on the economy and the ‘hard data’ will begin to reflect a slowdown later this quarter, but it’s unlikely to be as severe as survey data suggests. In our opinion, the May Jobs Report (released June 6) will be the critical piece of data for the economy and the Fed. Consumer spending should remain relatively resilient until the Unemployment Rate rises, at which point we expect the Fed will start easing.