Economic Commentary
The U.S. economy continues along a path of steady expansion, with second-quarter growth estimates of around 2%. While a downward revision to first-quarter GDP (to 1.6%) caught headlines, high-frequency indicators—including steady jobless claims and stable ISM business surveys—confirm there is no meaningful evidence of a recession. Furthermore, a narrowing April trade deficit is poised to add upward momentum to near-term GDP forecasts.
A critical, yet underappreciated driver of this economic stability is the notable shift in money supply. Money supply has now posted three consecutive months of above-average expansion, and rising bank deposits confirm that systemic liquidity is expanding. While this is far from the excessive monetary surge that triggered the post-pandemic inflation spike, it indicates that private credit creation has healthy momentum. Historically, sustained improvements in liquidity are highly constructive for ongoing economic activity.
Concurrently, a major debate has emerged regarding productivity. Following last year’s surge, aggregate economic statistics have yet to reflect the massive capital deployment in artificial intelligence. However, this is a matter of timing rather than a lack of efficacy. The spending boom in data centers and computing infrastructure is occurring right now, while the measurable productivity payoff operates on a lag. This investment cycle mirrors past technological revolutions, where infrastructure buildouts preceded a significant macroeconomic renaissance.
Investment Commentary
Capital Markets: Yield Relief and Equity Premiums
For multi-asset portfolios, the financial markets are signaling a clear reduction in near-term headwinds. West Texas Intermediate crude has retreated toward $87 per barrel, lowering gasoline futures and easing immediate consumer pressure. Crucially, the 10-year Treasury yield has moved down to approximately 4.44% after briefly threatening 4.75%. This relief in the fixed-income market removes a significant constraint on equity valuations.
This yield environment has prompted some commentators to mistakenly argue that the equity risk premium has disappeared because stock earnings yields and nominal Treasury yields are both hovering near 4.5%. This analysis relies on a fundamental valuation error by directly comparing real and nominal returns. A stock trading at a 20x multiple offers a 5% real earnings yield that grows alongside inflation. Conversely, a standard Treasury bond delivers a fixed nominal return. When properly benchmarked against Treasury Inflation-Protected Securities (TIPS)—where real yields sit around 2%—equities continue to offer an attractive premium of 2.5% to 3%, closely matching long-term historical averages.
Looking ahead, market participants should look past speculative noise regarding Federal Reserve governance and instead focus on immediate policy signals. In particular, public commentary from influential voices like Kevin Warsh will be pivotal in gauging the future direction of interest rates. Ultimately, the combination of steady growth, expanding liquidity, retreating yields, and a powerful AI investment cycle reinforces a constructive environment for equities.
Wealth Planning Commentary
A durable power of attorney (DPOA) is an essential legal document that allows an individual, known as the principal, to appoint a trusted person to make decisions on their behalf if they become incapacitated. A durable power of attorney for health care authorizes an agent to make medical decisions when the principal is unable to communicate or make informed choices. Similarly, a durable power of attorney for finances grants an agent authority to manage financial matters, such as paying bills, handling investments, managing property, and conducting banking transactions. These documents help ensure that important health care and financial decisions are made according to the principal’s wishes while avoiding delays, confusion, and potentially costly court proceedings.
Although durable powers of attorney are recognized throughout the United States, the laws governing them vary from state to state. Differences may include the required forms, witnessing and notarization requirements, the scope of authority that can be granted, and the circumstances under which the agent’s authority becomes effective. Some states have adopted versions of the Uniform Power of Attorney Act, while others follow their own statutory frameworks. Because of these variations, individuals should ensure that their durable powers of attorney comply with the laws of their state of residence and review the documents periodically, especially after moving to another state or experiencing significant life changes. Consulting with a qualified attorney can help ensure that these important documents are legally valid and tailored to the individual’s needs.
Additionally, financial custodians such as Fidelity Investments and Charles Schwab typically require more than simply presenting a valid DPOA. While state law determines whether a DPOA is legally valid, financial institutions have their own review procedures to protect account holders and ensure the document grants the necessary authority. Both Fidelity and Schwab have their own forms that will need to be signed and notarized along with having a copy of your DPOA on file.