Content (265)
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White papersMay CPI report: War impact remains contained, allowing the Fed to stay on hold
Today’s inflation report reflects ongoing price pressures tied to the Middle East conflict, though the impact remains relatively contained. Headline inflation, primarily driven by energy, rose 0.5% in May, as expected, lifting the annual rate to 4.2%, the highest in over three years. However, inflation concerns were eased by goods deflation and a lower-than-expected Core CPI reading of 0.2%. Even so, the fluid situation in the Middle East suggests the risk of higher energy prices for longer, along with second-round inflation impacts, persists.
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White papersRethinking diversification in a tightly linked global market
Despite the S&P 500’s resilience amid the Middle East conflict, its concentration remains a concern, underscoring the importance of diversification. However, achieving diversification has become more challenging as global markets remain interconnected through AI supply chains, reducing regional differentiation. At the same time, regions most exposed to the Middle East conflict have lost their appeal as effective diversifiers. Against this backdrop, investors must reassess their approach, with a focus on differentiated and independent growth drivers to build more resilient portfolios.
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White papersWhy positive surprise matters in small-cap growth
In small-cap growth, returns are driven less by current earnings and more by shifts in long-term expectations. Because valuations hinge on those expectations, when a company delivers results or provides signals that exceed consensus expectations, even small upward revisions can have an outsized impact on both earnings and valuations. For investors, recognizing these inflections early is critical in a segment where markets often underreact.
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White papersA deal with Iran will not push the Fed to cut policy rates
A U.S.–Iran agreement to reopen the Strait of Hormuz appears to be moving closer. If implemented, it would restore energy flows and begin to unwind the largest supply disruption in history. Current reports suggest that reopening the Strait would trigger a 60-day negotiation phase focused on Iran’s nuclear program, so the path forward is not yet free of implementation risk.
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White papersFive dynamics shaping today’s investment landscape
Geopolitical risk, consumer strain, AI, policy limits, and the changing role of the United States are all shaping global markets. Markets are adapting to a regime shift in which macro, policy, and technology are colliding more directly—and more quickly—than investors have been used to. This set of five articles draws on Seema Shah’s (Chief Global Strategist at Principal Asset Management) discussion of the “five dynamics” shaping today’s investment landscape, translating those dynamics into practical frameworks for portfolio decision-making.
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White papersRisk assets face off with rising global bond yields
The recent interest rate turmoil has driven long‑dated government bond yields to notable historical extremes, with U.S. 30-year yields hitting their highest level since 2007, 30-year JGBs since their introduction in 1999, UK gilts since 1997, and German bunds since 2011. Yet, simultaneously, equities have absorbed the rise in yields without too much damage, supported by a strong earnings environment. That resilience should not be taken for granted, however, as the balance of risks is becoming increasingly finely poised.
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White papersRising global bond yields: The test for risk assets
Global bond markets have sold off sharply in recent weeks, pushing long-end yields to multi-decade highs across major markets. U.S. 30-year yields hit their highest level since 2007, 30-year JGBs since their introduction in 1999, UK gilts since 1997, and German bunds since 2011.
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White papersWarsh appointment: Inflation sets the early agenda
Kevin Warsh’s tenure as Federal Reserve chair begins amid heightened market scrutiny as investors grapple with renewed inflationary pressure. Stronger‑than‑expected April CPI reinforces the case for patience, even as the new chair has expressed comfort looking through one‑off price pressures. However, the Fed’s consensus decision‑making structure and the drift of core inflation away from target both suggest policymakers may hold off on cuts and keep policy unchanged longer than anticipated. For investors, the risk is rising that it will be 2027 before they see any further policy easing from the Fed.
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White papersPositive surprise: Recognizing change before consensus
A positive surprise occurs when a company delivers results or provides signals that meaningfully exceed consensus expectations, thereby raising the market’s view of its sustainable growth rate. In small-cap growth, where valuations are largely driven by long-term growth assumptions embedded in discounted cash flow valuation models, such surprises can have an outsized impact on both earnings expectations and valuations.
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White papersCoping with market downturns
The market environment has shifted repeatedly over the past year, driven by a combination of policy uncertainty, geopolitical developments, and changing financial conditions. Beginning in April 2025, amid heightened trade tensions, markets experienced notable volatility before settling into relatively calmer conditions after the U.S. Supreme Court overturned key elements of the administration’s tariff framework. While this uncertainty left investors uneasy during the initial weeks of Trump’s second administration, sentiment gradually improved as markets stabilized through the first two months of 2026.
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White papersApril CPI report: Fed easing is becoming increasingly unlikely in 2026
After an extended period of cooling inflation, the impact of the Middle East conflict is driving a reacceleration in prices. Headline inflation rose 0.6% in April, lifting the annual rate to 3.8% and approaching a three-year high. Similar to March, energy was the largest contributor, accounting for over 40% of the increase. The more notable development in today’s report, however, was the upside surprise in core inflation, which excludes food and energy.
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White papersPrincipal Well-Being Index: Optimism among businesses in short supply
Macro uncertainty amid a series of shocks has led to a decline in confidence in both the business and broader economic outlook. Moreover, despite limited direct global exposure, these shocks have made small businesses grapple with the same macro pressures long faced by larger firms. Helping buffer these concerns, however, are relatively resilient underlying fundamentals, which should reduce the risk that these anxieties translate into broader economic weakness.
