⚡️Market Strategy Flash
June 11, 2026
What Happened: As expected, the Bureau of Labor Statistics’ (BLS’) Consumer Price Index (CPI) for All Urban Consumers (read: “headline” CPI) popped 0.5% month-over-month (M/M) and 4.2% year-over-year (Y/Y) in May. By contrast, the CPI for All Items Less Food & Energy (read: “core” CPI) rose by a less-than-expected 0.2% M/M and 2.9% Y/Y in the same time frame (see the chart below).
War-Flation: Clearly, the Iran war-related impact on the CPI for Energy, which soared 23.5% Y/Y last month, is driving a wedge between “headline” heat and “core” coolness. While the geopolitical oil supply shock continues, the saving grace is that it was anticipated by markets and investors are coming to understand the mechanical, textbook divergence in inflation trends.
Underlying inflation of 2.9% Y/Y remains relatively subdued
Sources: BLS, WCG, 6/10/26. Notes: Core = All items minus food and energy. CPI = Consumer Price Index.
Keep Calm: Perhaps level-headed investors like us are right to “keep calm and carry on” when it comes to “transitory” energy inflation pressures. Historically, persistent run-away inflation is spurred by demand-related stress on the productive capacity of the domestic economy (see the chart below).
Non-Inflationary Equilibrium: Judging by my “normalized” composite of industrial and labor capacity utilization (capu), however, the pace of “core” CPI inflation is almost exactly where it should be:
- Currently, economy-wide capu momentum is resting just below the “horizon” line. Specifically, a z-score of -0.1 standard deviation (SD) is virtually indistinguishable from the long-term average of 0.0, signaling that overall capacity utilization is close to perfectly balanced.
- Looking ahead, my indicator leads the “core” CPI inflation rate by seven months, meaning a statistically neutral reading today points to a benign, trend-like inflation impulse tomorrow. In other words, structural inflation trends seem well-anchored because capacity utilization isn’t flashing signs of overheating.
Core inflation momentum is almost exactly where it should be
Sources: BLS, FRED, WCG, 6/10/26. Notes: CapU = Capacity Utilization. Vertical gray bands = US economic recessions. Momentum = Year-over-year change.
Bottom Line: Policymakers and investors who are over-reacting to hot “headline” inflation are likely missing the forest for the trees. If broad industrial and labor capacity aren’t strained, the energy-fueled spike in “war-flation” may prove temporary. Indeed, my analysis isolates and quantifies current inflationary pressure as an “exogenous” supply-side shock, not an “endogenous” demand-driven shift. As such, we question the need for the Federal Reserve (Fed) to raise the federal funds rate at this juncture.
Definitions
The BLS is a government agency that measures inflation, jobs, and spending in America.
The CPI tracks prices over time and shows how much everyday living costs are rising.
Industrial CapU measures factory output against full limits and shows how hard factories are running their machines.
The Unemployment Rate (UR) shows the number of jobless people looking for work as a percentage of the total labor force.
Economy-Wide CapU Momentum is a normalized sum of annual changes in the industrial capu rate and annual changes in the UR. It tracks how quickly or slowly overall factory and labor use is changing.
SD measures how spread out numbers are and tells us if data sit close to or far from average.
A z-score transformation changes raw data into standard scores and shows how many SDs a given point is from its average.
The Fed is the United States’ central bank, which influences interest rates, money supply and inflation to keep the economy and employment stable.
The federal funds rate is the target interest rate for overnight bank loans and sets the baseline cost for borrowing money.
Disclosures
The views expressed are for informational and educational purposes only and are subject to change without notice.
This material is not intended as, and should not be interpreted as, individualized investment advice or a recommendation to buy, sell, or hold any security, sector, industry, or investment strategy.
References to specific companies, securities, sectors, or industries are for illustrative purposes only and should not be construed as investment recommendations.
Investing involves risk, including the possible loss of principal. Investments in a specific industry or sector may involve greater risk and volatility than more diversified investments.
Past performance is not indicative of future results. No investment strategy can guarantee a profit or protect against loss.
Forward-looking statements, including views about future demand, pricing, supply, or industry cycles, are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results may differ materially.
Data and information are believed to be reliable, but accuracy, completeness, and timeliness are not guaranteed. Source documents should be retained for factual claims, third-party research references, and company-specific data.
Portfolio holdings, allocations, and risk budgets are subject to change based on market conditions, client objectives, and investment guidelines.
The author, firm, clients, or related persons may hold positions in securities mentioned and may buy or sell those securities without notice, subject to applicable policies and regulations.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through WCG Wealth Advisors, LLC, an SEC Registered Investment Advisor. WCG Wealth Advisors, LLC and The Wealth Consulting Group are separate entities from LPL Financial. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. Past performance does not guarantee future results.
All information in this report is believed to be from reliable sources; however, WCG Wealth Advisors, LLC, makes no representation as to its completeness or accuracy.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the companies as well as broad market, economic and political conditions. Stock investing involves risks, including fluctuating prices and loss of principal. Value investments can perform differently from the market as a whole. They can remain undervalued by the market for long periods of time. (135-LPL) International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets. (93-LPL)
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Bonds are subject to availability, change in price, call features and credit risk. (116-LPL)
The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors. (122-LPL)
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss. (28-LPL)
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. (26-LPL)
Standard deviation is a historical measure of the variability of returns relative to the average annual return. If a portfolio has a high standard deviation, its returns have been volatile. A low standard deviation indicates returns have been less volatile. (131-LPL)
This is for educational / general purposes only, does not constitute investment, tax or legal advice and should not be relied on as such. This is not to be construed as an offer to buy or sell any financial instruments. Any strategies discussed are not intended to be relied upon as the sole factor in making an investment decision for any individual. As with all investments there are associated inherent risks. Please obtain and review all financial material carefully before investing. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested in directly. These comments should not be construed as recommendations but as an illustration of broader themes.
Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations. In addition, forward-looking statements, including index targets or market scenarios, are hypothetical in nature, reflect current views and assumptions and are subject to change based on market and economic conditions and are not guarantees of future performance. This is a hypothetical example and is not representative of any specific investment. Your results may vary. (88-LPL) Scenario outcomes are illustrative and not predictive. This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
The S&P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. Indexes are unmanaged and cannot be invested in directly. (102-LPL)
Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
Publication Date: June 12, 2026
For Public Use in the US
The Wealth Consulting Group
LPL 1123925