Summary for the Week of June 26, 2026
- The case for fading the Fed’s higher-rate projections rested on one bet: that falling oil keeps pulling inflation down. This week oil fell — WTI off more than 10% to about $70 as the Strait of Hormuz reopened — and inflation got worse, not better.
- Core PCE, the gauge the Fed targets, hit 3.4% year over year, the highest since October 2023 — driven by services (restaurants, hotels, healthcare), not energy. Cheaper crude cools the headline and does nothing for a services core.
- No growth crack arrived to force a cut: the −4.5% durable-goods headline was all transportation (core capex +10.5% y/y), and spending rose 0.7% with the saving rate at 3.0%.
- The market has stopped pricing cuts — roughly 80% now see none in 2026 — and the hedge against a Fed stuck behind a 3.4% core is showing up in gold, not bonds.
The rate-cut bet was always a bet on oil: once the war spike reversed, the hike projections would price back out. Oil has more than reversed — WTI is below its pre-war level — and the hikes haven’t left the curve. Joseph Wang (Fed Guy), a former trader on the New York Fed’s open-market desk, names the asymmetry: “the market began to price in rate hikes because oil prices surged, and now that oil prices are coming down, the market is actually not really taking away those hikes.” The relief solved the wrong problem.
Oil fell more than 10% and core inflation rose anyway
The oil relief arrived in force: a US-Iran deal reopened the Strait of Hormuz, and WTI fell more than 10% on the week to about $70, a 17-week low (FRED). Then core inflation rose anyway.
Headline PCE rose 0.4% on the month (4.1% year over year), but core PCE rose 0.3% to 3.4%, the highest since October 2023 (BEA). Services drove it — $94.3 billion of the month’s spending increase against $61.8 billion in goods, concentrated in restaurant meals, hotel rooms, auto repair, and healthcare. The categories pushing core up are the ones cheaper oil never touches.
Inflation moved from energy to services, where oil can’t reach
The inflation is no longer the kind oil makes. May’s CPI spike to 4.2% was an energy event — over 60% of the monthly rise. What’s left is services prices that have nothing to do with gasoline and don’t fall when crude does. Even the headline relief lags: fuel inventories are drawn down into peak driving season and crack spreads — refiners’ margins between crude and gasoline — are widening, so cheaper crude isn’t reaching gasoline prices yet, a point Quinn Thompson (Forward Guidance), a former oil-markets trader, has pressed. Whether crude snaps back on scarcity or stays down, neither path touches the services core.
No growth crack is coming to force a cut
The dovish fallback was that a weakening economy forces the Fed’s hand anyway. The hard data took that away. The durable-goods headline fell 4.5% — but entirely on transportation, a Boeing swing; orders excluding transportation rose 1.3%, and core capital-goods orders rose 10.5% year over year (Census). The consumer didn’t crack: spending rose 0.7%, real spending and income turned positive after a soft April, the saving rate held at 3.0% (BEA), and jobless claims sit at 215,000. The weakness is in surveys — the Philadelphia Fed’s manufacturing index posted one of its largest monthly drops on record — but the surveys have given false recession signals all expansion, and the series the Fed weighs show none of it. That leaves the Fed without a growth case for a cut. Jim Bianco (Bianco Research) puts it plainly: the Fed “cannot cut rates… with a 4% inflation rate” without inviting “every bond investor to leave.”
Markets stopped pricing cuts, and gold is the verdict
The repricing has already happened. The market puts roughly 80% odds on zero 2026 cuts; the June projections lifted the FOMC’s own inflation path, and nine of eighteen officials now pencil a hike. Jeffrey Gundlach (DoubleLine) got there early — “no rate cuts are coming,” the Fed “more likely to raise than cut” — paired with 20% in gold and real assets.
With the funds rate at 3.6% and core PCE at 3.4%, the real policy rate is barely positive — a Fed holding, not winning. The hedge against that is gold, near $4,075 — well off its January peak but firm through the week — while Bitcoin, the other debasement trade, languishes near $60,000, far below its 2025 high. Investors are hedging a Fed stuck behind inflation by buying the one asset that doesn’t need the Fed to get it right.
Snapshot
Levels as of June 24–26, 2026
| Level | Note | |
|---|---|---|
| Fed funds | 3.50–3.75% | held Jun 17; 9/18 dots see ≥1 hike |
| US 2Y / 10Y / 30Y | 4.09 / 4.40 / 4.86% | little changed despite the 3-yr-high core |
| WTI crude | ~$70 | −10%+ on the week; Hormuz reopened, below pre-war |
| Core PCE (May) | 3.4% y/y, +0.3% m/m | highest since Oct 2023; services-driven |
| Headline PCE (May) | 4.1% y/y, +0.4% m/m | spending +0.7%; saving rate 3.0% |
| Durable goods (May) | −4.5% headline | all transport; core capex +10.5% y/y |
| S&P 500 | 7,354 | off the ~7,500 high |
| Gold | ~$4,075 | ~27% below the Jan 29 record ($5,595) |
| Bitcoin | ~$60K | far below its 2025 high; lagging gold |
Watching
- JOLTS — Tuesday, Jun 30: job openings (cons. ~7.28M vs 7.62M prior). A soft print is the first hard-data test of whether the labor side is finally cooling.
- ISM Manufacturing — Jul 1; ISM Services — Jul 6: the bridge between the crashing soft surveys and the firm hard data. If ISM rolls over, the case that growth is holding weakens.
- Nonfarm payrolls — Thursday, Jul 2 (holiday-shifted; cons. 114K vs 172K prior): the swing print. A sub-100K number is the only near-term print that would give the doves a case for a cut.
- The oil-to-gasoline lag & Hormuz status: crack spreads closing would let crude’s drop finally reach headline CPI; a re-closure would put the war price back on. Neither moves the services core.
Correction (July 8, 2026): this piece originally described gold as being “at a record near $4,075” and “up about 13% on the year.” Gold’s record is $5,595, set January 29, 2026; $4,075 was roughly 27% below it, and the year-to-date figure was wrong. The direction of the argument — investors hedging in gold rather than bonds — stands; the superlative did not. The three references have been corrected.
Sources
Data: BEA Personal Income & Outlays, May 2026 (PCE, core PCE, spending, saving rate); Census Advance Durable Goods, May 2026; BLS CPI (May); FRED (WTI DCOILWTICO, SP500, BTC, Treasury yields). Voices: Joseph Wang, Fed Guy “Markets Weekly”; Jim Bianco, Bianco Research interview; Quinn Thompson, Forward Guidance; Jeffrey Gundlach, DoubleLine “Gundlach Unlocked”. Builds on our Jun 20 weekly, the May CPI and PPI deep dives, and the May jobs detail.