Monday's Scoop: Cautious🌤️

Hey friend - we’re feeling the heat today in NYC.

Don’t miss our latest Explained on how heat and drought are reshaping the economy

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Here’s what you need to know today to inform your work, spending, and investments…

1. Rising costs are making it difficult for Americans to save money.

2. Corporate profits have been pretty decent.

3. Air quality across the United States is the worst in 25 years.

Global Energy Emissions: 37.4 billion tonnes of CO₂
^{An all-time high, up 1.1% from 2022. (IEA)}

Wildfires and pollution have trapped many Americans in the worst air quality in 25 years. In an analysis of thousands of Environmental Protection Agency air quality monitors nationwide, the American Lung Association reported the poorest air quality in the West, particularly in Los Angeles, CA, San Bernardino, CA, and Phoenix, Arizona. Maine, Hawaii, and North Carolina tested the best with their strong ocean breezes. Air quality is still better than before the Clean Air Act was passed in 1970. Record wildfires across California and Canada are primarily to blame for airborne soot pollution.

Inflation Rate: +3.5% (YoY), +0.4% (MoM)
^{Policymakers aim for 2% YoY inflation (CPI)}

Rising living costs are making it more difficult for Americans to save. The Commerce Department said people spent more and saved less in March, reporting a 0.5% increase in disposable income but a 0.8% increase in personal consumption expenditures. Policymakers’ preferred inflation gauge rose 0.3% in March, marking a 2.7% rise in the cost of living over the past year. That’s a much slower increase than in past years, but prices keep climbing faster than usual. Higher expenses mean less savings. Personal savings after accounting for expenses and taxes slowed. The personal saving rate as a percentage of after-tax income fell for the second month to 3.2%. That’s a 40% drop in the past year and nearly 60% from before the pandemic.

The Market: ⬆️ +0.3%
S&P 500: 5,116.17
1Mo: -2% | 1Yr: +23% | 5Yr: +74%

The market drifted higher on Monday without any major shocks. Friday's inflation report helped calm investors, showing stubborn but not reaccelerating price increases. However, corporate financial updates reinforced the slowing economy narrative.

Corporate financial reports last week were better than the first. Nearly half of the companies in the S&P 500 have provided their first quarter of corporate financial updates, and about 77% have reported higher profits than investors projected. That’s about average for the earnings seasons of the past decade, according to FactSet. If the rest of the companies report as expected, cumulative earnings will have grown 3.5% over the last year. Much of that success has come from cost efficiency and price increases. Sales growth has been mostly disappointing, but companies have been able to maintain their net profit margins over the past year.