After steadily cooling through 2023 and 2024, inflation—measured by Core PCE—has begun trending higher again. On Friday, Core PCE came in at 2.79% year-over-year, marking the third straight month of elevated levels. While still below its long-term average, rising inflation can create headwinds for risk assets.
What is Core PCE?
It’s the Federal Reserve’s preferred inflation gauge, tracking the price changes of goods and services excluding food and energy—a key measure of underlying inflation trends.
How Should We Interpret This?
No single economic indicator serves as a perfect trading signal, but each piece of data contributes to the broader mosaic of factors that shape market trends.
Right now, Core PCE remains below its long-term average of 3.2% but is rising. While this isn’t yet a major concern for equities, a continued uptrend could push us into a tougher market regime—one where inflation sustains above historical averages and accelerates. Historically, this has been the most challenging backdrop for stocks.
