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News of the day for May 29, 2026

The S&P 500 is on track to post its 9th consecutive week of gains.
Credit: Angela Weiss / AFP / Getty Images

Stock futures are slightly higher this morning as the market looks to add to yesterday's record closing levels; major stock indexes are poised to close out May with solid gains for the second month in a row; Dell stock is soaring after an upbeat earnings report that showed booming demand for its AI servers; shares of The Gap are tumbling after the retailer reported disappointing results and cut its full-year sales forecast; and a Blue Origin rocket exploded on a Florida launchpad last night, the latest setback for the Jeff Bezos-owned company. Here's what you need to know today.

Stock Futures Rise as Market Looks to Add to Records

Stock futures are slightly higher Friday after each of the major indexes closed at records yesterday for the second day in a row. Futures tied to the Dow Jones Industrial Average were up 0.3% recently, while futures linked to the S&P 500 and the Nasdaq tacked on 0.1%. WTI crude oil futures were down 1.2% at $87.80 per barrel amid reports that the U.S. and Iran are nearing a deal to extend the ceasefire again while talks about Iran's nuclear program continue. Gold futures were up less than 1% at $4,560 an ounce, while bitcoin was at $73,300, after falling as low as $72,500 yesterday to its lowest point in more than a month. The yield on the 10-year Treasury note was little-changed at 4.45%.

Major Stock indexes On Track For Another Month of Solid Gains

As the final trading session of the month gets underway, each of the major indexes is on track to close out the month with noteworthy gains. The S&P 500 and Nasdaq Composite, which have gotten significant boosts from the strong performance of tech stocks in recent weeks, are up 5% and 8%, respectively, in May. That performance follows a 10% rise for S&P 500 in April and a whopping 15% increase for the Nasdaq last month. The Dow, which hit its first record high since February this month, is up 2% in May, after gaining 7% last month. Investors have largely brushed aside concerns about the impact of the Iran war as the economy remains resilient and corporate earnings have consistently come in stronger than expected.

Dell Stock Soars as Earnings Top Expectations

Shares of Dell Technologies (DELL) are popping this morning after the PC and server maker posted first quarter results that were well ahead of what analysts had expected. The hardware maker reported $43.8 billion in revenue, nearly double what it posted the same time a year ago, while adjusted earnings per share more than tripled to $4.86. Sales of Dell's AI-optimized servers grew more than 750% year-over-year. Dell lifted its sales outlook for the year thanks to the AI momentum. Dell stock, which is among the top performers in the S&P 500 in 2026, were up 35% in recent premarket trading.

Gap Sinks on Lackluster Results, Sales Outlook

Shares of The Gap (GAP) are sliding after the apparel retailer posted a lackluster first-quarter earnings report and trimmed its sales outlook for the year. The Gap said Thursday it earned an adjusted 38 cents per share in the first quarter, 1 cent ahead of the analyst consensus compiled by Visible Alpha, while sales of $3.50 billion came in just shy of estimates. The owner of its namesake clothing brand, along with Old Navy, Banana Republic and Athleta, said it now expects sales growth of 1% to 2% this year, down from the previous forecast of 2% to 3%. Gap shares were down 15% in recent trading.

Bezos' Blue Origin Loses Rocket on Launchpad

A rocket that was being prepared for an upcoming launch from Blue Origin, the space exploration company run by Amazon (AMZN) founder Jeff Bezos, exploded on the launch pad in Florida last night. The company has said that no crew were on board or near the New Glenn rocket, and that all personnel at the facility are accounted for and safe as they work to determine what caused the sudden explosion. The loss of the rocket is the latest setback for Blue Origin, which also experienced a mishap in New Glenn's first commercial mission earlier this year, when it deployed a satellite at too low of an altitude to be used.

Company Says 'AI Opportunity Shows No Sign of Slowing'

Dell counts AI chip leader Nvidia as a partner. Here, CEO Michael Dell (right) is seen with Nvidia CEO Jensen Huang at an event earlier this month.
Credit: Ian Maule / Bloomberg / Getty Images

Key Takeaways

• Dell shares soared Friday morning, adding to their recent record highs, after the server maker posted better-than-expected results and lifted its outlook on booming AI demand.
• Chief Operating OfficerJeff Clarke said the company's "AI opportunity shows no signs of slowing.”

Dell's stock keeps serving up new highs.

Shares of Dell Technologies (DELL) jumped 33% Friday, adding to yesterday's record close, after the server maker and Nvidia partner posted better-than-expected results and lifted its outlook on booming AI demand.

Dell reported adjusted earnings per share of $4.86 that more than tripled from a year earlier, on revenue that nearly doubled to a record $43.8 billion. Both figures blew past analysts' estimates compiled by Visible Alpha as AI-optimized server orders rocketed 757% to $16.1 billion.

“Our record Q1 performance reflects strong in-quarter demand, as well as our pace of innovation across the full stack of PCs, compute and storage,” said Chief Operating Officer Jeff Clarke in a press release late Thursday. He noted that the "AI opportunity shows no signs of slowing.”

Why This Matters to Investors

The strong results are adding fuel to what's already been a strong rally for shares of Dell this year.

Chief Financial Officer David Kennedy said Dell now sees full-year revenue of between $165 billion and $169 billion, up from the previous guidance of $138 billion to $142 billion, thanks in large part to the AI-driven momentum.

Shares of Dell have been on a roll recently, hitting a series of record highs in recent days amid improving sentiments around the AI trade and after the company won a high-profile show of support from the Trump administration, along with a $9.7 billion deal with the Pentagon.

Friday's jump leaves Dell shares up about 235% for 2026. Only two stocks in the S&P 500 have posted bigger gains so far this year.

UPDATE: This article was updated after initial publication to include current stock price information.

The New York Knicks completed a 4-0 sweep of the Cleveland Cavaliers on Monday, securing their spot in the NBA Finals.
Credit: Jason Miller / Getty Images

Key Takeaways

• MSG Sports shares hit another record high Thursday as the New York Knicks, the company's most-valuable sports franchise, get set to play in the NBA Finals for the first time since 1999.
• Shares of MSG Entertainment, Sphere Entertainment and Live Nation have also gained this year as affluent Americans continue to spend on experiences such as live sports.

Madison Square Garden Sports stock is bouncing.

Shares of the professional sports franchise owner closed at another record high on Thursday, three days after the company's premier holding, the New York Knicks, secured a spot in the NBA Finals for the first time since 1999. MSG Sports (MSGS) shares, which rose nearly 1% today, have added 43% since the start of the year, about four times the gain of the benchmark S&P index.

MSG Sports, which also owns the New York Rangers professional hockey team, earlier this month said it had filed confidentially with the Securities and Exchange Commission to take the first step in spinning off the Rangers from the Knicks. News in February that the company was considering the move had given the stock a boost. The Rangers missed the NHL playoffs this year.

Why This News Matters

Investors don't have many avenues to invest in the largely privately-owned world of professional sports, and they are rewarding one of the few stocks that provides exposure to the performance of major league teams.

Shares of MSG Entertainment (MSGE), which owns the arena where the teams play, and of Sphere Entertainment (SPHR), which operates the Las Vegas Sphere and is also run by Knicks owner James Dolan, are also trading near record highs.

Other entertainment-related stocks including Live Nation Entertainment (LYV) are up this year as the U.S. economy continues its K-shaped trend, in which higher-earning consumers are continue spending on experiences such as live sports and concerts while others pull back.

The Knicks will tip off the Finals next Wednesday to try to win their first championship since 1973. They await the winner of the Western Conference Finals between the Oklahoma City Thunder and San Antonio Spurs.

Treasury Secretary Scott Bessent displays a printout showing a mocked-up $250 bill at the White House on Thursday.
Credit: Kent Nishimura / AFP via Getty Images

Key Takeaways

• The Treasury Department is pursuing a $250 bill featuring the sitting president, though making one would face legal and production hurdles.
• Federal law prohibits living people on U.S. currency, and a bill backing a $250 bill with the president's face has stalled in Congress.

Six months ago, the Treasury retired the penny as a wasteful relic. Now it's preparing a note with the president's face on it—and a much higher face value.

Trump administration officials have asked the Bureau of Engraving and Printing (BEP), the agency that designs U.S. currency, to produce prototypes of a $250 bill featuring President Donald Trump, according to a Washington Post story that cited four current and former employees.

"I don't think that there's anything untoward about having the president of the United States— the person who is president of the United States—on the 250th-anniversary bill," Treasury Secretary Scott Bessent said at a White House briefing on Thursday.

Whether one will get made—and, if so, when—remains an open question. Rep. Joe Wilson (R-South Carolina) introduced a bill in February 2025 ordering the Treasury to print "$250 Federal Reserve notes" with Trump's portrait. (Federal law has barred living people from U.S. currency since 1866. Wilson's bill would create an exception.) It was referred to committee and hasn't advanced.

A Treasury spokesperson told Investopedia the BEP is "conducting appropriate planning and due diligence" on Wilson's bill and would produce a "$250 commemorative note" for the anniversary if the legislation becomes law.

Bessent said no bills would be produced without such legislation. “We will stick to the law," he said.

Rep. Andy Barr (R-Ky.), left, and Treasurer Brandon Beach display a mockup of a $250 bill featuring President Trump in a January 2026 post on X.
Credit: @RepAndyBarr / X

The Post's story included a mock-up of a $250 bill featuring the president’s face and signature that it said administration officials provided to the Bureau of Engraving and Printing in August. "Any 'designs' are not final or made public unless the bill is made law nor would the BEP release any real designs or mockups before that action occurs," the Treasury spokesperson said.

A new high-value note typically takes six to eight years to produce, employees told the Post, so it might be difficult for a $250 bill to reach wallets anytime soon—or, for that matter, in time for this summer's 250th-anniversary celebrations of the 1776 Declaration of Independence.

The $100 has been the largest U.S. bill since 1969, when the Treasury pulled the $500 and other large notes. Prices have climbed about ninefold since, so today's $100 buys roughly what $11 did then.

Still, even a legal-tender $250 bill wouldn't catch up. Matching what a $100 bill bought in 1969 would cost more than $900 today.

Alberto Musalem, president of the Federal Reserve Bank of St. Louis, and his colleagues are trying to navigate high inflation and economic growth.
Credit: Betty Laura Zapata / Bloomberg via Getty Images

Key Takeaways

• Slowing GDP growth combined with rising inflation is putting pressure on the Federal Reserve's dual mandate to keep inflation low and employment high.
• Fed officials view inflation as the greater risk, at least for now, and are discussing the possibility of rate hikes if inflation does not subside soon.

With every new bit of economic data, the Federal Reserve's mission to keep inflation low and employment high at the same time looks more like a double bind.

A slew of economic data released Thursday deepened the central bank's dilemma in fulfilling its dual mandate from Congress to use monetary policy to achieve stable prices and maximum employment. Almost every needle moved slightly in the wrong direction from the Fed's perspective.

Inflation rose, remaining well above the Fed's 2% target for a fifth year, forcing households to cut back on savings. At the same time, economic growth is slowing.

The Bureau of Economic Analysis estimated that GDP grew at an inflation-adjusted rate of 1.6% in the first quarter. That was down 0.4 percentage points from its previous estimate and a slowdown from the 2.1% growth in 2025. The decline was largely due to a reduction in business inventories (a volatile category) and a downturn in consumer spending.

Officials at the central bank must decide whether to raise interest rates to fight inflation or lower them to help the job market and the economy if it starts to deteriorate. In recent remarks, Fed officials see greater risks to the inflation side of its dual mandate, so financial markets are pricing in rate hikes at some point before the end of the year. But Thursday's data complicated that picture.

"The economy isn’t just soft, it’s struggling. That's the clear message in the flood of economic data released today," Mark Zandi, chief economist at Moody's Analytics, wrote on social media Thursday.

What This Means For The Economy

Slowing growth and rising inflation would put the U.S. economy on a path to "stagflation," in which workers face reduced employment prospects and a rapidly rising cost of living.

Zandi noted the 1.6% growth rate was especially lackluster, given that it incorporated a bounce-back from the fourth quarter of last year, when the government was shut down, which dragged down economic growth. The economy is now especially vulnerable to further energy shocks, such as if the U.S. and Iran fail to reach a peace deal that reopens the crucial Strait of Hormuz in the days ahead.

"The Iran war needs to end, and the Strait of Hormuz needs to be reopened soon, or recession will become more likely than not," he wrote.

In recent speeches, Fed officials have warned of risks to both inflation and the health of the job market. Alberto Musalem, president of the Federal Reserve Bank of St. Louis, said the Fed was well-positioned to react to either challenge.

"There is a scenario where inflation remains high; there's no disinflation in the next quarter or two. And in that scenario, the economy will probably require a hike," he said in an interview with Bloomberg Television at an economics conference in Iceland.

"There's also a scenario where the economy weakens materially in the second half of the year because real incomes are challenged and corporate margins are challenged," he said. "In that scenario, inflation could come down. In that scenario, we would be thinking of no hikes, maybe even a cut."

A bright spot in Thursday's data was unemployment claims, which remained low, suggesting the job market is stable at least for the time being. With no mass layoffs in sight, Fed officials have mostly been focused on inflation risks, and in recent speeches have described it as the greater threat.

"I see elevated risks to both sides of our mandate, and from a risk-management perspective, I currently believe that the right course of action is to hold rates steady," Fed Governor Lisa Cook said in a speech at Stanford University on Wednesday. " However, I want to be clear about my risk assessment: The risks remain tilted toward higher inflation."

Cook said she still believed inflation would cool without the Fed having to raise rates and the labor market would stay afloat without help from Fed rate cuts, but that she was losing patience for inflation to come down on its own.

"After five years of above-target inflation, I am particularly attuned to the risk that elevated inflation will become embedded in price- and wage-setting behavior," she said, according to prepared remarks. "As such, I am prepared to raise rates if the expected disinflation does not appear in a timely manner."

A Google employee allegedly used insider info to make over $1.2 million on prediction markets.
Credit: Photo by Annette Riedl / picture alliance via Getty Images

Key Takeaways

• The government has charged a Google employee with improperly using company information to place—and win—bets on prediction markets.
• It's the latest example of efforts to police the new markets, illustrating both government efforts to rein things in and the range of issues that might now be effectively be considered "insider trading."

The idea that uncannily accurate bets on popular Google searches might lead to charges akin to insider trading might have seemed bizarre not too long ago—but here we are.

The Justice Department this week unsealed a complaint alleging that a Google employee known as "AlphaRaccoon" used insider information from the company to place a series of bets between October and December of last year on prediction market Polymarket.com, turning a more than $1.2 million profit.

Those bets weren't about whether the company might beat earnings or buy a competitor. Instead, they included "Will Pope Leo XIV be the #1 searched person" and "Will Donald Trump rank in the Top 5 most searched." The CFTC, in a civil complaint parallel to the Justice Department's case, is seeking fines, disgorgement of profits, restitution and trading prohibitions.

WHY THIS MATTERS TO YOU

Insider trading cases used to involve trading stocks on nonpublic company information that few people had access to. In the realm of prediction markets, where there are wagers on war, what a politician or CEO might say, or what artists might trend on Spotify, the game appears to have changed.

A Google spokesperson in an emailed statement told Investopedia the accused worker accessed "a tool available to all employees" but was in breach of the company's policies; the employee has been put on leave, they said, and the company "will take the appropriate action."

The government's path forward for regulating the burgeoning prediction-markets business remains uncertain, but it seems clearly to be in the crosshairs. The Justice Department in April charged a U.S. soldier, alleging he used classified information to profit on an event contract related to the timing of a U.S. military operation in Venezuela.

Jay Clayton, U.S. Attorney for Southern District of New York and a former SEC chair, at an event in February said "yes" when asked whether he expected prosecutions involving prediction markets, according to Law360. "Because it's a prediction market doesn't insulate you from fraud," Clayton said.

The latest insider trading case lands at an uncertain time for prediction markets regulation. Policymakers are asking questions, while platforms are saying they're working to monitor the situation. Trump administration regulators have been explicit about not wanting to stifle innovation in financial markets.

The expansion of prediction markets could hit a speed bump as investors demand more safeguards. That the rollout of prediction market ETFs has been put on ice while the Securities and Exchange Commission considers the implications of them appears to signal as much.

"Novel products raise novel questions," SEC Chair Paul Atkins said recently.

Gas prices are dependent on what happens next in discussions between Iran and the U.S.
Credit: Scott Olson / Getty Images

Key Takeaways

• Oil prices could spike in the coming months if the current deadlock over the Strait of Hormuz continues, according to forecasts.
• Brent Crude could break previous records and push up fuel prices if traffic through the strait fails to resume by the end of June, one analysis said.
• If the stalemate drags on indefinitely, Gulf states could build pipelines to bypass the Hormuz blockade, causing prices to fall.

The Iran War’s energy crunch has already caused ripples across the U.S. economy, and it could become even more disruptive if the crucial Strait of Hormuz doesn’t reopen soon.

Crude oil prices fell this week, according to the Brent international benchmark. Traders are optimistic that the U.S. and Iran will reach an agreement soon to reopen the vital shipping channel. An estimated 20% of the world’s oil supply normally travels through the Strait of Hormuz. But if traffic doesn’t end up flowing by the end of June, oil prices could blow past previous record highs, forecasters say.

If the stalemate continues, Brent Crude could surge up to nearly $150 a barrel, up from just under $94 on Thursday afternoon, according to an analysis by experts at the Brookings Institution think tank this week. That would, in turn, push up gasoline prices and stoke inflation that’s already surged to a three-year high.

What This Means For The Economy

A large spike in oil prices could threaten the U.S. economy by pushing up gasoline prices and stoking inflation, potentially leading to a recession.

The forecasts clarified the stakes of the ongoing peace talks between the U.S. and Iran. The countries are seeking to end the war that began Feb. 28 and has remained in an uneasy truce since April 8. Since the conflict began, Iran has blocked all traffic through the strait, keeping oil, fertilizer, and other resources from the Persian Gulf from reaching global markets, wreaking havoc on the U.S. and world economies.

If the deadlock drags on, record-high gasoline prices could be just the beginning, according to experts. So far, energy markets have mitigated the impact of the strait closure by using up strategic reserves and oil stored on ships at sea, but that can only delay inevitable shortages, according to Brookings researchers Robin Brooks and Ben Harris.

“By mid-July, all temporary buffers will be gone, leaving a crude shortfall of 7.1 million barrels per day,” they wrote.

If the shortfall were to hit that level and prices rose as predicted, it would be well above the $139 record set in 2022 after Russia invaded Ukraine. It would also be expensive enough to threaten to send the U.S. economy into a recession, according to some analyses.

The dynamics could change if the hoped-for reopening never materializes, and the strait remains choked off for the foreseeable future. That could prompt the gulf states, whose economies depend on crude oil exports, to take steps to build workarounds, independent forecaster Robert Fry said in an email.

“If the Strait remains closed indefinitely, the gulf states won't sit on their hands,” he wrote. “They'll build pipelines to bypass the strait.”

Those projects could include expanding existing pipelines owned by Saudi Arabia and the UAE, or building new ones through Jordan or Turkey.

“If the strait remains closed, oil prices will go much higher in the short run (i.e., the rest of 2026), but they will come back down as new pipelines are opened,” Fry wrote.

In the meantime, financial markets will collide with physical reality, and people will have to consume less oil one way or another. Lorie Logan, president of the Federal Reserve Bank of Dallas, said that's sure to affect the economy, although it's not clear exactly how.

"With supplies highly constrained, if shipping through the strait does not soon return to prewar levels, world oil and natural gas consumption could need to fall more meaningfully than it has so far," she said in a speech at an economics conference in Japan on Wednesday.

"The economic consequences would depend on the degree to which end users can switch to other energy sources or use energy more efficiently, versus curtailing economic activity," she said. "One way or another, I expect energy markets to come into rough balance before too long. If the molecules aren’t available, the world can’t consume them."

The S&P 500 is on track to post its ninth straight week of gains, its longest streak since 2023.
Credit: ANGELA WEISS / AFP via Getty Images

Key Takeaways

• Goldman Sachs analysts raised their year-end S&P 500 price target in a note this week, but warned risks to the bull market are growing.
• Goldman sees some evidence of excessive speculation in today's market and mounting risk that high fuel prices slow growth and tighten financial conditions, a combination known to derail market rallies.

The stock-market rally is charging full speed ahead—but some “yellow flags” have begun to pop up, according to Goldman Sachs. 

“The conditions that have marked the ends of high-valuation, high-concentration bull markets in the past remain mostly absent today, although some of those conditions appear to be drawing closer,” wrote a team of Goldman Sachs equity analysts in a Tuesday note. 

The S&P 500 has risen for eight consecutive weeks due in large part to a blistering rally in shares of chip makers and other AI infrastructure beneficiaries like optical networking suppliers. The index rose to a fresh record on Thursday, putting it on pace to notch a ninth straight winning week. That would mark the index's longest streak since 2023.

Two dynamics typically spell the end of rip-roaring bull markets like the one we’re in now, according to Goldman.

Why This Is Important

Investors have largely shaken off concerns about the war in Iran to focus on the meteoric growth of AI data center suppliers. But the rally of the last two months has set a high bar for the market's best-performing stocks at a time when the full effects of the largest oil supply shock in history remain highly uncertain.

First, Goldman wrote, “an excess of speculative risk-taking” drives stock valuations unsustainably high and makes the market more vulnerable to surprises. Second, “a deteriorating fundamental backdrop” that usually involves interest rates rising and growth declining.  

Goldman sees some evidence of excessive speculation in the market today, including “recent surges in investor risk appetite and the Momentum factor.” (Factor investing is a strategy of selecting stocks based on certain broad characteristics, with momentum—usually meaning relative price appreciation—a popular one.)

The relentless momentum of the AI trade is most evident in skyrocketing chip and memory stocks. Memory chip maker Micron (MU) saw its market value top $1 trillion on Tuesday after shares soared nearly 20% absent much of a catalyst. It’s one of five issues in the S&P 500 that have at least tripled in value since the start of the year, the others being Sandisk (SNDK), Intel (INTC), Seagate Technology (STX), and Western Digital (WDC). 

All five owe their gains this year to booming data center demand for memory devices and semiconductors, which has caused their earnings to surge. Goldman warns semiconductor stock gains have recently outpaced expected earnings growth, a disconnect that could be driven by a hint of irrational exuberance. 

Speculation isn’t off the charts, according to Goldman. Retail investor trading has ticked up recently, but it remains below historic highs. Similarly, IPO activity is rising, but the market hasn’t been flooded with new issues like it was in 1999 or 2021, the peaks of past cycles. (Investopedia explored the possible effect of a rush of big IPOs earlier this week.)

Another cause for concern, according to Goldman, is the accumulation of risks to both economic growth and corporate earnings. Exceptional earnings growth has been the driver of the recent rally, but headwinds, like high energy prices, are picking up steam as some tailwinds, like the benefit of last year’s tax cuts, fade. 

High oil prices stemming from the war in Iran “should result in weaker consumer spending, more pressure on profit margins, higher inflation, and less Fed easing than we had expected coming into the year,” the analysts wrote. While they still believe the economic outlook is more positive than negative—due primarily to the tailwinds of the AI data center boom—they see a rising risk that growth slows and financial conditions tighten, a combination that has tanked overextended markets before.

While it's not hard to find bulls out there, some analysts are growing uneasy about the concentration of capital within the S&P 500, especially a select group of AI infrastructure beneficiaries.

“If you think about what is the most crowded equity ticker in the world, it’s the S&P 500,” Savita Subramanian, head of equity strategy at Bank of America Securities, told CNBC on Thursday morning. “If we’re in an environment where investors need to raise capital, that is probably first to be sold.”

Subramanian, however, doesn't view herself as bearish. "I like stocks—I just don't like the index right now," she said. "The premium that investors are paying for high sales growth companies is the highest we’ve seen in at least 20 years."

Companies outside of tech with healthy margins and solid growth outlooks aren't getting the same attention, according to Subramanian. "We think it’s time to maybe trade down on the growth expectations" and look to sectors like materials and energy for exposure to growth without the AI price tag, Subramanian said.

Goldman Sachs is also bullish. They this week raised their S&P 500 year-end target from 7,600 to 8,000, implying 6% upside from its midday level on Thursday.

Bargain shoppers may feel the effects of inflation more acutely, new research shows.
Credit: Brandon Bell / Getty Images

Key Takeaways

• New research shows household budgets for lower-income families are hurt more by inflation because of "cheapflation."
• In times of high inflation, prices rise faster for cheaper versions of products than for their luxury brand counterparts.
• "Cheapflation" could help explain why inflation sometimes seems more punishing than official statistics suggest.

If inflation seems far higher to you than the official statistics show, it could be because the data doesn't account for a phenomenon called "cheapflation."

Although economists have long known that inflation tends to take a bigger bite out of working-class household finances compared to the well-off, they may have underestimated the size of that gap by as much as 90%. That’s according to research published this week by the National Bureau of Economic Research, carried out by Kunal Sangani, a professor of economics at Northwestern University.

You've probably experienced cheapflation even if you've never heard of it—it's when prices rise faster for budget versions of products than they do for luxury brands. It means that in times of high inflation, bargain hunters experience more sticker shock than those buying from the top shelf.

"There was a sense that people had that the official inflation numbers that were being reported by the BLS ... that those inflation figures weren't representing the experiences they were having when they're going to the grocery store and experiencing much higher prices than the 5% or 10% that was often being cited in official numbers," Sangani said. "For lower-income customers, the data show that that's clearly true."

What This Means For The Economy

The "cheapflation" phenomenon could mean lower-income households are under more cost-of-living pressure than official statistics capture.

The difference can be larger than you might think, especially during times of high inflation, such as the aftermath of the pandemic.

Take coffee, for example. Sangani looked at price data from market research firm NielsenIQ and found that if you bought a more affordable brand like Folgers or Maxwell House, you experienced steeper price hikes than if you bought something fancier like Pete's or Starbucks. Between 2020 and 2023, prices for discount coffee brands rose 36.4% versus 9.7% for the premium stuff, according to data Sangani provided to Investopedia.

The differences add up at checkout. Over that time period, prices for the cheapest groceries rose 51.5%, while the higher-end versions only went up only 16.3%.

To be sure, wealthier people do not exclusively buy the most expensive brands, nor do those with lower incomes stick only to the bargain bins. Still, the bottom 20% of earners saw their grocery bills rise 27.3% in the post-pandemic period, versus a 24.9% increase for the top 20% according to Sangani's data.

Why Cheapflation Happens

The reason for the difference is straightforward, Sangani's research showed: companies tend to pass their own cost increases through to their prices.

For example, if the price of coffee beans rises by 20 cents a pound, Folgers and Starbucks will likely raise their prices by about 20 cents a pound. That 20 cents is a higher percentage increase for the lower-priced Folgers, however.

Sangani's research, using prices for individual products, found much larger differences in inflation rates between lower and higher-income households than previous analyses relying on official data from the Bureau of Labor Statistics.

The BLS combines data for lower- and higher-end products in the same category to give an idea of the overall rate of price increases, so it misses the cheapflation factor.

To get an idea of how inflation varies across income groups, the bureau accounts for how much people spend on different items depending on income—for example, food and gasoline are a bigger portion of your budget the lower your income.

Cheapflation, a term coined in 2024 by Alberto Cavallo and Oleksiy Kryvtsov, adds more detail to that kind of analysis. It could help explain why, in surveys, people with lower incomes tend to be more pessimistic about inflation than their wealthier counterparts.

"My impression is that people's trust in statistics produced by the government seems to have wavered a little bit recently, and one small part of it might be that those statistics aren't capturing the reality that they're facing, especially if they're at the low-income kind of distribution," he said.

Gas prices are pushing up costs on many every day items.
Credit: Alex Wroblewski / Bloomberg via Getty Images

Key Takeaways

• As widely expected, the PCE price index rose to its highest in nearly three years in April.
• PCE inflation rose 3.8% over the year, its highest annual increase since May 2023.
• Prices excluding food and energy rose the most since November 2023.
• Core PCE inflation is the benchmark the Federal Reserve uses to determine whether inflation is at its 2% annual target.

Surging energy prices due to the Iran war helped push the Federal Reserve's preferred inflation gauge to its highest in nearly three years in April.

Consumer prices as measured by the Personal Consumption Expenditures price index rose 3.8% over 12 months in April, the highest annual inflation since May 2023, the Bureau of Economic Analysis said Thursday.

That was in line with economists' expectations, though the 0.4% increase in the index from March was slightly below the 0.5% forecast by a survey of economists by Dow Jones Newswires and The Wall Street Journal.

A 5.5% month-over-month surge in gasoline and other energy prices due to the war in Iran helped push the index higher. However, the jump was less than the 20.9% monthly increase in March.

"The impact of higher gas prices is still putting pressure on inflation," wrote Michael Pearce, Chief U.S. Economist at Oxford Economics, in a commentary. "We expect inflation to nudge higher in May, but the key for the Federal Reserve is what is happening to underlying inflation."

The core index, which excludes volatile food and energy prices, rose 3.3% over the year, the most since November 2023. Over the month, it grew 0.2%, below the 0.3% forecasters expected.

What This Means For The Economy

Rising inflation squeezes consumer finances and puts pressure on the Federal Reserve to raise interest rates to counteract it, which can hurt economic growth.

Rising PCE inflation was widely expected after the Consumer Price Index showed a similar trend for April when it was released earlier this month. However, the uptick in core PCE inflation was especially significant. It's the benchmark used by Federal Reserve officials to determine whether inflation is at its 2% annual target, something it hasn't achieved since 2021.

Economists view core prices as a more reliable indicator of the longer-term trajectory of inflation, since food and energy prices can be influenced by factors unrelated to broader inflation trends. Fed officials have become increasingly vocal about the risks of the Iran conflict pushing up inflation, and have raised the possibility of hiking the central bank's benchmark interest rate to counteract it.

The increase in core prices also showed soaring fuel costs are becoming contagious, affecting prices for other things, as higher transportation costs are passed along to customers.

Those higher prices are causing some strain on household finances. Personal income was flat, less than the 0.4% increase forecasters had expected. Spending rose 0.5%, in line with forecaster expectations, though down from the 1% increase in March that was fueled by tax refunds.

With income stagnant, consumers sacrificed saving to fund their increased spending, as the saving rate fell to 2.6% from 3.2% in March, reaching the lowest since June 2022.

"The consistent declines in real disposable income growth in recent months and rapid drop in the personal savings rate visible in the April personal income and spending report raise real concerns about the resilience of future consumer spending despite the steady performance over the first two months of the war," wrote Scott Anderson, BMO Capital Markets' Chief U.S. Economist, in a commentary. "Should inflation remain elevated, it will be increasingly difficult for consumers to keep up their current pace."

Update, May 28, 2026: This article has been updated to include commentary from economists.