We're getting further away from rate cuts... A second wind for the AI trade... What's good for Micron may not be good for the rest of the AI ecosystem... Why now is not the time to follow the herd... Make sure to sign up for tomorrow's event...
It's another three-year high for inflation...
This morning, the Bureau of Economic Analysis released its monthly personal consumption expenditures ("PCE") data, which showed a 4.1% year-over-year rise in May.
That marks the highest level for headline PCE since April 2023 – when inflation was on the way down from 2022's spike.
As with other recent inflation metrics, energy is taking the lead. In May, the PCE's energy-services component surged more than 24% from May 2025.
But that problem may fade soon... West Texas Intermediate crude is back below where it was before the Iran conflict began. Once falling oil prices make their way to the gas station, we can expect to see inflation begin cooling.
However, oil isn't the only driver of inflation. Core PCE, which doesn't include energy or food prices, rose 3.4% in May – the highest level since October 2023.
And core PCE has now risen for three straight months. After hitting a four-year low of 2.6% in April 2025, the rate of inflation has slowly picked back up.
Over the past six months, core inflation is above 4% annualized.
None of that is welcome news for the rate-cut crowd...
In his first policy decision as chairman of the Federal Reserve, Kevin Warsh made sure to include one single line about the Fed's goals: "The Committee will deliver price stability."
And in the press conference, Warsh noted that the Fed has "missed" on inflation for more than five years. And he's right... Inflation has come in above the Fed's 2% target for 63 straight months.
So the labor market is no longer at the front of the Fed governors' minds. Inflation is the problem they're stuck with. And, as we've hit on several times in recent weeks, that means the next move for interest rates from the Fed is going to be higher – not lower.
In its Summary of Economic Projections last week, the Fed pointed toward at least one rate hike in 2026. And the market agrees...
According to CME's FedWatch tool, markets are pricing in a 60% chance that the Fed will raise interest rates in September. By the end of 2026, the market is pricing in an 80% chance of at least one rate increase this year – and a 40% chance of more than one hike.
We'll have to see if that changes in the coming months as the recent decline in energy prices makes its way into the inflation data. But the core reading is still showing that inflation is a problem even without energy.
As long as that's the case, interest rates are going to be headed higher.
These tech earnings tried to put the AI trade back on track...
Just Tuesday, we noted that AI stocks have "cooled off" – dragging down the major U.S. indexes. But what a difference two days makes...
Yesterday after markets closed, memory-chip maker Micron Technology (MU) reported its third-quarter results. Micron didn't just beat its sales and earnings estimates... It blew them out of the water.
Revenue more than quadrupled from the same quarter last year to $41 billion. And net income grew by a factor of 13. In fact, Micron's net income for the third quarter was higher than the company's total revenue in the second quarter.
Looking ahead, Micron is forecasting $50 billion in revenue for the fourth quarter, which would represent another 300%-plus year-over-year increase.
With memory-chip prices surging, Micron also saw its margins expand.
Gross margin, a measure of how much a company makes after production costs, came in at 84.6% in the most recent quarter. That's more than double the 38% gross margin Micron reported in the same quarter last year.
But Micron's success could be cause for broader concern...
With companies having to pay more for chips, they're going to pass on those costs to customers. Just this morning, Apple (AAPL) announced that it was raising prices for its MacBook computers and iPads, citing higher memory and chip costs.
From Apple's statement...
The rapid expansion of AI data centers has created an extraordinary surge in demand for memory and storage. We have never seen a component price increase this much, this quickly.
So what's good for Micron (and its shareholders) may end up hurting its customers and fueling inflation.
That's something we're going to keep an eye on, not just from an inflation standpoint but also for what it means for AI investment.
Surging memory-chip prices mean that the hyperscalers like Alphabet (GOOGL), Amazon (AMZN), Meta Platforms (META), and Microsoft (MSFT) will have to pay more to build out their AI infrastructure.
That's not what investors want to see, especially at a time when they're starting to look for return on investment – not just that these companies are investing heavily to "win" the AI race.
Micron's shares surged more than 15% today, continuing the stock's incredible year. Micron is now up more than 280% this year and has soared 850% over the past 12 months.
That put tech stocks back on track after their recent pullback... for a while. All three major indexes opened higher – led by the tech-heavy Nasdaq Composite Index – before Apple's announcement took some of the wind out of the market's sails.
Apple shares dropped more than 6%, pulling down the rest of the Magnificent Seven. The Roundhill Magnificent Seven Fund (MAGS) fell more than 2%.
And since this group of stocks makes up such a large portion of all the major indexes, the Mag Seven's decline hurt the market today. The Nasdaq fell about 0.5%, while the S&P 500 was about flat and the Dow Jones Industrial Average rose 0.1%.
Micron's results didn't help the overall market, but they gave a second wind to AI chipmakers...
The iShares Semiconductor Fund (SOXX) has doubled so far this year, and it's up 163% over the past 12 months. On the back of Micron's strong earnings, SOXX rose 3.8% today after dropping 8% on Tuesday.
The good times may not last, though.
As Charlie Bilello, chief market strategist at wealth-management firm Creative Planning, shared on the social platform X, only one other period matches the sector's return over the past 14 months.
And it's not a time that the semiconductor industry, or the market as a whole, would like to repeat...
And gains like that have brought in a huge wave of retail investors. As Barchart shared on X on Tuesday, mom-and-pop investors flooded into semiconductor stocks last week.
And since May, retail inflows into semiconductor ETFs have been higher than any point dating back to at least 2024.
This onslaught also shows in the relative strength index ("RSI"), a measure of whether a stock is "overbought" or "oversold." The Philadelphia Semiconductor Sector Index has an RSI of 89 – its most "overbought" level in history.
Beware of following the crowd...
Yes, semiconductor stocks have been on a tear. But as Bilello's chart shows, the sector always underperforms once these "boom" periods end. Even the best case showed flat returns over the next 14 months. And in some cases, investors lost half their money in little more than a year.
As Bilello's chart shows, when the boom ends, the decline comes quickly.
Between the retail crowd piling in, high memory-chip prices potentially hurting demand, and the dot-com-like surge in chip stocks, this rally looks closer to the end than the beginning.
We're not there ‒ yet. Micron's earnings show that the chip sector is full speed ahead thanks to AI.
We don't recommend folks sell their semiconductor stocks today. But we do suggest making sure you have an exit plan for when the boom ends – like trailing stop losses – to preserve some of these gains.
Make sure to tune in...
We'll close today with a reminder about a new presentation from Extreme Value editor and Friday Digest writer Dan Ferris.
Tomorrow, Dan is going live with a free presentation detailing a massive change he sees coming to our financial system as soon as July 4.
Dan says the change, which he's calling "Project Hamilton," could be the biggest shock to our financial system since the end of the gold standard more than 50 years ago.
Tomorrow at 10 a.m. Eastern time, Dan will tell viewers how to protect their wealth while also laying out two ways investors can take advantage of what he says could be "the biggest trade of all time."
Click here to RSVP to the event and reserve your free spot.
New 52-week highs (as of 6/24/26): Alpha Architect 1-3 Month Box Fund (BOXX), Healthpeak Properties (DOC), iShares Biotechnology Fund (IBB), Illumina (ILMN), Roivant Sciences (ROIV), Snap-on (SNA), Travelers (TRV), Twist Bioscience (TWST), and Invesco DB U.S. Dollar Index Bullish Fund (UUP).
In today's mailbag, reason to share a story from a classic book about stock trading... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Since it [was] a quiet mailbag [yesterday], a classic quote and reminder: 'It's a bull market, you know.' – Old Turkey" – Subscriber Beau E.
Corey McLaughlin comment: Thanks for the note, Beau.
For anyone wondering, what Beau's referring to is a line by a character in Edwin Lefèvre's classic book, Reminiscences of a Stock Operator, set in a fictionalized world of stock trading at the turn of the 20th century. It's full of wisdom that's as useful today as it was 100-plus years ago.
One story features a character nicknamed "Old Turkey" for the way he strutted around trading floors. A customer at one shop, Elmer Harwood, encourages Old Turkey to sell a stock he owns... then buy it back after it falls like Elmer predicts.
"I hope the stock reacts and that you will be able to repurchase your line at a substantial concession, sir," Old Turkey says. "But I myself can only trade in accordance with the experience of many years. I paid a high price for it and I don't feel like throwing away a second tuition fee."
And he added a phrase that we've repeated often in Stansberry Research: "It's a bull market, you know."
True Wealth founding editor Dr. Steve Sjuggerud actually shared the whole story – in an excerpt from the book reprinted with permission – back in a 2007 issue of DailyWealth.
You can read it here, and check out the entirety of Reminiscences of a Stock Operator if you never have. As Steve wrote, "It is required reading for any student of the stock market and commodity trading."
All the best,
Nick Koziol
Baltimore, Maryland
June 25, 2026
