The Federal Reserve's favorite inflation indicator, the PCE Price Index, will be released by the BEA on Thursday. The index differs from the better-known Consumer Price Index (CPI) because its composition is changed more frequently and is quicker to reflect real-time pricing. In the most-recent report, through April, PCE inflation reportedly increased at a 3.8% rate year over year. By comparison, the latest CPI report, through April, had overall inflation rising 4.2%. Core PCE, which removes volatile food and energy prices from the index, had risen at an annual rate of 3.3% in the latest publication. Our PCE forecasts call for slightly higher readings for May: 4.0% for the headline number and a steady 3.3% for the core reading, driven by fall-out from higher energy prices due to the Iran war. This trend is evident in the Producer Price Index (PPI) report. Farther up the value chain, producer prices are rising at rates even approaching 25%. And expectations for future inflation rates are changing as well: the three-year outlook for inflation is 2.6%, versus 2.3% three months ago. We track 20 inflation measures on a monthly basis. On average, they are indicating that prices are rising at a 5.0% rate year over year, up 70 basis points compared to a month ago. Focusing on core inflation - which we obtain by averaging Core CPI, market-based PCE Ex-Food & Energy, the five-year forward inflation expectation rate, the 10-year TIPs Break-even Interest Rate and the PCE Price Index - our reading is 3.0%, flat month over month. Given inflation trends, we do not expect the Fed to implement any rate cuts over the next several quarters.

Sustainable Impact Investing, or ESG investing, is gaining traction with the global investment community. According to the Global Sustainable Investment Association, global assets under management in Sustainable Investment strategies had grown to $30 trillion in 2022, up from $23 trillion in 2016, despite a pullback of more than $8 trillion in investment in the U.S. in recent years. Europe and Japan are now the fastest-growing regions. Meanwhile, the UN Principles for Responsible Investing -- to which Argus Research is a signatory -- now represents more than 5,000 signatories, according to UNPRI.org. Indeed, the UN is targeting global asset growth in the strategy of another $10-$20 trillion in 2024-2027, as outlined in its recent PRI Strategy Plan. As assets have flowed in over the past 40 years, Sustainable Impact Investing has evolved. The discipline, originally known as Socially Responsible Investing, at first focused on excluding companies that conducted business in South Africa, or participated in industries such as tobacco, alcohol, and firearms. Over time, the list of industries to avoid increased to include soft drinks, fast food, and oil and gas. Performance of these initial strategies lagged, and the approach has been modified to focus on what companies should do versus things they shouldn't do. So instead of merely identifying industries to avoid, the discipline now promotes "sustainable" business practices across all industries that can have an "impact" on global issues such as climate, hunger, poverty, disease, shelter, and workers' rights. Argus has several investment products related to this theme.

Sustainable Impact Investing is gaining traction not only with Argus Research clients but also with the global investment community. As assets have flowed in over the past 40 years, Sustainable Investing has evolved. The discipline, originally known as Socially Responsible Investing, first focused on excluding companies that conducted business in South Africa, or participated in industries such as tobacco, alcohol, and firearms. In time, the list of industries to avoid increased to include soft drinks, fast food, and oil and gas, among numerous others. Performance of initial strategies lagged, and the approach has been modified. Now, instead of merely identifying industries to avoid, the discipline promotes "sustainable" business practices across all industries that can have an "impact" on global issues such as climate, hunger, poverty, disease, shelter, and workers' rights. Given the strategy's focus on leading management practices, we expect the growth curve for Sustainable Investing to again slope upward in the years ahead.

Eaton Corp., founded in 1911 to manufacture geared truck axles, is now a diversified power management company. Its customers span a wide range of industries, and sales are evenly split between the U.S. and abroad. As a result, Eaton has a balanced presence in early-, mid-, and late-cycle sectors, as well as recession-resistant service capabilities. Based in Dublin, Ireland, the company has approximately 94,000 employees. The shares are a component of the S&P 500.