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Economy & Markets 

  • Higher energy prices have led to increased inflation levels throughout the economy. April CPI rose 3.8% year-over-year and the core rate, which excludes food and energy, rose by 2.8%. Service inflation rose by an annualized 3.3%, the highest level in 14 months. The core PCE inflation rate was 4.3% in the first quarter, the highest in three years.
  • Real GDP increased by an annualized 2.0% in the first quarter, an increase from the 0.5% rate in the previous quarter. Real final demand rose at a 2.5% rate compared to 1.8% in the fourth quarter, an indication of strengthening private sector demand. Rising technology spending accounted for almost two-thirds of overall growth in the quarter.

 Equities

  • The S&P 500 rebounded sharply in April, advancing approximately +10.4%, its strongest monthly gain since November 2020. The strength was driven by a rally in the communications services and technology sectors, while energy stocks lagged. Domestic equities outpaced their international counterparts by nearly 3%.
  • First quarter earnings results for the S&P 500 have come in ahead of expectations. The outlook for profit growth remains strong as estimates currently forecast 2026 earnings for the S&P 500 to exceed 20%. Valuation levels remain in the ~20–21x range for forward earnings, toward the higher end of the historical range.

Fixed Income 

  • The yield curve flattened this month as short-term rates rose more than long-term rates due to energy related inflation concerns and market expectations of zero FOMC rate cuts in 2026.
  • Investment grade credit spreads reversed course and tightened back to 78 basis-points.

Employment

  • The April unemployment rate was unchanged at 4.3%. Employers added 115,000 jobs, which exceeded expectations. During the last week of April, new unemployment claims fell to 189,000, the lowest level since September 1969.
  • Healthcare and Social Assistance (HSA) jobs have grown by 1.8 million since December 2023, while all other categories have declined by 127,800 over the same period. In 2025, the U.S. hit “Peak 65”, as the highest number of people in history turned 65. This augurs well for further job growth in HSA.

Federal Reserve 

  • New Fed Chairman, Kevin Warsh, will have his hands full leading the Fed as he inherits a moderately growing economy with low unemployment that is facing elevated energy prices and rising inflation.
  • The May consumer sentiment survey fell to the lowest level in the survey’s history. Inflation expectations for the year ahead are 4.5%. The Fed needs to be wary of those expectations becoming self-fulfilling.

Issues to Watch

  • President Trump meets with Chinese Premier, Xi, with many topics on the agenda to discuss. Tariffs, war in the Middle East, and growing concerns about AI security threats will be discussed with low probability for big announcements.
  • Expectations for the economy and financial markets are positive for the year ahead with the greatest question mark for both being the duration of the conflict with Iran and the effective closure of the Strait of Hormuz.
Chart of Economic Metrics

1 Data provided by Bloomberg. Metrics are as of month-end or most recent publication
2 Provided by U.S. Real GDP Economic Forecast Survey Median
3 Provided by World Real GDP Economic Forecast Survey Median
4 Provided by Bloomberg Intelligence Forecast
5 Provided by World Probability Forecast
6 Arrows represent a month-over-month change

 

Chart of Index Returns

Asset Allocation / Tactical Positioning 

Chart of Asset Class

7 Equity tactical weights are relative to the Cambridge Trust Wealth Management Core Equity allocation and is comprised of 80% S&P 500 and 20% MSCI AC World ex-U.S. Index.
8 Fixed Income tactical weights are relative to the Cambridge Trust Wealth Management Core Taxable allocation and is comprised of 100% Barclays Intermediate Gov/Credit Index.
9 Below investment grade holdings include high yield and emerging market debt mutual funds. Represents an out-of-benchmark allocation that will be reflected as an overweight position relative to the Barclays Intermediate Gov/Credit Index if any allocation is held.
10 Alternative tactical weights represent an out-of-benchmark allocation that will be reflected as an overweight position when utilized and neutral position when not.
11 Direction arrow highlights any recent changes of the overall allocation after a recent tactical asset allocation or strategy change. Last changes were made at March 2026 Asset Allocation Committee meeting.

 

 

Views are as of May 2026 and are subject to change based on market conditions and other factors. The opinions expressed herein are those of the author(s), and do not necessarily reflect those of Eastern Bankshares, Inc., Eastern Bank, or any affiliated entities. Views and opinions expressed are current as of the date appearing on this material; all views and opinions herein are subject to change without notice based on market conditions and other factors. These views and opinions should not be construed as a recommendation for any specific security or sector. This material is for your private information, and we are not soliciting any action based on it. The information in this report has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is neither representation nor warranty as to the accuracy of, nor liability for any decisions made based on such information. Past performance does not guarantee future performance.