The Market Just Got a Huge Warning Sign

Inflation has returned as a significant economic force, with the April Consumer Price Index reaching 3.8% and the Producer Price Index showing a 1.4% monthly increase. This surge, driven by energy costs and supply chain bottlenecks, creates a disconnect between robust stock market performance—largely fueled by massive AI infrastructure spending—and the reality of declining real wages for consumers. While high-end earners maintain discretionary spending, middle-market companies face margin compression and inventory struggles as production costs rise. Investors must navigate this K-shaped economy by prioritizing companies with strong balance sheets and pricing power, as the current environment of sticky inflation and potential interest rate adjustments threatens to squeeze consumer purchasing power and corporate profitability across various sectors.