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Inflation Down, Mortgage Rates Still Up, and Craic

  • Writer: Doug MacGray
    Doug MacGray
  • 1 minute ago
  • 4 min read

June 1, 2025


U.S. INFLATION: The Fed's preferred inflation index is the Personal Consumption Expenditures (PCE) index. According to the Bureau of Economic Analysis, prices in April rose 0.1%. Year over year, the index was up 2.1% which is down from 2.3% a month ago. The Fed likes to view these indices without food and energy due to their volatility. The PCE Index without food and energy was up 2.5% year over year, a decrease from the prior month when it was up 2.6%.


MOODY'S DOWNGRADES U.S. GOVERNMENT DEBT: On May 16, Moody's downgraded U.S. government debt to Aa1, its second highest rating. S&P (2011) and Fitch (2023), two other ratings agencies, similarly lowered their ratings for U.S. debt long ago. With $36 trillion in debt, this is not a surprise.


MAY CLOSES OUT STRONG FOR U.S. STOCKS: U.S. stocks just finished their best month since late 2023 and ended up near where they started for the year, but still 4% lower than the mid-February highs. Going forward, the status of trade talks with China, and our own government's ability to manage its own debt going forward will be scrutinized along with overall economic data.



LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.



MORTGAGE RATES PROVIDE NO RELIEF AND U.S. HOME SALES DECREASE: The average 30-year-mortgage in the U.S. is 6.89% providing no relief to potential homeowners looking to find an affordable home. In April, pending home sales decreased 6.3% according to the National Association of Realtors. Year-over-year, pending home sales are down 2.5% There is an increase in inventory, but mortgage rates are constraining overall activity.



U.S. HOUSE PRICES: As we all know, housing prices rose into bubble territory prior to 2008 when the bubble burst, and housing prices plummeted. Prices have fully recovered. Taking inflation into account, housing prices are about 12% higher than the bubble peak.



SECOND QUARTER G.D.P. PREDICTIONS: The economy contracted last quarter. What will the second quarter outcome be? According to the Bank of America, the second quarter GDP will come in at 1.8%. Goldman Sachs and the Atlanta Federal Reserve Bank are both predicting 3.8%.


TARIFF REVENUE: Tariff policy remains volatile and its legal status is currently in dispute, so this will remain hard to predict. As of last Friday, revenue from customs duties totaled $67.6 billion year to date, up from $29.6 billion during the same period last year, a 78% increase. As a revenue source, however, it remains a relatively small percentage of overall revenue. In April, Washington generated $850 billion in revenues, and about 2% was from customs duties.


IRELAND!: About a year ago, my brother and my sister-in-law said that they wanted to go to Ireland for the first time. Knowing we had been twice, they asked if we would like to come along and help plan the trip. After much planning, the trip came about and we were in Ireland over much of the last couple of weeks. The last image is a map of our overall route. We flew into Shannon Airport in the west and flew home from Dublin in the east. In order are Cliffs of Moher, Dingle, Kinsale, Cobh (the Titanic's last stop), Kilkenny, and Dublin. We experienced lots and lots of music, chatted up lots of locals, and enjoyed mostly good weather. Dingle was our favorite stop. It is beautiful, lots to do, and friendly folks. It has a population of 1700 people and 52 pubs! There is a lot of musical talent in the country, and lots of fun-loving people. Their comedic style is sarcasm, but very winsome sarcasm. We enjoyed all the craic.



If you have never been and you are thinking of going and need some input from a three-timer, let me know.


Have a great week!


Our purpose is to honor God by helping our clients see the objective, find the path, and navigate past the obstacles to a more prosperous future.



Douglas R. MacGray, J.D., C.F.P. ®

President

Stonecrop Wealth Advisors, LLC

Direct | Cell | Fax

(610) 628 4545



"An optimist will tell you the glass is half-full; the pessimist, half empty; and the engineer will tell you the glass is twice the size it needs to be." Oscar Wilde


"But among you there must not be even a hint of...greed." Ephesians 5:3


SOURCES:

MORTGAGE RATES PROVIDE NO RELIEF AND U.S. HOME SALES DECREASE: https://www.nar.realtor/newsroom/pending-home-sales-declined-6-3-in-april AND YCharts.com

TARIFF REVENUE: https://www.ftportfolios.com/Commentary/EconomicResearch/2025/5/29/tariffs,-courts,-and-chaos-mapping-the-shifting-trade-terrain AND https://www.zerohedge.com/political/trumps-tariffs-deliver-record-23-billion-revenue-may


(c) 2025 Anno Domini, Stonecrop Wealth Advisors, LLC, All Rights Reserved


Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.


SDG

*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.

*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.

*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.

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