Growth Declines as Prices Increase

Good morning, The economy’s flirting with stagflation, oil prices are doing the cha-cha with geopolitics, and AI just got a brain upgrade—because apparently, thinking before speaking is now a feature.

It’s going to be one of those days!

ECONOMY
Is the U.S. economy at a crossroads?

Economic storm clouds are gathering as Federal Reserve projections hint at the dreaded combination of slowing growth and rising prices. However, officials insist we're not facing a rerun of the economic nightmare that defined the 1970s.

Have you ever wondered what happens when an economy simultaneously suffers from high unemployment and persistent inflation? This economic paradox, known as stagflation, suddenly appears in conversations among economists and policymakers. Why is this concerning economic term resurfacing now, and what might it mean for your financial future?

Recent Federal Reserve forecasts suggest we could be heading toward what RSM chief economist Joe Brusuelas describes as "Stagflation-lite" – not as severe as the 1970s crisis but worrying nonetheless. The Fed left interest rates unchanged last week but still anticipates two quarter-point cuts by year-end, even as they project slower growth, higher unemployment, and accelerating inflation – a challenging combination that typically shouldn't coexist in a healthy economy.

Remember the 1970s? That decade featured what many consider the worst U.S. economic leadership since the Great Depression. The Fed had their data wrong, elected officials implemented ineffective price controls, and the Ford administration even distributed "Whip Inflation Now (WIN)" buttons in a quaint public relations effort. Today's situation stems from a different source – the anticipated tariff shock from Trump's trade policies has economists revising growth estimates downward while inflation projections climb, despite the administration's claims that their policies will ultimately deliver both plentiful jobs and lower prices.

Going forward, Fed Chair Powell promises vigilant monitoring, stating, "I don't see any reason to think that we're looking at a replay of the '70s or anything like that." However, he acknowledges that stable inflation expectations are "at the very heart of our framework" and emphasizes, "We will be watching all of it very, very carefully. We do not take anything for granted." Chicago Fed President Austan Goolsbee captured the challenge perfectly: "There is nothing more uncomfortable than the stagflationary environment...where both sides of the mandate start going wrong."

ENERGY
Oil slips as Black Sea truce eases tensions

Brent crude dropped 9 cents, or 0.12%, to $72.91 a barrel, and U.S. West Texas Intermediate fell 23 cents, or 0.33%, to $68.88. The reason: Ukraine’s President Volodymyr Zelenskiy and Russia agreed to a U.S.-brokered truce, effective immediately, covering the Black Sea and energy facilities. Zelenskiy says he’ll ask Trump for weapons and sanctions if Russia breaks it. Phil Flynn from Price Futures Group figures this could soften sanctions on Russian oil, pushing prices lower.

Still, supply’s tight. Trump’s threat of tariffs on Venezuelan oil buyers—like China, its biggest market—boosted prices by over 1% Monday. Mukesh Sahdev from Rystad Energy says it’s a move to cut Venezuela’s output. Chevron’s deadline to leave Venezuela got pushed to May 27, which could trim 200,000 barrels daily, per ANZ. OPEC+ will raise output in May, but some members must cut back to overproducing earlier. New U.S. sanctions on Iran add pressure too.

AI & TECHNOLOGY
Google’s Gemini 2.5 raises the bar

Google has unveiled Gemini 2.5, a next-generation AI reasoning model designed to pause and think before responding—a major step forward in AI intelligence. The tech race for more reasoning-capable AI has intensified since OpenAI’s launch of the o1 model in 2024. Now, companies like Anthropic, DeepSeek, Google, and xAI are integrating computational reasoning to enhance problem-solving, fact-checking, and autonomy in AI.

Gemini 2.5 Pro Experimental, Google’s most advanced multimodal AI yet, is available via Google AI Studio and the Gemini app for premium subscribers. The model is built to excel in math, coding, and AI-driven web applications, outperforming several rivals on key benchmarks. Notably, it scores 68.6% in Aider Polyglot (a coding evaluation), surpassing OpenAI and DeepSeek, but lags behind Anthropic in software development benchmarks. It also achieves 18.8% on Humanity’s Last Exam, outperforming most flagship AI models in complex reasoning tasks.

A standout feature is its 1 million token context window—capable of processing more text than “Lord of the Rings” in one go—soon doubling to 2 million tokens. Pricing details remain undisclosed, with more updates expected soon.