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The world has always been volatile, but AI is accelerating the speed of change in ways we've never experienced before. Framing this with my favorite acronym, VUCA — volatility, uncertainty, complexity, and ambiguity — helps me make sense of the forces shaping today’s economy and the challenges that lie ahead.

We are barraged with news every day that creates uncertainty. The geopolitical climate is increasingly volatile due to the U.S. war with Iran and the continuing war between Russia and Ukraine. Passage through the Strait of Hormuz remains severely restricted, creating disruptions throughout global energy and transportation markets. This volatility is driving oil and gas prices higher, putting upward pressure on food prices and inflation, and creating significant supply chain disruptions.

The complexity of these issues leaves us wondering what happens next. How will these conflicts be resolved? What will the ripple effects be throughout the global economy? Which industries will be affected most, and for how long? Add the ambiguity surrounding these issues, and you can begin to understand why VUCA is my favorite acronym.

With all this chaos, you would expect growth to be weakening. It is not. Recent data shows the U.S. economy remains resilient, and AI investment is surging.

JPMorgan Chase CEO Jamie Dimon is a brilliant strategist and a true statesman. He was interviewed on May 29th at the 2026 Reagan National Economic Forum. Dimon is bullish on America and offers practical ideas on how we can improve people’s lives with good policy without raising taxes. He answers questions directly and honestly, which I find so refreshing these days.

Several comments from the interview stood out to me:

• Dimon believes the biggest issue facing the U.S. is not the stock market or inflation, it's geopolitics. He stressed that maintaining both the world's strongest military and strongest economy is essential to preserving the U.S. dollar's position as the global reserve currency. He also emphasized the importance of strengthening relationships with our economic allies rather than retreating from global trade.
• Inflation remains a concern. Dimon referred to it as "the skunk at the party" and warned that persistent inflation could keep interest rates higher for longer. If that happens, both consumers and financial markets could feel the impact.
• While he acknowledged the stock market's remarkable strength, he stopped short of calling it a bubble. His view is that valuations are elevated but supported by strong earnings growth and continued business investment, particularly in AI.
• Dimon's biggest warning centered on the federal deficit and the bond market. Annual deficits are approaching $2 trillion (while the total U.S. government deficit has surpassed $39 trillion), and he believes that continued government borrowing could eventually create significant stress in the bond market. If a recession were to occur, those deficits could grow even larger, increasing the risks.

At the end of the interview, Dimon was asked about the values that guide his life. Without hesitation, he answered:

• Have a purpose in life.
• Work hard.
• Do the best you can.
• Make the world a better place.
• Don’t allow bullies.
• Treat people with respect.

If Jamie Dimon ever decided to run for President, or any other office, he would have my vote. Unfortunately, character and integrity seem to be carrying less weight in our political system than they once did.

One final topic that caught my attention was Dimon’s perspective on China and America’s long-term competitiveness.

Dimon called China "a potential adversary" but warned that external threats shouldn't distract from dysfunction at home, saying, "We have to get our own act together, fast." On tariffs, he cautioned against their unpredictable implementation, noting that recent moves had destabilized the U.S.–China relationship and introduced unnecessary uncertainty into global markets.

Dimon argued that the U.S. needs to deal with the "enemy within" while remaining realistic about geopolitical competitors such as China. He also advocated stockpiling strategic resources such as rare earth materials rather than bitcoin. In his view, the U.S. could easily grow at 3% per year with decisive reforms and leadership.

He closed with a very important question: "We know what to do… but are we willing?"

INFLATION

Headline CPI is up 4.2% over the past year, core is up 2.9%

• The Consumer Price Index (CPI) for May rose 0.5% after rising 0.6% in April and is up 4.2% on an annual basis. Core CPI was up in May 0.2% after rising 0.4% for April. On an annual basis it was up 2.9%. With the spike in energy, this was expected. The core report is better news for economists. Consumers don’t really care about the core and see inflation as much worse than the numbers dictate.
• Personal Consumption Expenditures (PCE) rose 0.4% in April down from 0.7% in March, while the year-ago reading increased to 3.8%, the highest since early 2023.  Core prices, which strip out the volatile food and energy categories, rose 0.2% in April, with the year-ago comparison rising to 3.3% and up 0.1% from last month. However, this is up from the 2.6% pace for the twelve-months ending in April 2025.
• The Producer Price Index for May rose 1.1% versus April's increase of 1.4%. This lifted the 12-month inflation rate to 6.5%, up from 6.0% and the highest reading since 2022. The core prices, excluding energy and food prices, were down to 0.4% from April's 1.0%. Energy was the culprit again, up 10.7%

With inflation expanding and job growth stable, the Fed is unlikely to lower interest rates. While newly confirmed Fed Chairman Kevin Warsh may support lower rates, monetary policy decisions are made collectively by the 12-member Federal Open Market Committee and require a simple majority to change the rates.

The GDP for Q1 was up 1.6%. The Atlanta Feds GDPNow forecasts 3.3% growth for Q2. May employment increased by 172,000 jobs, exceeding expectations. Even with the Iran war, rising fuel and food costs, and continued geopolitical uncertainty, the data tells the story and overall, it’s a good one.

MANUFACTURING

We are now in the 5th month of expansion

After three difficult years, manufacturing finally appears to be gaining real momentum. AI investment continues to drive growth, business spending remains strong, and many of the indicators I watch are moving in the right direction. Most forecasters believe this cycle could continue for another 24 to 36 months. Let's hope so.

The current manufacturing expansion is being driven by a massive boom in AI-related infrastructure investments, business-friendly tax provisions that encourage capital spending, and continued reshoring efforts. Ongoing geopolitical tensions and tariff policies have also encouraged companies to build inventories and secure supply chains.

Here is some of the manufacturing and economic data that caught my attention this month:

• The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) rose to 54.0 in May from 52.7 in April, marking the fifth consecutive month of expansion and the strongest sustained growth since 2022. Sixteen of the eighteen major manufacturing categories reported expansion. New orders, production, and backlogs all moved further into growth territory. After contracting for three years, backlogs are finally growing again. Manufacturers remain cautious on hiring, however, with the employment index remaining in contraction territory for the 32nd consecutive month.
• Core industrial production, which excludes volatile autos, rose 0.3% in April, marking a fourth consecutive monthly gain. AI-related investment continues to be a major driver, particularly in high-tech equipment and semiconductor manufacturing. High-tech manufacturing is now up 9.2% over the past year, the fastest growth rate of any major category.
• U.S. core capital goods orders, excluding aircraft, rose 1.1% in April and are up 9.1% over the past year, the largest annual increase since mid-2022. Orders for fabricated metal products, primary metals, and electrical equipment all increased. Unfilled orders are up 11.5% over the past year, suggesting manufacturers are struggling to keep pace with demand.
• Shipments of core non-defense capital goods excluding aircraft, an important measure of business investment and a leading indicator for GDP, rose 0.4% in April. Business investment continues to benefit from favorable tax policies and AI-related spending and is now running at an annualized rate of 8.3%.
• Core consumer spending rose 0.5% in April and remains resilient despite concerns about consumer fatigue. Online retail sales continue to lead growth, rising 11.1% over the past year. As discussed in last month's Market Insights, the K-shaped economy remains very much in place.
• The National Federation of Independent Business Small Business Optimism Index fell slightly in May to 95.3, remaining below its long-term average.
• Nonfarm payroll employment increased by 172,000 jobs in May, well above expectations, while the unemployment rate remained relatively low at 4.3%. Job gains were led by leisure and hospitality, health care, construction, and government.
• Construction spending rose 0.4% in April as gains in homebuilding, office construction, and power projects offset weakness in manufacturing construction.
• Car and light truck sales improved in May, reaching a seasonally adjusted annual rate of 16.1 to 16.3 million units. Hybrid vehicles continue gaining market share and now account for approximately 15% of all new vehicle sales.
• The Shapiro Nonferrous Scrap Activity Index, which tracks daily purchases from duplicate accounts across our nine locations and represents a diverse industrial customer base, showed no change in May based on our twelve-month trailing average.

No single data point tells the whole story but taken together these indicators continue to paint a surprisingly positive picture for manufacturing and the broader economy.

CHINA

China’s oil reaction

One of the biggest questions facing our global economy today is what happens to energy demand after the current crisis passes. I like the perspective of JPMorgan oil and gas analyst Natasha Kaneva, who recently returned from her own research trip to China.

“We spent last week in China, [week of May 25] and the most striking takeaway from our meetings was not simply that oil demand has fallen. It was that it may have dropped by as much as 9% or 1.5 mbd—abruptly, unexpectedly, and with remarkably little visible disruption.”

The sharpest hit has been in petrochemicals, but the weakness has spread to transportation fuels like gasoline and diesel. The decline does not appear to be the product of a formal government conservation campaign. There were no conspicuous appeals to save energy, no major limits on mobility, and no sense of crisis in daily life. Instead, it looks like consumers have made a quiet economic choice. Faced with higher gasoline, diesel and airfare, many seem to have shifted away from oil-based transportation toward cheaper, lower-carbon alternatives: electric buses, gas-powered trucks, subways, electrified high-speed rail, and electric taxis.

Kaneva points to road transport indicators, which are still pretty robust even as gasoline and diesel demand has fallen. In other words, people are still traveling but they seem to be doing so in EVs. All in all, there’s reason to believe that China hasn’t had to dig very deep into its oil stockpiles (unlike the U.S.) to manage higher prices. Instead, it’s been allowing higher prices to do their thing and encourage new consumer and corporate behavior.

All of this raises an obvious question. As Kaneva puts it: “How much of today’s demand weakness is likely to reverse once conditions normalize, and how much reflects a more durable shift in consumption? Put differently, could the world actually function with something like 9% less oil?”

We are beginning to see similar behavior in the United States. According to the National Association of Convenience Stores (NACS), the amount of gas sold in March and April dropped by 10%. That trend continued into May. Faced with soaring fuel costs and continuing inflation pressures, consumers are changing their habits. Many drivers are no longer filling their tanks completely, opting instead for "top-ups" in between. At the same time, hybrid vehicle sales were up nearly 15% compared to last year.

When the Iran war eventually ends, oil prices will likely decline, but probably not as quickly as we would hope. President Trump has said prices will “fall like a rock.” I tend to believe the old "rockets and feathers" theory: prices rise like a rocket during a crisis and fall like a feather once it’s resolved.

Demand will recover, but probably not to pre-crisis levels. Countries and businesses alike will want greater protection from future disruptions and will likely scramble to rebuild inventories of oil and oil-related products. That additional demand, combined with changing consumer behavior, could unfortunately keep energy prices elevated for some time and continue to pressure household budgets.

METALS

The bull market continues

The CRU World Aluminium Summit in London (May 12th–14th) confirmed the widespread perception among market participants that the global aluminum market has entered a phase of growing tension, dominated by geopolitical risks, physical deficits and premium volatility. The central theme was, unsurprisingly, the impact of the Middle East crisis on global metal flows and logistics through the Strait of Hormuz.

CRU estimates a global aluminum deficit of around 1.4 million tons in 2026, with production losses in the Gulf amounting to roughly one quarter of regional supply, forecasting LME prices above $4,000 per ton between Q3 2026 and Q2 2027.

Other forecasters state that the deficit will be 2 million tons or more for this year depending on when the Iran conflict is settled. The $4074 LME high from March 2022 is expected to be taken out, and some are calling for $4500 LME next year. With the Section 232 Tariff still in place, this could take the physical price to about $3.50 per pound.

Markets don’t go up forever. We will have a correction at some point. But with solid fundamentals, this aluminum market still looks strong.

Robert Lighthizer, the U.S. Trade Representative for Trump is his first term, talked at the Harbor Summit meeting in Chicago last week. He remains a highly influential external figure, shaping the administration’s tariff strategies from his leadership position at the pro-Trump American First Policy Institute. He said if it was up to him, there would be a zero chance of any change in Section 232. Lighthizer also stated he expected the USMCA agreement to be renegotiated more in favor of the United States. That agreement ends on June 30th this year.

The higher U.S. aluminum prices have substantially increased the amount of scrap generated internally in the states. These prices have also attracted scrap from the rest of the world. Consequently, scrap spreads have widened substantially.

If that trend continues, there could be some demand destruction, although there has been very little of that seen so far. The old adage is the cure for high prices is high prices. We will see.

Aluminum scrap prices continue their upward trend, rising for the 11th consecutive month. Prime scrap prices rose less than the PMTA, which is consistent with the increased volumes. Secondary scrap moved up 8 cents on mixed aero turnings, reflecting stronger domestic demand and export demand. Copper prices rose 10% with increased AI demand. Stainless steel prices rose slightly while ferrous prices were steady.

CLOSING

We are living in a VUCA world, and the challenges are very real. Every day brings new concerns, whether they are geopolitical conflicts, inflation, supply chain disruptions, or the rapid pace of technological change. Yet the resilience of the U.S. economy, and our people, never ceases to impress me.

The philosophy of leaders like Jamie Dimon, who practice servant leadership and focus on purpose, hard work, integrity, and respect for others, gives me reason for optimism. I continue to believe that positive, hardworking people vastly outnumber the negative voices that often dominate the headlines.

The question is whether we will use this period of strength to address the issues we know are coming, or wait until it is too late.

“Double - no, triple - our troubles and we'd still be better off than any other people on earth.”
 - Ronald Reagan