Location Strategy Chartbook 06.27.2026

The Federal Reserve's policymaking Open Market Committee held its first meeting under new Chairman Kevin Warsh last week.

The committee left the target range for the bank’s main policy interest rate unchanged at 3.50 to 3.75%. It has been at this level since December of last year, and most observers had expected it to remain in place. However, the current economic environment is clearly different from what it was six months ago.

Nine members believe at least one rate increase will be appropriate, while an equal number sees the target either easing downward or remaining unchanged. This degree of division within the committee has not been seen in some time, and it is notable that, in a departure from previous meetings, the chairman did not submit his own projections.

The divide comes as surging inflation has brought the committee's price stability mandate to the fore, threatening to muscle aside concerns about weakness in the labor market. Core inflation measures have been advancing at a year-over-year rate well above the Fed’s 2% target for more than five years.

The committee’s more hawkish shift is supported, at least to some degree, by a labor market that has outperformed expectations so far in 2026. Aside from healthcare, only the leisure and hospitality industry employs as many as 15% more workers than it did five years ago, and it was only in September of 2025 that it finally recovered all the jobs lost during the COVID-19 pandemic. Knowledge-industry employment, in particular, remains underwater, having shed more than 700,000 jobs since peaking in April 2023.

Liz Ann Sonders, Schwab: May durable goods orders sank -4.4% y/y vs. +19.2% prior and fell into negative territory for the first time since February 2025

Supercore CPI (blue) and PCE (orange) inflation both continued to rise in May, up +3.7% and +3.9% y/y, respectively…moving further away from Fed’s 2% target

Around the world, everything from grocery prices and water bills to health insurance costs and even rents are facing growing pressure from extreme heat, droughts and heavy rains, in ways that even the savviest personal finance guru may not be able to plan for.

Food is one of the earliest categories clearly being affected, as extreme heat and droughts disrupt harvests. As one-off weather shocks become more regular events, there’s a risk that this kind of climate inflation could become an economic fixture.

Official data is in today, and US solar power generation continues to grow rapidly, up 15% compared to this time last year.

Solar power made up 12% of US electricity this April, a new record high that's up from 10.8% last year. Over the last twelve months, solar has made up 9% of US electricity, another record high.

Solar power also continues to skyrocket in Texas, with generation up 24% compared to last year. Over the last twelve months, solar has made up 11.6% of Texas' electricity, a record high.

Data center development in the United States has surpassed spending on all other commercial buildings combined, according to Jason Thomas, head of global research and investment strategy at Carlyle. Since the launch of OpenAI's ChatGPT in November 2022, completed data center projects have increased roughly 220%, while all other real estate development is up less than 10%.

Capital is following that momentum. Funds with exposure to digital systems raised over $100 billion last year — double the 2024 total — and accounted for roughly half of all infrastructure fundraising, according to financial data provider Preqin. Private transactions now routinely top $10 billion, including a $40 billion deal in 2025. Debt financing has followed suit, rising from $27 billion in 2020 to $92 billion last year, according to JLL.

"We may soon reach a point where data centers consume virtually all the economy's net private capital formation," Thomas warned in an outlook earlier this year.

It's "a lot of eggs put into this basket, especially when considering uncertainties about depreciation rates, hardware replacement cycles, and monetization timelines."

Those concerns are spreading. Companies have recently disclosed risks ranging from technological obsolescence to geographic concentration and tenant dependency.

MSCI reported in April that data centers have become a core institutional allocation in private markets, with exposure across infrastructure, real estate and private equity closed-end funds totaling $122 billion as of the third quarter.

That buildup comes as other sectors face structural constraints. A National Low Income Housing Coalition report found a shortage of 7.2 million affordable homes for low-income households, leaving just 35 affordable and available rental homes for every 100 extremely low-income renter households nationwide.

Meanwhile, the office market remains under pressure.

"The shift of capital away from traditional real estate has created a repricing and a meaningful thinning of competition in sectors that still have strong long-term fundamentals," said David Steinbach, global chief investment officer at developer Hines.

Construction starts across the residential, office and industrial sectors have dropped as much as 50% to 80% from cyclical peaks, he said, citing data from real estate services firm CBRE.

The U.S. apartment market is beginning to stabilize as supply pressures ease, with improving conditions emerging in a growing number of markets.

The supply of new homes in the US crossed above 10 months in May. That's a level we've previously seen only during recessions or the 2022 inflation spike.