June Charts of Interest: Tariffs Are Driving Prices Bananas

Trader Joe’s charged $0.19 per banana for many years. Then last year, the grocer raised the price to $0.23 per banana. Further increases are a possibility since the May consumer price index (CPI) report showed that banana prices are continuing to climb.

Blame tariffs for the latest increase. As Axios points out, the short shelf life of bananas made it impossible for importers to stockpile them before this year’s new tariffs went into effect.

The free banana given out to runners at the end of races just got more valuable.

Overall Inflation Has Yet to React to Tariffs

The CPI increased by a very modest 0.1% on a seasonally adjusted basis in May. Over the last 12 months, the index that includes all items increased 2.4% before seasonal adjustment. (Bananas have very little impact on the CPI.)

Core inflation, which excludes food and energy, also rose 0.1% in May. Core inflation is up 2.8% on a 12-month basis. This is a sign that tariffs have yet to impact overall inflation, though it is likely too early to see the impact.

Nonetheless, Tariff Revenue Soared Again

According to The Wall Street Journal, the U.S. government collected $22.2 billion in tariffs in May, up from the already large $15.6 billion collected in April. (Bananas were also only a small part of this.) Hopefully, the U.S. and China have reached a détente regarding trade.

Stock Gains Have Typically Followed Geopolitical Shocks

Speaking of things going bananas, the Israel-Iran conflict has added to the Middle East’s instability. So, let’s look at how stocks have historically responded to geopolitical shocks.

“Based on the 25 selected market shocks since [World War II], a majority (65%) resulted in a one-day decline in the S&P 500 [index] averaging 0.4%,” wrote CFRA Research’s Sam Stovall in his weekly Sector Watch report. “Yet following most shocks, investors concluded that these events would not adversely impact global economic conditions, causing the S&P 500 [to] recover these losses in a matter of days or weeks.”

His data is displayed in the chart below. The S&P 500 was higher 60 days after a market shock event nearly two-thirds of the time. The U.S. economy has generally fared well too, but not always. “Three military shocks, among others, that either triggered or accompanied recessions and bear markets include the Iraqi invasion of Kuwait, the Yom Kippur War and the surprise attack on Pearl Harbor,” commented Stovall.

The Israel-Iran conflict is still ongoing as I write this on Wednesday. Let’s hope it does not escalate and cooler minds prevail. (I know, that’s a big ask for the Middle East.)

Small-Cap Stocks Remain on Sale Across the Globe

Value-oriented investors seeking bargains can find many options among small-cap stocks—not just here in the U.S., but in other countries as well. The table below from Schroders’ May 2025 Equity Lens report shows small-cap stocks trading at valuation ratios below their 13-year averages (indicated by the boxes shaded in green).

Bonds Cushion the Volatility of Stocks, But Not Always

Stocks and bonds have been good portfolio partners because of their low correlations. Wilshire calculates the average correlation between the S&P 500 and the Bloomberg U.S. Aggregate Bond index as 0.15. (A correlation of 0.0 signals returns as being fully independent of each other.)

This average correlation masks the swings that have occurred over time. Correlations between stocks and bonds have soared since the pandemic because both were adversely affected by high inflation. The current period of high correlations follows a decade of below-average correlations.