I made an appearance this week to discuss Cisco earnings on the Schwab Network, you can see the clip HERE.
It was a very quiet week on Wall Street as many traders and portfolio managers take vacation and enjoy the summer weather before Labor Day. However, we did get some inflation data this week (more below) while oil prices stabilized. I think the super-spike scenario ($150+) in crude prices that many predicted earlier this year is now off the table. However, there has been a massive drawdown in global oil reserves which will need to be replenished so don’t expect a crash in oil prices, either. This means that the desired 2% inflation level by central banks will be harder to achieve and that means interest rates will likely continue to trend higher.
CPI and PPI Reported This Week
Headline CPI rose just 0.1% in July, holding the annual rate at 3.4%. Core CPI, which strips out food and energy, ticked up 0.2% for the month and sits at 2.5% year-over-year. Shelter remains the holdout — still climbing at a 3.2% annual pace and responsible for roughly two-thirds of the headline gain — while energy prices fell another 1.5% on the month but are still up 14.7% year-over-year on base effects from earlier in the year.
PPI told a similar story. Final demand prices were flat in July, though the annual rate sits at 4.7% — and core PPI, which strips out food, energy, and trade services, also sits at 4.7% year-over-year, so the underlying pressure hasn’t eased much even with a flat monthly print.
Neither report was a blowout in either direction, and that’s the point. I read both as confirmation that inflation is cooling gradually rather than snapping back, which is exactly what markets wanted heading into the September FOMC meeting.
The S&P 500 Keeps Making New Highs
The S&P 500 had another good week as it emerges from the June/July consolidation period and analysts are now calling for 8000+ on this index.
Putting It Together
Nothing this week changes my broader view. The data is moving in the right direction — slowly.
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President, Kisco Capital
