We have probably grown as tired of writing about inflation as you are reading about it, but there is no avoiding this week’s consumer price index (CPI) for July. Entering Wednesday morning’s CPI release, the S&P 500 had risen over 12% off its June 16 lows as investors bet that falling commodity prices coupled with improving supply chains and retailers discounting goods to reduce inventory gluts, would translate to cooling inflation data for July. Fortunately for bulls that indeed was the case, as inflation moderated from 9.1% year-over-year in June to 8.5% in July, well below consensus estimates. As a result, the peak inflation narrative strengthened significantly, and stocks responded with another leg higher. For perhaps the first time all year, bulls have some real momentum as the Nasdaq Composite has now risen over 20% from its 2022 lows and is technically back in a bull market, as growth stocks have recently thrived as interest rates have moderated. The S&P 500 has now responded to its worst start since 1970 by cutting those losses in half and bonds have also started off the second half of 2022 with strength.
Next week will see a bevy of housing market data releases as well as important visibility into the health of US consumers with a retail sales report for July.
Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder
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