• The non-discretionary component of the PCE inflation index has remained sticky.

 

 

  • Homes are taking longer to sell.

 

Source: Redfin

 

Housing affordability is at the lowest levels since the 1980s. (2 charts)

 

 

 

  • Consumer inflation expectations eased further last month, according to the latest survey from the NY Fed.
  • 1-year inflation expectations:

 

  • 3-year inflation expectations:

 

  • Households are not too worried about unemployment.
  • – Probability of losing a job (holding at pre-COVID levels):

 

 

  • US households are increasingly concerned about not being able to make minimum debt payments.

 

 

  • This chart shows credit card utilization rates by generation.

 

 

  • Fund managers now consider a US recession the biggest tail risk.

 

Source: BofA Global Research

 

  • As of July, the federal budget deficit exceeded $1.5 trillion (fiscal year-to-date).

 

 

  • The PPI report came in softer than expected, with core PPI slightly negative in July. The weakness was driven by trade services, a measure of business markups, suggesting that companies’ pricing power has diminished as end users resist high prices.
  • Stocks and bonds rallied in response to softer producer price increases
  • The market is still pricing in the possibility of one or more 50 bps rate cuts this year, with a total of 110 bps of rate reductions anticipated.
  • The NFIB small business sentiment index surprised to the upside, climbing to its highest level in nearly 2.5 years. Small business outlook improved sharply in July. It should be noted that this indicator tends to be sensitive to US political events.
  • The July CPI report was roughly in line with expectations, with the headline index dipping below 3% year-over-year. However, the core services CPI accelerated, as rent inflation jumped.
  • US retail sales in July exceeded expectations, easing recession concerns. The market trimmed the chance of 50 basis point rate cuts.

 

Market Data

 

  • Gold is trading near record highs.

 

 

  • Fund managers’ global growth expectations point to downside risks for stocks.

 

 

  • Tech positioning has eased as earnings growth decelerates (2 charts).

 

Source: Deutsche Bank Research

 

 

  • Fund managers still see the Magnificent 7 exposure as the most crowded trade.
  • It’s worth noting that outside of the tech mega-caps, margin expectations have been trending lower.

 

 

  • The S&P 500 is testing resistance at the 50-day moving average.

 

 

  • What will drive US equity returns over the next 30 days?

 

Source: S&P Global PMI 

 

  • It appears that utilities are no longer just a defensive sector; they have also become an indirect play on AI.

 

Source: Reuters   Read full article

 

 

Great Quotes

 

“Weak people take revenge, strong people forgive, intelligent people ignore.”

– Albert Einstein

 

Picture of the Week

 

Cliffs of Telascica Nature Park, Croatia

 

 

 

All content is the opinion of Brian Decker