• The June increase in producer prices was stronger than expected, driven by trade services (business markups). Businesses still maintain some pricing power.

 

 

  • Excluding trade services, the PPI was almost unchanged.
  • The U. Michigan consumer sentiment index deteriorated further, driven by households’ frustration with inflation.

 

 

  • However, inflation expectations eased.
  • The market is increasingly convinced that the Fed will implement 75 basis points of rate cuts this year, with September now fully baked in.
  • Mortgage rates are sharply lower after the decline in Treasury yields.

 

Source: Mortgage News Daily

 

  • The U. Michigan consumer survey index of buying conditions for houses is at record lows.

 

 

  • The inventory of homes for sale is now well above last year’s levels …

 

Source: Redfin

 

  • … as properties take longer to sell.

 

 

  • However, prices continue to hit record highs.

 

Source: Redfin

 

  • June retail sales were flat month-over-month, dragged down by weak vehicle sales. The decline was due to a two-week cyberattack on car dealer software company CDK, which caused widespread outages at car dealerships.
  • Online retail sales increased again.
  • Sales of building materials rebounded.
  • The Atlanta Fed’s GDPNow Q2 growth estimate climbed to 2.5% (annualized) in response to the retail sales report
  • Despite the upside surprise in retail sales, Treasury yields declined again. We believe the Bond market is the best barometer of economic strength or weakness.

 

 

 

Market Data

 

  • In Q1, the average equity sleeve of advisor portfolios analyzed by Fidelity reached the highest level in two years, dominated by US equities.
  • US office vacancy rate projections:

 

 

  • Small caps are much more sensitive to Treasury yields than large caps, especially tech.
  • The S&P 600 small-cap index now looks very overbought.

 

 

  • The Dow is also in overbought territory.

 

 

  • The Nasdaq 100 experienced a long-overdue pullback on Wednesday, marking its biggest one-day decline since 2022.

 

 

 

Great Quotes

 

“Excellence is never an accident. It is always the result of high intention, sincere effort, and intelligent execution; it represents the wise choice of many alternatives. Choice, not chance, determines your destiny.”  – Dr. Aristotle

 

Picture of the Week

 

Kendwa village, Zanzibar, Tanzania

 

 

All content is the opinion of Brian Decker.