Market Commentary

Weekly Market Commentary July 16, 2018

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Solid earnings and perhaps some potentially blissful ignorance on the ongoing risks over trade pushed stocks to a second straight week of strong gains. The S&P 500 soared 1.5% for the second week in a row. The MSCI ACWI climbed 1.0%, and the Bloomberg BarCap Aggregate Bond Index rose 0.2%.

Key points for the week

  • The U.S. consumer price index annualized growth hit a six-year high.
  • Producer prices continue to be affected by a tight labor market and trade tensions.
  • Markets posted strong gains for the second straight week.

Economic News

Inflation has reached its highest level in the last six years. After years of struggling to stay above 2%, the CPI is now approaching 3%. The price increase in June was actually weaker than expected, but still enough to reach an intermediate-term high. U.S. consumer price index grew by 0.1% for the month of June, slightly below the 0.2% forecast. In the last year, the CPI has risen 2.9%, the largest gain since February 2012. Core CPI, index excluding food and energy, rose 0.2% in June, raising the annual Core CPI growth to 2.3%.

We expect inflationary pressure to continue. A tight labor market, trade tensions and increasing input prices for producers will continue to affect inflation for months to come. The producer price index rose 0.3% in June, also reaching a six-year high in annualized growth. An increase in prices for producers could carry over to the consumer and would lead the Federal Reserve to raise rates at a quicker pace. This would increase borrowing rates for producers and consumers.


 Fun Story of The Week

Career firefighter recovers Jet Ski, 6 years after Hurricane Sandy

Doug Ferrigno lost his river home due to Hurricane Sandy in 2012. He was finally able to move back and received a call from the local police department. They had found his Jet Ski on someone’s front lawn six miles away. The Jet Ski didn’t have any scratches and the keys were still in the ignition. It started right up! For Ferrigno, this find provides closure for the last six years.


 

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