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.
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
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.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ACWI INDEX
The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.