Last week we saw a bout of market volatility. Some investors were worried that the bull market’s two biggest assumptions might not be reliable. Many see the AI hype slowing and some weakness in the US job market. They’re also increasingly keen for the Fed to lower interest rates. That all makes the latest inflation reading all the more important for investors. They’re holding out for a “just right” figure. If the number’s too hot, it’ll make it hard for the Fed to lower interest rates now higher rates are its best tool for cooling consumer price rises. But if the number’s too cold, it could hint that the economy is slowing faster than expected and the Fed is behind the curve.
Still, inflationary pressures have been easing, particularly across the more stubborn components. And though the year-over-year comparisons might not look as encouraging – prices were already on the decline from their peak last year – there are signs that prices have been steadily dropping over the past three months. That should bring inflation a good step closer to its target, and allow the Fed to start lowering rates more regularly.
Whatever happens with the data, and whatever the market’s response to it, remember to take a step back rather than getting swept up in the erratic, fleeting movements. It’s just one piece of data, after all. So stick to your well-thought-out strategy, ideally by using a well-diversified portfolio.
In the calendar
- Monday Earnings Barrick Gold.
- Tuesday UK unemployment (June), German economic sentiment (August), US PPI (July), UK Unemployment rate (June). Earnings Home Depot.
- Wednesday US inflation (June), UK inflation (July). Earnings Cisco.
- Thursday UK and Japan GDP (Q2), US retail sales (July), China retail sales and industrial production (July). Earnings Walmart, Applied Materials, JD.com, Deere.
- Friday UK retail sales (July), US consumer sentiment (August).
What you might’ve missed last week
Global
- Global markets saw some large sell-offs, and the stock market’s volatility gauge spiked to levels reminiscent of past downturns. But the S&P 500 ended up virtually flat on the week.
US
- A weekly update from the job market eased worries a little.
Japan
- The Bank of Japan appeared to be bowing to market pressure, suggesting it wouldn’t hike interest rates again until the turbulence settles.
UK
- House prices rose by 0.8% in July compared to June, marking the fastest increase since January.
- The UK competition regulator raised concerns about the £2.5 billion Barratt-Redrow merger.
- British services companies saw a surge in new orders and the highest rise in employment in over a year during July.
- The construction industry accelerated sharply in July, growing at its fastest pace in more than two years.
- Discussions are underway to allow for increased government borrowing by using a different measure of debt.
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