Is it just me, or does the news seem to be on a rinse and repeat cycle? Stocks are near record highs, bond yields are climbing slowly, and the K-shaped economy continues.
Inflation data released last week left investors mildly encouraged about the future. On Wednesday, the Consumer Price Index (CPI) was released, and showed a 3.4% rise in prices over the trailing-twelve months. That’s still well above targets, but it was lower than June’s 3.5% annualized rate. Core CPI, which excludes food and energy, rose 2.5% annualized.
The Producer Price Index (PPI), which measures wholesale inflation, was flat in July. For the trailing twelve months, the PPI was up 4.7%. It’s no wonder that the goods we are buying are ever more expensive.
I saw this morning that the price of a pound of ground beef has reached $10 in parts of the country. In a related story, more and more families are buying their groceries and necessities on credit cards. This is unsustainable. Total credit card indebtedness by Americans is now $1.26 trillion. That’s not as big as the national debt (soon to hit $40 trillion), but it’s still huge. No matter how low we get the inflation rate, it is unlikely to turn negative, so we will not see prices fall, we will just see them rise more slowly. And all of the inflation we’ve seen since Covid is still in the system.
Luckily, we are not in an avian-flu outbreak, and chicken remains a more-affordable protein source. It is in plentiful supply, and many consumers are switching from beef to chicken.
The Congressional Budget Office predicts that the number of people over 65 will outnumber the group that is under 18 for the first time in U.S. history by 2030. This is problematic for many reasons. The older cohort tends to take money from the government (social security and Medicare, despite being your own paid-in money, hits the federal budget like an expense) while the younger cohort is just beginning to pay in. Immigrants have always filled the gap, but now we have an anti-immigrant administration. What will happen? We will have to reverse course on immigration, or cut benefits, or raise taxes, or all of the above..
If you’re living in Manhattan, you probably already know that rents are expensive. But with a drop in available listings, rents are getting even worse. The median rent on new Manhattan leases is more than $5,000 per month. That’s 6.4% higher than last year. Shelter prices nationwide rose by 3.2% over the last twelve months. The median home price is the U.S. has risen to $434,100 – near the record high. Existing home sales were down 1.7% in July.
You may not be aware that one of our greatest national resources is foreign college students. They bring welcome diversity, revenue, and the opportunity to keep gifted workers at graduation. But this year, foreign student enrollment dropped 17% for the school year just finished.
U.S. retail sales fell in July by 0.6%, as people cut back on online shopping and buying cars.
Transit for oil tankers through the Strait of Hormuz has dropped to near zero, and a senior Iranian source said last week that there was no progress in talks to extend or build on the June cease-fire.
In what must be a related story, China has announced that it is opening the first regular cargo route through the Arctic. For now, it says that it will send cargo ships by the northern pass (up the east coast of Asia, turn left above Russia, and eventually reach Europe). But if I were China, it would be hard to resist collecting some oil from Russia on the return trip. We will see.
For the week ending on August 14th, the Standard & Poor’s 500 finished at 7,785, the Nasdaq Composite Index at 26,729, and the Dow Jones Industrials at 53,732. The yield on the ten-year Treasury closed at 4.696%. U.S. crude oil cost $82.40 per barrel, while N.Y. gold cost $4,390.00 per ounce, and one Euro was worth $1.16.
Elizabeth E. Cook
Partner, Diastole Wealth Management
News and information were gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) Yahoo Finance, Barron’s, The Wall Street Journal, Axios, CNBC, The Bureau of Labor Statistics, USA Today, Bloomberg, The Hustle, IBKR, Fortune, AP, and Reuters. If you have questions, please call Diastole at 203.458.5220, or email me, Liz Cook, at ecook@dwinvest.com. Thank you for reading!
July was the hottest month on record for the contiguous United States. Temperatures averaged 76.89 degrees Fahrenheit, topping the previous record of 76.77 degrees Fahrenheit set in July 1936. One might almost want to take the China route home from work when things are this hot. But at the same time, the American Heart Association says that up to five cups of coffee each day are safe for most adults and might even improve cardiac health. What to do?