Economy
Inflation rose last month at an annual rate of 2.7%, according to the latest consumer price index report. Core inflation (which excludes food and energy prices) rose to 2.9%. Both numbers are slightly higher for June than they were in May, but also in line with consensus expectations. The Fed has been vocal about their concerns with inflation accelerating in the second half of 2025 due to tariffs, and as such, we have not seen any interest rate cuts this year. The next opportunity for a rate cut is less than two weeks away when the Fed meets on July 31, but the market has widely priced in no change in rates.
In the construction industry, residential home building picked up last month, but is still slower than this time last year. Both permits for new builds and starts on builds rose in June. The National Association of Home Builders attributes the overall low numbers to high interest rates (which impacts borrowing costs both for builders and prospective buyers), elevated supply numbers (apparently no one wants a 7% mortgage), and rising material costs (tariffs, supply chain disruptions, etc.).
Markets
The S&P 500 made fresh all-time highs this week, rising 0.59%. The market was driven higher by solid earnings growth, primarily in the financial sector. Major banks, including JP Morgan, Citi, and Wells Fargo, reported higher profits for the second quarter. We're in the early innings for earnings season, but so far we've seen better-than-expected results according to FactSet. The positive week brings the year-to-date returns for the S&P 500 above 7%. Looking ahead to next week, two of the "Magnificent Seven" stocks, Alphabet and Tesla, will report earnings.
What We're Reading
- Where the Economy is Heading, According to 69 Economists - WSJ
- The (Muted) Impact of Tariffs on Inflation - Barry Ritholtz
Have a great weekend.
Dogwood Wealth Management