Weekly Investment Perspective

U.S. stocks continued their upward trajectory, closing at all-time highs. The move was supported by a cooler than expected consumer inflation report and sustained corporate earnings momentum. The Dow Jones Industrial Average (DJIA) gained last week, up 1.58% and closing above the 40,000 mark. The S&P 500 also drifted higher, adding 0.86%. Meanwhile, the Nasdaq Composite continued its strong performance on the year, up 0.25% for the week.

The cost of consumer goods and services fell in June for the first time since the pandemic in 2020, affirming a recent slowdown in inflation that could compel the Federal Reserve to cut U.S. interest rates in the next few months. The consumer price index fell 0.1% last month after no change in May, the government said Thursday.. The 12-month rate of inflation also slowed to 3% from 3.3% and matched the lowest level since April 2021. The more closely followed core CPI that strips out food and energy rose just 0.1% for the second month in row. It came in under Wall Street's 0.2% forecast.

The story of inflation over the past year is generally consistent: the cost of goods is either flat or falling, but service cost inflation remains stubbornly high. The same pattern repeated itself at the wholesale level in June. The cost of goods -- gas, electronics, appliances - dropped by 0.5% in June. They have now fallen in four of the first six months of 2024. The cost of services, however, rose 0.6% in June following sizable increases in the prior two months. On an annual basis, core service prices have risen 5.0% compared to a 1.7% decline in core goods prices. However, the June CPI report did show some progress in one of the stickiest components of core services as shelter prices logged the lowest monthly increase since early 2021.

U.S. consumer sentiment ebbed in July, but inflation expectations over the next year and beyond improved, a survey showed on Friday. The University of Michigan's preliminary reading on the overall index of consumer sentiment came in at 66.0 this month, compared to a final reading of 68.2 in June. Economists polled by Reuters had forecast a preliminary reading of 68.5.

Politics have returned to the forefront for financial markets following an assassination attempt on former President Trump at a rally in Pennsylvania on Saturday. Trump's ear was grazed by a bullet while one rally attendee was killed and others critically injured before the shooter was neutralized by Secret Service. Early this week, Trump also announced Ohio senator JD Vance as his VP running mate. Market participants will continue to monitor the election polls and potential implications for government policy as the November elections draw nearer.