The annual inflation rate dropped to its lowest level since March 2021. The Consumer Price Index (CPI) for July came in at 0.2% for the month, which was 2.9% for the last twelve months. Core CPI, which excludes volatile food and energy also increased 0.2%, which is up 3.2% for the last year. Both increases came in line with expectations. The cost of shelter, a large weighting within the all-items CPI, increased 0.4% for July and contributed to 90% of the increase. Auto insurance was also higher at 1.2%, and it is up 18.6% over the last year. Those areas were offset by July’s deflation in cars and trucks of 2.3%, and they are down 10.9% from a year ago. Other areas that were lower on the month were apparel (-0.4%), medical services, and core commodity prices (both -0.3%). Though the annual inflation rates for overall and core prices are higher than the Fed’s target of 2.0%, the trends over the last few months have been much lower and pave the way for the Fed to lower short-term rates at their next meeting in September. CNBC
Other Inflation News: A day before the CPI numbers came out, the Producer Price Index (PPI) came out. The PPI is the inflation index that producers and manufacturers pay on wholesale prices and inflation at the producer level usually filters into consumer prices. For July, the PPI rose 0.1% and was up 2.2% for the past year. More evidence that inflation is starting to get under control and approaching pre-pandemic levels. AP News
Inflation 10-year Outlook: The measure of expected inflation is the 10-year break-even rate, which is what market participants expect inflation to be, on average, over the next ten years. As of now, it is reading 2.09%, so investors expect that overall inflation should hit the Fed’s target over the next decade (see chart).
Q2 Earnings Update: The reporting season is almost over for the second quarter, and the news has been very good. Revenues grew 5.2% for the quarter so far, and if that holds up as the last companies report, it will be the largest growth rate in the last couple of years. The earnings growth rate for the S&P 500 is 10.8%. If that holds up it will be the largest increase since Q4 2021. We always like to remind investors that stock prices follow earnings, so solid earnings growth is what elevates stock prices in the long run. FACTSET
Financial Planning/Investment Strategy Corner:
If You’re Stressed About Money – Examine Your Money “Scripts”: Everyone has a relationship with money and finances, much of it rooted in childhood and early adulthood. If someone is struggling with spending, saving, etc., they may want to examine their beliefs that subconsciously affect money decisions. Brad Klontz, a financial psychologist, suggests that there are three main money “scripts” that get in the way of a healthy view of money. They are money avoidance, money worship, and money status. Avoidance is when money is viewed negatively or having wealth means you are greedy and leads people to avoid accumulating or earning money. Money worship is when people feel having money leads to happiness which can lead to overspending. When the script is about money status, it is similar to the worship script where they tend to overspend and keep up appearances. Lastly, there is a money script he believes is healthy and that is money vigilance. This is when someone is cautious about spending, diligent about saving, and has a future orientation to stay on track for goals. If you are stressed about money and your finances, examining and challenging your beliefs can help you get to the root cause of the issue. You can also examine your spending and habits in the context of whether they are really making you happier. You may not be able to control these beliefs all the time, but recognizing them may be the first step in reducing your financial stress. CNBC
Quick Hits:
- How Olympians improve their sleep: GetPocket/Wash Post
- Just how bad is sun tanning for you and your skin? NYT
- A blood test for Alzheimer’s may be coming to your doctor’s office soon: AP News
- Some scientists believe we are hitting our biological age limit of about 100 years: WSJ
- The best nutritional takeaways so far in 2024: NYT
- A recent study suggests modern humans almost went extinct 900,000 years ago: Smithsonian Magazine
Be More Productive and Happy by Doing Less: In our frenetic society, the mantra is if you want more achievement, money, joy, etc., you have to do more. However, the evidence from research supports doing less to increase productivity and happiness. Some research suggests that workers are only truly focused on work for six hours a week – not 40. Busy work may feel productive, but it is keeping workers from the work that matters and drains them of energy. The same goes personally with lives busy with kids, homes, friends, and hobbies with the stress of many activities and things to do. For areas in work where you want better results and less stress focus on things that have brought big wins and make a list of tasks that lead to those wins. All other tasks should be reduced or minimized. The same approach can be used at home by focusing on what brings you joy and minimizing overscheduling of things you “must do”, but don’t bring joy. It’s not always easy to eliminate or reduce the “must-do” list but you have to be creative, and sometimes, ruthless. To improve your life and happiness, sometimes it's better to look at subtraction and not addition. Harvard Business Review
Quote: “Be happy for this moment. This moment is your life.” Omar Khayyam
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