Stick The Soft Landing
U.S. equity markets advanced to their highest levels of the year on an "inflation week" rally after the closely-watched CPI and PPI reports showed a continued sharp cooldown in price pressures.
Closing at the highest levels since April 2022, the S&P 500 advanced 2.4% this week, while the other major equity benchmarks - the Mid-Cap 400 and Small-Cap 600 - gained 3%.
Real estate equities- the sector with perhaps the most potential upside from a "soft landing" scenario- were among the leaders for a third straight week. The Equity REIT Index gained 2.9%.
The "2-handle" on the headline CPI print and the "0-handle" on headline PPI clash with recent commentary from Federal Reserve officials speaking of "sticky inflation" that requires further demand softening.
Ahead of the start to real estate earnings season next week, brokerage firm JLL reported this week that office leasing activity rebounded 7.7% in Q2 compared to Q1, an encouraging sign that office demand may be showing early signs of stabilization.
U.S. equity markets advanced to their highest levels of the year on an "inflation week" rally after the closely-watched CPI and PPI reports showed a continued sharp cooldown in price pressures. The "2-handle" on the headline CPI print and the historically sharp decline in the year-over-year rate clashes with recent commentary from Federal Reserve officials, including from Richmond Fed President Barkin, who said this week "inflation has proven stubbornly persistent" and advocated for "weakening demand to control inflation" - perplexing commentary that appears to discount or outright ignore the last six-to-nine months of economic data in which inflation has cooled without a corresponding uptick in the unemployment rate.
