Market Commentary — August 15, 2022

The much-awaited CPI inflation report came out last Wednesday, and while CPI is still at a YOY level of 8.5%, it was zero for the month of July, giving investors hope that inflation has peaked. The Fed reiterated it still had work to do to tame inflation, but the data lowered expectations from a 75-basis-point (0.75 of a percentage point) rate hike in September, to only 50 bps.

Decomposing the 8.5% headline rate – food prices increased 1.1% sequentially, but energy prices dropped 4.6% and even better, gas prices declined 7.7%. Core inflation, ex-food, and energy were unchanged. Meanwhile, the annual increase in the producer price index fell 50 basis points sequentially to 9.8% in July, registering its first pullback since April 2020.

One of the favorite economists I follow is Duke’s Campbell Harvey. He posted a great video explaining the inflation data which I encourage you to view. If my Econ professors had been as good as him, who knows where I would be today – maybe helping out the Fed?

In ETF news, hopping on the anti-ESG train, the Peter Thiel-backed asset manager Strive launched an anti-activism energy ETF (ticker DRLL). On the flip side, the Senate’s passage of the historic climate bill is expected to bolster demand for EVs and battery materials, to the benefit of ETFs like BATT.

Single stock ETFs have taken it to the next level, with Roundhill filing for 1-to-1 single security ETFs with no leverage or inverse exposure, just single exposure to foreign stocks: Samsung and Aramco. Not sure what advantage that offers over owing the ADRs.

And single-bond ETFs are the way. This one makes more sense, enabling someone at Robinhood (who doesn’t sell bonds) or someone not wanting to navigate the clunky Treasury Direct website, to get exposure to a specific Treasury bond maturity.

Retail Sales come out next week on August 17th, perhaps offering more insight into the health of the consumer. I am off to Seattle and then looking forward to FutureProof in September. Who’s going?

Jane Edmondson
CEO and Co-Founder

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