Wall Street has all eyes on the June Consumer Price Index which economists expect will slow to an annual headline rate of +3.1% and a "core" rate (strips out food and energy) of +5.0%. Federal Reserve officials have been widely broadcasting that a 25 basis-point rate hike is all but guaranteed at the upcoming July 25-26 meeting, so this read is not likely to have any impact on that decision. At those projected levels, it would be tough for the Fed to justify another monthly pause.

Many bulls are hoping that the July and August inflation reads will both show even further slowdowns, which could in turn convince the Fed to hold off on another hike at its next meeting in late September (there is no August policy meeting). While a "disinflation" trend would be welcome by the Fed as well as consumers, there is growing concern about the impact it could have on corporate margins and the economy in the quarters ahead.

The big risk is that decreasing inflation could evolve into outright "deflation," meaning prices start to turn negative. This can happen quickly when prices are trending down if consumers develop a mindset of holding off on purchases because they think prices are going to drop even further, which can lead to decreased economic activity and deal a blow to corporate earnings.

Deflation also raises the risk of recession and job losses. At the same time, economists say slowing inflation could have the effect of reinvigorating consumer confidence and spur increased spending. With jobs still plentiful and wages continuing to rise healthily, economists think the second scenario is more likely.

Assuming consumer spending doesn't rise too sharply and reignite inflation, many economists believe steady consumer demand would likely prevent the economy from slipping into recession as a result of the Fed's rate hiking campaign. As far as the various impacts to corporate earnings, some early Q2 releases already illustrate that this is becoming a more difficult environment to eek out a profit, especially for consumer goods companies.

Levi's, for instance, slashed its outlook last week on a combination of slower consumer spending and planned price reductions. Notably, CEO Chip Bergh said the company was taking price reductions because it had "raised prices relative to competitors past the point where it could continue to grow market share." There are really no US earnings of interest today but Thursday will bring highly anticipated results from Conagra, Delta, Fastenal, and PepsiCo, all of which will provide further clues as to how companies are adjusting their strategies.

Aside from the CPI report today, the only other economic data on the calendar is the Fed's Beige Book. I still like "big-tech" better than many other stocks, despite their recent aggressive run higher.

Perhaps One Big Reason US Economy has so far Proved Resilient in the Face of Fed Rate-Hikes: Most mortgage holders aren't feeling the pain of higher interest rates as more than 60% of existing mortgage holders are sitting on rates below 4%, per a BlackKnight report out Monday. Mortgage interest payments as a percentage of disposable income have remained relatively flat even as mortgage rates have soared, the St. Louis Fed noted in a recent blog post. That's left homeowners in the U.S. fairly insulated from rate shock. Unless, of course, they need to sell their house. Meanwhile, the 30-year mortgage is a uniquely American thing. In other countries, loans are shorter and homeowners are forced to frequently reprice at current market terms. Most mortgages in the U.K. reprice every two years, so interest rates have a direct effect on discretionary income. U.K. homeowners will be spending as much as 30% of their income on mortgage payments, up from about 20% previously, according to an estimate from Barclays CEO C.S. Venkatakrishnan. Those golden handcuffs that are keeping homeowners from moving are likely buoying the U.S. economy. Source Axios

Interesting to Think About... Concert Ticket Prices Continue to Skyrocket, Complete Reversal from the Past: Back in the 60s, 70s, 80s, and even 90s concerts were cheap to attend but the music was more expensive. Think about that for a moment. Think about how things have flip-flopped in many areas. Bands would hold concerts to promote their latest singles and newest album in hopes that we would go to the record store and purchase them. In today's world the music is essentially free but the concerts will cost you an arm and a leg. The Wall Street Journal recently ran an article that stated the average resale price for concert tickets on SeatGeek has more than doubled since 2019, from $125 to $252 so far in 2023. For sold-out acts such as Taylor Swift, Beyoncé and Bruce Springsteen, that number jumps to $1,311, $480 and $469, respectively, the company says. Industry insiders point to sky-high demand: U.S. concert attendance is up 24% since 2019, according to Live Nation Entertainment, which owns Ticketmaster. Added fees and dynamic pricing drive up costs further for concertgoers. The average fan paid $104 for tickets to the top 200 tours in North America in 2022, according to trade publication Pollstar, up from $87 in 2019. On top of that 16oz beers are now selling for +$20 at some venues and concert t-shirts are selling for +$50. A recent survey said that 37% of adults reported they’ve attended fewer concerts in the 12-months, with the most popular reason being the high cost of tickets. The question now is how much more will the fans be willing to spend? Source WSJ

What Americans' Toothpaste Choices Reveal About the Economy: Americans are cutting back on personal hygiene products in a troubling sign for the US economy and consumer-focused companies. Americans are now skimping, even on everyday items such as toilet paper and toothpaste. “The strains that the consumer is under have been exacerbated over the last couple of months,” said Morningstar analyst Erin Lash. The reduction of food assistance programs, lower tax returns and using up extra savings and stimulus funds have an impact, she said. Personal-hygiene products, including staples, have taken a hit, according to NIQ, which tracks purchases at US retailers. Units sold of toothpaste, laundry detergent and toilet paper are down around 3%-4% in the 52 weeks through June 24. To be sure, some products are being used less at home as Americans return to work and travel. Still, this sets up a tough remainder of the year for consumer-goods companies and retailers, which begin reporting their latest quarterly results in a few weeks. Their stocks have trailed the S&P 500 this year, and now their ability to keep raising prices and gloss up their income statements looks like it won’t work much longer. Source Fortune

Judge Rejects F.T.C. Delay of $70 Billion Microsoft-Activision Deal: A federal judge on Tuesday ruled against the Federal Trade Commission’s attempt to delay Microsoft’s $70 billion acquisition of Activision Blizzard, setting the stage for the tech giant and the video game publisher to merge as soon as this month. In a 53-page decision, Judge Jacqueline Scott Corley of the U.S. District Court for the Northern District of California said the F.T.C. had failed to show it was likely to prove the merger would result in a substantial reduction in competition that would harm consumers. The ruling is a significant blow to the F.T.C.’s efforts to police blockbuster tech mergers more aggressively. That strategy is spearheaded by the agency’s chair, Lina Khan, who has argued that Big Tech’s vast influence over commerce and communications has led to anticompetitive behavior. Source NYT

Jeep "Ducking" Craze Sweeps the Nation: The act of placing a rubber duck on someone's Jeep—called Jeep "ducking" and/or "Duck Duck Jeep"—began with one person, named Allison Parliament, from a small town in the Canadian province of Ontario. She unknowingly started a movement of kindness, fellowship, and recognition with that first rubber duck she placed on a Jeep. Two years later, that single gesture has morphed into the Jeep ducking craze that has swept throughout the Jeep enthusiast community in the United States as well as in nearly a dozen other countries around the world. According to Parliament, "Jeeps get ducked for many reasons and with lots of motivations and meanings. For me, it was an act of kindness, a healing of sorts, as well as recognition of and greeting to a fellow Jeep owner. But it can just be that you like their Jeep, or it's the same Jeep you have, or maybe a classic Jeep you would like to own one day. You don't really need a reason for Jeep ducking other than to connect, bring a smile to someone's face, and have fun."

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