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How are we thinking about the July 2025 U.S. CPI report?
Core CPI for July came in at +0.3% m/m, up from +0.2% m/m in June and in-line with consensus. Beneath the surface, we see more settled housing inflation, sustained inflation in non-shelter services categories, but moderate upward pressures on goods prices. Importantly, however, we do not see tariff-related inflation leading to a ‘spiral’ higher for inflation expectations. A key anchor, we believe, is that shelter (>40% of Core CPI) has now settled below its 2018-2019 run-rate. At the same time, mid-/high-income consumers are still spending on discretionary items, which makes us think that consumer finances are in okay shape despite a drag from higher tariffs.
Looking at the bigger picture, we continue to view the market as a glass half full: The technical bid remains strong, and fundamentals are solid enough to push markets slightly higher. The big stories, however, remain the productivity enhancements we are seeing as well as the coordinated global easing cycle (despite the global economy having an asynchronous economic recovery). Against this backdrop, our key themes remain the Security of Everything, Productivity/Worker Retraining, Collateral-Based Cash Flows, and Capital Heavy to Capital Light.
