July’s Consumer Price Index (CPI) report showed headline year-over-year inflation remained steady at 2.7%, below the anticipated level of 2.8%. Core inflation, which excludes more volatile food and energy prices, rose to 3.1% from a prior 2.9%, indicating underlying price pressures. The “Inflation Path” chart highlights the unchanged year-over-year print in headline CPI, and uptick in core CPI. We anticipate additional upward pressure on inflation in the coming months as the effects of recent tariffs become more evident in the data.

Inflation Path

• Source: LPL Research, Bureau of Labor Statistics, Burea

With 90% of S&P 500 companies having reported second quarter results, corporate America has handily topped expectations, displaying resilience in the face of a challenging policy environment. Although the S&P 500 had a relatively low bar to clear of just 4.9% earnings growth expected for the quarter, America’s largest companies have cruised past estimates. S&P 500 earnings per share (EPS) growth, tracking over 11% year-over-year growth, is more than doubling the level expected at the start of the season on July 1. Alongside the better-than-anticipated results, an earnings season rarity has also caught investors’ attent

Healthcare has been getting more support from the market pundits lately as a potential value play. While LPL Research’s Strategic and Tactical Asset Allocation Committee (STAAC) has a neutral recommended weighting for the sector, our assessment of the fundamentals (including policy risk) and our technical analysis work suggest the sector is closer to an underweight than an overweight. At this point, attractive valuations and the possibility that a near-term market pullback improves the performance of defensive sectors leave us comfortable at neutral. If some proceeds are needed to fund an upgrade, healthcare will be in the discussion &m

The U.S. Dollar Index (DXY) has rebounded over the last month following its worst first half since its inception in 1973. Progress on trade negotiations, a patient higher-for-longer Federal Reserve (Fed), better-than-expected economic data (up until last Friday’s employment report), and rotational pressure back into U.S. equities have been key catalysts behind the recovery. Technically, oversold conditions, contrarian levels of bearish sentiment and positioning, and major uptrend support for the DXY have also been supportive of the greenback. 

Of course, with currencies, it’s all relative to the other side of the