{"id":83324,"date":"2025-07-24T04:09:31","date_gmt":"2025-07-24T04:09:31","guid":{"rendered":"https:\/\/mycryptomania.com\/?p=83324"},"modified":"2025-07-24T04:09:31","modified_gmt":"2025-07-24T04:09:31","slug":"clouds-gather-on-the-rate-cut-horizon","status":"publish","type":"post","link":"https:\/\/mycryptomania.com\/?p=83324","title":{"rendered":"Clouds gather on the rate cut horizon."},"content":{"rendered":"

A hot consumer inflation report showed that tariffs are starting to make their impact on price\u00a0levels<\/strong>.<\/p>\n

The Consumer Price Index (CPI) increased by 2.7% compared to last year, while the core figure that strips out food and energy prices gained by 2.9%<\/strong>. Both figures rose from May\u2019s rate which was expected.<\/p>\n

Categories that should be sensitive to the initial round of tariffs are accelerating<\/strong> as well. That includes household furnishings that rose 1.0% compared to the prior month, which was the largest increase since January\u00a02022.<\/p>\n

Overall core goods excluding autos rose by 0.5% and is the biggest increase since mid-2022<\/strong>. Back then, the headline CPI figure was running at 9.0% on a year-over-year basis. The chart below shows the annual rate of change in the CPI\u2019s core goods (blue line) and core services (orange line) measures.<\/p>\n

Chart from Liz Ann Sonders on\u00a0X<\/p>\n

On the producer side, the June Producer Price Index (PPI) rose by 2.3% compared to last year while the core figure increased by 2.6%. While both figures represent a deceleration from May, much of the decline was attributed to weak demand for travel that drove a decline in services<\/strong> inflation<\/strong> while goods rose 0.3% month-over-month.<\/p>\n

Along with growing evidence that inflation could rise further in the back half of the year, evidence suggests the economy is performing just fine<\/strong>. That includes retail sales for the month of June that rose by 0.6% month-over-month, and was well ahead of estimates for a 0.1% increase.<\/p>\n

Rising inflation and strong economic data is clouding the outlook for interest rate cuts from the Federal Reserve even further<\/strong>. Market odds are about evenly split on a quarter-point rate cut in September or no cut at\u00a0all.<\/p>\n

This week, let\u2019s look at the latest evidence that markets are increasingly pricing higher inflation<\/strong>. We\u2019ll also look at why stocks are continuing to rally past uncertainty over the rate outlook<\/strong>, and the key chart level that would point to further breadth expansion<\/strong>.<\/p>\n

The Chart\u00a0Report<\/h3>\n

As consumer inflation shows signs of accelerating, leading indicators of inflation have been sending warning signals in recent weeks<\/strong>. That includes a rally in assets with a high inflation beta, and are sensitive to rising price levels<\/strong>. Copper prices broke out to all-time record highs two weeks ago, and is notable because copper has among the highest correlations to longer-term inflation expectations<\/strong>. And right on cue, 10-year inflation breakeven rates are starting to move above key levels (chart below). You can see that the 10-year inflation breakeven rate is moving above trendline resistance and is testing the high end of a range going back to\u00a02022<\/strong>.<\/p>\n

Chart from Tavi Costa on\u00a0X<\/p>\n

While President Trump is demanding that the Fed slash interest rates, the central bank could be forced to hold interest rates at an elevated level<\/strong>. That\u2019s because of the Fed\u2019s dual mandate to promote price stability along with full employment. Fed members have been broadcasting concerns about the impact of tariffs on inflation, which is becoming evident. At the same time, labor market statistics and the recent report on retail sales shows that the economy holding up just fine<\/strong>. The Atlanta Fed\u2019s estimate for 2Q GDP currently sits at 2.4%, showing a steady growth rate. As long as the economy is holding up, the Fed\u2019s focus could keep shifting towards price stability<\/strong>.<\/p>\n

Although the outlook for rate cuts is in question, stocks have continued rallying with the S&P 500 moving out to fresh record highs last week. Stock prices follow earnings over the long-term, and evidence of a strong economy is supporting the earnings outlook<\/strong>. The next chart to watch is for a breakout in the average stock. The Invesco S&P 500 Equal Weight ETF (RSP) tracks an equal-weight version of the index instead of capitalization-weighted. You can see below that RSP is testing the highs from late 2024 and is close to breaking out. That follows a \u201cgolden cross\u201d earlier this month when the 50-day moving average (black line) crossed above the 200-day moving average (green line). A move to new highs shows the average stock is keeping up with the S&P\u00a0500<\/strong>.<\/p>\n

Bearish positioning in the average stock could be another contrarian bullish tailwind<\/strong>. The Russell 2000 Index tracks small-cap stocks, and bearish bets are surging even as markets have rallied off the early April lows. Large speculators have built a large net short position in Russell 2000 Index futures<\/strong> that rivals short positioning around the lows seen during last summer\u2019s market selloff and bearish bets seen coming off 2022\u2019s bear market. If positive momentum persists, short-covering by large speculators could deliver another boost to the average\u00a0stock<\/strong>.<\/p>\n

While some market-cap ranges could see a bullish positioning catalyst, one near-term headwind that could impact stocks has to do with historical seasonality and fund flows<\/strong>. July is historically one of the strongest months for the stock market, but the gains are seen during the first half on average. Seasonal weakness hits later in the month and tends to persist into next month. August is also among the worst months for fund flows<\/strong> (which is a driver of poor seasonality), with the chart below showing median mutual fund and ETF flows by month going back to\u00a01996.<\/p>\n

Heard in the\u00a0Hub<\/h3>\n

The Traders Hub features live trade alerts, market update videos, and other educational content for\u00a0members<\/strong>.<\/p>\n

Here\u2019s a quick recap of recent alerts, market updates, and educational posts:<\/p>\n

More macro trades show promising setups.<\/strong>Our portfolio boost from Bitcoin, copper, and\u00a0silver.<\/strong>The key chart I\u2019m watching around inflation reports.<\/strong>A new option position in a crypto and AI-linked stock.<\/strong>How I\u2019m playing the relative strength in Chinese\u00a0stocks.<\/strong><\/p>\n

You can follow everything we\u2019re trading and tracking by becoming a member of the Traders\u00a0Hub<\/strong>.<\/p>\n

By becoming a member, you will unlock all market updates and trade alerts reserved exclusively for\u00a0members.<\/p>\n

\ud83d\udea8Our recent 142% gain would cover a subscription for two years if you apply this discount found in the link\u00a0below:<\/em><\/p>\n

\ud83d\udc49You can <\/strong>click here to join\u00a0now<\/strong><\/a>\ud83d\udc48<\/strong><\/p>\n

Trade Idea<\/h3>\n

IONQ Inc\u00a0(IONQ)<\/p>\n

Peaked near the $50 level back in January and started a new basing pattern. Recently testing the $50 area a couple times since May, and making smaller pullbacks on each test. I\u2019m watching for a breakout over\u00a0$50.<\/p>\n

Key Upcoming\u00a0Data<\/h3>\n

Economic Reports<\/em><\/p>\n

Earnings Reports<\/em><\/p>\n

I hope you\u2019ve enjoyed The Market Mosaic, and please share this report with your family, friends, coworkers\u2026or anyone that would benefit from an objective look at the stock\u00a0market.<\/p>\n

Become a member of the Traders Hub<\/strong> to unlock access\u00a0to:<\/p>\n

\u2705Model Portfolio<\/strong><\/p>\n

\u2705Members Only\u00a0Chat<\/strong><\/p>\n

\u2705Trade Ideas & Live\u00a0Alerts<\/strong><\/p>\n

\u2705Mosaic Vision Market Updates +\u00a0More<\/strong><\/p>\n

Our model portfolio is built using a \u201ccore and explore\u201d approach, including a Stock Trading Portfolio and ETF Investment Portfolio.<\/p>\n

Come join us over at the Hub as we seek to capitalize on stocks and ETFs that are breaking\u00a0out!<\/strong><\/p>\n

Come join the\u00a0Hub!<\/a><\/p>\n

Disclaimer: these are not recommendations and just my thoughts and opinions\u2026do your own due diligence! I may hold a position in the securities mentioned in this\u00a0report.<\/em><\/p>\n

Clouds gather on the rate cut horizon.<\/a> was originally published in Coinmonks<\/a> on Medium, where people are continuing the conversation by highlighting and responding to this story.<\/p>","protected":false},"excerpt":{"rendered":"

A hot consumer inflation report showed that tariffs are starting to make their impact on price\u00a0levels. The Consumer Price Index (CPI) increased by 2.7% compared to last year, while the core figure that strips out food and energy prices gained by 2.9%. Both figures rose from May\u2019s rate which was expected. Categories that should be […]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-83324","post","type-post","status-publish","format-standard","hentry","category-interesting"],"_links":{"self":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/83324"}],"collection":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=83324"}],"version-history":[{"count":0,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/83324\/revisions"}],"wp:attachment":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=83324"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=83324"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=83324"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}