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- Monday's Scoop: Steady🌤️
Hey friend - I hope you enjoyed the weekend.
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Here’s what you need to know today to inform your work, spending, and investments:
🌎 Big picture
Climbing insurance costs are becoming a barrier to homeownership.
Inflation seems to be back to normal.
Corporate profits are looking decent so far.
How are you feeling about the economy? |
👜 Cost of living trends
Inflation Rate: +3.0% (YoY), -0.1% (MoM)
Policymakers aim for 2% YoY inflation (June CPI)
Inflation seems to be returning to a much more normal level. The Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) price index rose by only 0.1% in June. The cost of living overall is only 2.5% higher than a year ago. The Federal Reserve’s preferred inflation gauge, the core PCE index, which strips out volatile food and energy prices, rose by a modest 0.2% in June. That’s a much more normal rate than we’ve seen in the past few years.
The cost of living has stopped rising as quickly as in the past few years, and inflation is now much closer to the 2% annual rate that policymakers consider normal. The Fed has raised borrowing costs to slow spending and business activity in an attempt to cool the overheating economy and slow price inflation. Investors and economists expect the Fed to ease some of its inflation-fighting policies soon and make it a little less expensive to borrow to buy a home, lease a car, or spend on your credit card.
🤓 Inside Scoop: What is the difference between the PCE and CPI?
The PCE (Personal Consumption Expenditures) price index and CPI (Consumer Price Index) are two ways economists track inflation, but they differ in scope and method. The PCE covers all goods and services consumed by households, adjusting for changes in consumer behavior, while CPI focuses on a fixed basket of goods and services.
The PCE may often show lower inflation because it accounts for consumers switching to cheaper alternatives, like beef to chicken, as beef prices rise. The PCE also includes a broader scope of costs. For instance, while the CPI tracks only out-of-pocket medical expenses, the PCE tracks medical costs paid on consumers’ behalf. The weightings of the underlying categories also differ. The PCE has a smaller weight for shelter. Investors pay the most attention to the CPI because it usually comes out a couple of weeks before the PCE. Policymakers at the Federal Reserve prefer the PCE, particularly the core PCE that strips out volatile food and energy prices.
🏠 Housing trends
30yr Mortgage Rate: 6.8%
That’s down from 6.9% a year ago. (MBA)
Median Existing Home Price: $426,900
That’s up from $410K a year ago. (NAR)
High insurance costs are becoming a barrier to home homeownership. Homeowners saw a 21% increase in insurance premiums last year, driven by severe weather events linked to climate change, according to Policygenius. Insurers pass the rising costs of more frequent weather damage to consumers, and some insurers have already started pulling out of high-risk areas altogether. State Farm and Allstate, for instance, have stopped accepting new policies in California due to rising wildfire damage. The lack of available and affordable insurance options is becoming a significant barrier to homeownership, as many mortgages require insurance coverage. Despite the rise in costs, understanding the exact impact of climate risk on premiums remains challenging due to limited data sharing by insurers.
📈 Investment trends
The Market: ⬆️ +0.1%
S&P 500: 5,463.54
1Mo: -1% | 1Yr: +19% | 5Yr: +86%
The market didn't do much on Monday as investors waded through corporate financial updates and waited for an update from the Federal Reserve about its economic policies this week. Investors don't expect the Fed to reduce borrowing costs this week, but they will be looking for signals that a rate cut will come in September.
Corporate profits have been decent so far, but sales are slowing more than expected. We’re nearly halfway through second-quarter corporate financial updates, and 78% of companies have reported higher profits than investors expected, according to FactSet. S&P 500 companies are on track to report nearly 10% earnings growth this year, the highest year-over-year increase since the fourth quarter of 2021. Sales, however, haven’t been as exciting. Only 60% of companies have reported better sales growth than investors expected, well below average. Much of the profit growth has been driven by cost cuts.
🏭 Companies worth watching
👍👎 APPROVAL RATINGS
Act like a boardmember and judge how companies behave. Engaging helps build your financial confidence and hold corporations accountable. (+2pts)
 Warner Bros Discovery | Court Battle Warner Bros Discovery sued the NBA to block its new licensing deal with Amazon, Comcast, and Disney that ended the NBA's 40-year relationship with TNT and Warner. The media giant sees NBA games as a valuable lifeline for its broadcast network and claims to have a right to match Amazon's offer.
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💭 Broader perspectives… (+2pts)
Do you still have a TV cable subscription? |
 McDonald’s | Fast Food Slowdown McDonald's reported its first global revenue decline in years as inflation drove consumers to more affordable options and more Gaza-war-fueled consumer boycotts hurt sales. The fast food giant may extend its promotional $5 meal deal after receiving a positive response.
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 Loews | Passing the Batton After nearly 25 years as CEO, James Tisch will step down from Loews Corporation, naming his son Benjamin Tisch as his successor and staying on as chair. The insurance and property giant transitions while in a solid financial position, reporting rising sales and strong investment returns in the second quarter.
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 Kroger | Merger on Hold Grocery giants Kroger and Albertsons agreed to pause their merger as they face increased opposition from state and federal regulators arguing the merger would harm consumers and cripple competition. The two would have combined to be the largest supermarket by store count in the US, competing with Walmart and Amazon.
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 Disney | Box Office Hit Disney's Deadpool & Wolverine has emerged as a box office triumph, generating $438M in global ticket sales in its first weekend as one of the highest-grossing releases of the year. The Marvel epic is expected to pass $1B in sales this year and contribute to over $30B in cumulative Marvel studios earnings for Disney.
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🛠️ Recommended resources (+2 pts)
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