What Happened Last Week
- Inflation Data: Tuesday’s headline Consumer Price Index (CPI) was in line with expectations, but Producer Price Index (PPI) on Thursday came in hot.
- Anchorage Summit: President Trump met Vladimir Putin in Alaska. As expected, negotiators made no tangible progress on a peace deal for Ukraine.
- Buffett’s United Healthcare Stake: Quarterly 13-F filings showed that Berkshire Hathaway has been building a position in UnitedHealthcare.
What We’re Watching This Week
- Retail Earnings: A number of consumer-facing firms will report earnings this week.
- Jackson Hole: Chair Jerome Powell will give his annual keynote at the Jackson Hole Symposium on Friday morning.
- Ukraine Talks: Trump is set to meet with European leaders on Monday in D.C. to discuss the Russians’ offer.
Investment Management Team’s Views
Stocks finished the week higher despite a very hot PPI print that muddied the waters on the inflation front after Tuesday’s benign CPI print. The recent uptick in inflation, as captured by both metrics, has been primarily driven by services, rather than goods, providing no clear guidance on the impact of tariffs on prices and the effects of an immigration slowdown on the supply side of the economy. Friday’s retail sales data and June revisions were marginally positive for the growth outlook, but didn’t change the view that the economy is weakening and needs rate cuts. We will hear from Chair Powell on Friday during the Fed’s Jackson Hole Symposium, which may provide insight into how the Board is thinking about recent data. A 25 basis point (bp) cut by the Fed remains the base case for September, but there is now very little chance for a 50 bp “jumbo” cut priced in the curve.
On Friday, President Trump hosted Vladimir Putin in Anchorage to discuss an end to the war in Ukraine. Although no agreement was reached, reports indicate that Putin would accept U.S. security guarantees for Ukraine, in exchange for a cessation in fighting along existing front lines. The current offer is unlikely to be acceptable to Ukraine and its European allies, as they maintain that Ukraine will cede no territory. Ukrainian President Volodymyr Zelenskyy and other European leaders are expected to meet with President Trump on Monday in Washington, D.C., to discuss recent developments; however, a peace agreement still appears unclear.
Last week saw small caps outperform large cap peers, and the unloved healthcare sector rally more than the broader market. Thursday’s quarterly 13-F filings showed Warren Buffet’s Berkshire Hathaway building a stake in UnitedHealthcare, and Eli Lilly shares continued to rally off their recent lows. It was a slow week for corporate earnings, but the frequency of reports is expected to increase as earnings season enters its final weeks. This week, several of the largest U.S. retailers, including Walmart, Home Depot, and Target, will release earnings reports. Looking even further ahead, Nvidia will provide its quarterly update next week, and Broadcom the week after, as the overall strong U.S. earnings season draws to a close.