Hi YXI friends,

Today we are going to digest the market reaction since the July CPI report.

We first review the July CPI from yesterday and Retail Sales data from this morning, as well as the market reactions in equities and bonds.

In the second half of the article, we examine the latest moves in Treasury ETFs, Equity ETFs (specifically XRT), Tesla, Bitcoin, and Gold.

Dive in!

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. CPI came pretty much in line with expectation

Both CPI and Core CPI printed 0.2% MoM, in line with the expectation. On a YoY basis, Headline CPI came in at 2.9%, which is a touch softer than expected, but I think the market is not too bothered about this.

This set of data gives us a nice continuation of the downtrend that the Fed has been wanting for the past two years. It should at least remove any roadblocks towards a September cut.

Here is a breakdown of the key CPI components, as well as their individual contribution to the overall CPI.

The bigger debate is whether September should be a 25bp cut or 50bp.

The case for 50bp:

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