What to watch in the week ahead 8/14

Driving financial news in the week ahead: Housing data, Federal Reserve Minutes, retail sales. 

  • Soft CPI numbers triggered a market rally on Wednesday, which extended into Thursday as PPI numbers were also a downside surprise. Average gas prices also fell below $4 a gallon, after peaking at slightly above $5 in mid-June. 

  • Yieldstreet revamped Norfolk Industrial Complex Equity II on the platform.The opportunity gives investors a chance to add industrial real estate to their portfolio.

CPI numbers last week: July headline CPI came out lower than expected, at 8.7% against 8.9% expected, while headline was flat from June at 5.9% (against 6.1% expected). PPI was also a positive surprise, with production prices down month-over-month. 

The prevailing narrative, which is also underpinning public market performance, is that inflation has peaked. However, it is still debatable how fast it will come down, and to what levels, with most analysts predicting a higher “new normal” inflation for the foreseeable future compared to the 2010s. 

A sanguine market reaction. Investors – already eager for positive catalysts – appeared to be buoyed by the peaking inflation numbers. The S&P rallied strongly on Wednesday and Thursday last week, but uncertainty continues to lie ahead, especially as August is traditionally a low liquidity month. 

Fed Minutes unlikely to show hints of potential monetary policy reversal…According to Bloomberg, “…Even Wednesday’s softer-than-expected July consumer price reading did little to alter bond traders’ expectations, in part as Fed leaders were quick to note that the CPI print didn’t change their view of the central bank’s path toward higher rates.” 

And investors have been too quick to price a Fed pivot, according to Goldman Sachs: 

“Markets recently moved sharply towards pricing easier Fed policy, fueled further by…US CPI report that showed core inflation finally slowing. But we think that it is too early for the market to be trading a full Fed pivot. While we expect disinflation ahead due to the recent fall in retail gasoline prices and improvements in some supply chain measures, we think the near-term inflation picture is likely to remain uncomfortably high. We…expect core goods and services prices to remain firm on a sequential basis, in part due to ongoing firmness in shelter inflation. We therefore think it will take until early next year for inflation to decline enough for the Fed to stop hiking.” 

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Housing data and retail sales: Aside from Fed minutes, investors are likely to focus on housing data and retail sales next week. Mortgage rates have continued their gyration; after dropping at the end of July, mortgage rates moved higher, with increased volatility. The 30-year fixed-rate mortgage averaged 5.22% in the week ending August 11, up from 4.99% the week before, according to Freddie Mac. Building permits and housing starts for July will be released next Tuesday, after posting 1.7M and 1.56M respectively in June.

July retail sales will be released Wednesday, after rising 1% in June, beating the consensus estimate for 0.9%. This figure will be highly scrutinized to understand how the consumer is responding in an inflationary and rising rate environment.    

Yieldstreet’s launches

Yieldstreet continues to offer private market investment opportunities while investor sentiment appears to be marginally improving, which may bring increased inflows into both public and private markets. 

This week, Norfolk Industrial Complex Equity II was opened on the platform. Expected to generate a target net annualized return of 13-15%, the opportunity gives investors a chance to add this subcategory of real estate to their portfolio.* The offering provides investors with exposure to three flex-industrial properties that are leased by 25 tenants including the GSA and Fortune 500 companies.

*Target returns are offered as opinion and are not referenced to past performance. Target returns are not guaranteed and results may differ materially.

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