The U.S. July CPI and other economic data will be released this week! The Federal Reserve's interest rate cut schedule may be reshaped

According to Zhitong Finance APP, Apple (AAPL.US) announced an additional investment of $100 billion in the United States to boost technology stocks, driving U.S. stocks back to near historical highs. Last week, the S&P 500 index rose by 2.5%; the Nasdaq Composite Index closed at a new high, with a cumulative increase of nearly 4%; the Dow Jones Index rose by about 1.4%.

Currently, the market is betting that the Federal Reserve will cut interest rates multiple times this year. The U.S. July CPI, to be announced on Tuesday, is undoubtedly the focus of economic data this week. Investors will also closely monitor the latest developments in the U.S. July PPI, retail sales, and consumer confidence. In terms of corporate earnings reports, only 8 companies in the S&P 500 index will release their latest earnings this week, with the reports from CAVA (CAVA.US), Cisco (CSCO.US), and Deere & Company (DE.US) being the highlights.

New Federal Reserve Officials

The economic data over the past week has been relatively bland and has not changed the recent economic narrative. Due to concerns about a softening labor market, investors are now betting that the Federal Reserve will cut rates by at least 50 basis points this year. Furthermore, the news that U.S. President Trump nominated his economic advisory committee chairman Stephen Miran to serve as a Federal Reserve governor to replace Adriana Kugler, who unexpectedly announced her resignation, has intensified predictions that the Federal Reserve will soon cut rates.

Federal Reserve officials have shown a divergence in their direction on interest rate policy. In the most recent meeting, Federal Reserve governors Chris Waller and Michelle Bowman held differing opinions on the decision to maintain interest rates.

Michael Feroli, Chief U.S. Economist at JP Morgan, stated that if Miran is approved as a Federal Reserve governor before the September meeting, there may be at least three dissenting votes against maintaining interest rates at that meeting. He said, "For Powell, the risk management for the next meeting may not just be balancing employment and inflation risks. We now believe that the path of least resistance is to bring forward the next 25 basis point rate cut to September."

Inflation Data

The U.S. July CPI will be released at 20:30 Beijing time on Tuesday. The market expects this data to reflect the impact of tariffs on inflation. Wall Street economists predict that the U.S. July CPI will rise by 2.8% year-on-year, up from 2.7% in June. The core CPI for July, excluding food and energy prices, is expected to rise by 3% year-on-year, up from 2.9% in June; the July core CPI is expected to rise by 0.3% month-on-month, up from 0.2% in June.

Alan Detmeister, a senior economist at UBS, pointed out that tariffs are driving inflation to accelerate, and the July data will initiate a rising trend that will last for several months. He expects that by the end of this year, the year-on-year increase in the U.S. core CPI will rise from 2.9% in June to 3.5%.

Retail Sales

The U.S. July retail sales data will be released at 20:30 Beijing time on Friday. Investors will gain the latest insights into consumer spending from this data. Economists expect U.S. July retail sales to grow by 0.5% month-on-month, slightly lower than June's 0.6% RBC senior U.S. economist Michael Reid stated that a significant portion of this growth is expected to come from automobile sales. He anticipates that retail sales, excluding volatile items like automobiles and included in the quarterly GDP control group, will only grow by 0.1%. He remarked, "We expect the data excluding automobiles to perform modestly."

Bitcoin or Bread?

Market speculation remains high. The latest research by Apollo's chief economist Torsten Sløk points out that Nvidia (NVDA.US), the largest stock by market capitalization in the S&P 500 index, has a price-to-earnings ratio that is the highest since Microsoft (MSFT.US) in 1999. Meanwhile, stocks like Firefly Aerospace (FLY.US) surged on their first day of trading, and cryptocurrencies and related stocks are experiencing a new round of rebounds.

Richard Bernstein Advisors CEO Richard Bernstein stated that there are typically two scenarios that can end the market's speculative frenzy. One is that the Federal Reserve is forced to raise interest rates in the face of rising inflation, which will increase the cost of leverage for investors and businesses, limiting market liquidity. The other is that the Federal Reserve cuts interest rates during a rapid economic slowdown, on the brink of recession.

Richard Bernstein said, "When you combine these two factors, people will stop speculating because they have to buy bread and groceries." "They won't speculate on Bitcoin. They need bread."

In his view, this makes the Federal Reserve's current predicament the focus of investors' attention, as they wonder how much further the market can rise. Richard Bernstein stated, "The market must watch very carefully the predicament the Federal Reserve is facing." "Is the employment data weak enough to prompt the Federal Reserve to cut rates, but not weak enough to trigger a recession, causing people to shift from Bitcoin to bread? That is the dilemma the Federal Reserve is currently in."