Your premarket read — what moved overnight, and what it means for long-term investors. A 3-minute brief from Kodiak Capital Advisors.

Note: I apologize for missing the last two editions of Base Camp, my kids have been sick, unfortunately in sequence, and I didn't have time to write and get it out. Back on schedule though. Thanks for understanding.

The Setup

Inflation week delivered, and it delivered calm. Softer CPI and PPI reports pushed September rate-hike odds down and carried the S&P 500 to a record close above 7,800 for the first time. This morning brings the last two data points of the week: July retail sales and consumer sentiment, and they're the ones that tell us how households actually feel.

Stocks

Futures are flat: S&P 500 and Dow futures are up a hair, Nasdaq futures down a hair. That's a market with nothing left to react to until 8:30. Our read: after a week that added a record high, a directionless Friday open isn't indecision, it's the market having already priced in the news. The interesting question isn't today's tick, it's whether an index at all-time highs squares with an economy where consumers are this gloomy.

Rates & The Fed

The week's inflation data was the good kind of boring. July CPI rose just 0.1% for the month, bringing the annual rate to 3.4% from 3.5%; core inflation, which strips out volatile food and energy, slowed to 2.5% year-over-year. Thursday's producer price index was flat outright. Odds of a September rate hike have fallen to roughly 35%, down from about 46% a week ago. Yields eased but stayed high: the 2-year (most sensitive to Fed policy) near 4.18% and the 10-year around 4.66%. Plain English: the Fed likely doesn't have to act next month, and cash, CDs, and short-term bonds still pay well.

Commodities & The Dollar

Oil is having a genuinely bad week. Brent slipped about 2% to roughly $87 and is set for a sharp weekly drop, even though the Strait of Hormuz remains effectively closed and there's still no Iran deal. The relief is coming from supply elsewhere, higher U.S. production and China drawing down stockpiles, which the IEA warns is a temporary cushion, not a fix. That said, falling energy prices are the main reason inflation cooled. Gold sits just under $4,400 after a run of more than 10% this month, and the dollar is little changed.

What It Means For You

Here's this week's tension worth sitting with: the S&P 500 hit a record on Wednesday, and the same week consumer sentiment is expected to print near 54, a level historically associated with recessions. Both things are true. Markets price the earnings of large global companies; sentiment surveys measure how it feels to buy gasoline that costs 25% more than it did a year ago. A portfolio built for a decade doesn't need those two signals to agree, and history is unkind to investors who sold because the mood was bad. If the gap between headlines and your own experience is unsettling, the productive response is to revisit your allocation and your cash reserve, not the news.

On Deck Today

• July retail sales, 8:30 a.m. ET, expected up 0.3%. The best real-time read on whether consumers are still spending despite how they say they feel.
• University of Michigan consumer sentiment (preliminary August), 10:00 a.m. ET, expected 54.1, down from 55.2. Watch the inflation-expectations figure, currently 4.2%; the Fed watches it closely.
• Hormuz headlines, with no deal in sight and stockpiles drawing down, energy remains the week's swing factor into next week.

A note from Kodiak

Markets give you a new reason to react every single morning. Our job is to help you tune out the noise and keep your plan on track. If you'd like a second opinion on how today's headlines fit your portfolio, book a 15-minute intro call →.

Written by Jeffrey Mansell, Kodiak Capital Advisors, LLC.