Will Higher Taxes on Importshibit the Continuous Stock Market Growth?
The U.S. Consumer Price Index (CPI) data is set to be released on Tuesday, July 15, 2025. Analysts anticipate a 0.23% monthly increase and a 2.6% annual rise in the CPI, with the Core CPI, excluding volatile food and energy prices, projected to climb by 0.30% monthly and 3.0% annually.
These predictions suggest a moderate acceleration in inflation, attributed to recent tariffs and rising prices for services such as hotels, airfares, and medical services.
The expected CPI changes could influence the likelihood of a September interest rate cut by the Federal Reserve. Currently, bond futures markets indicate a 60% probability of a rate cut in September. However, if the CPI data surpasses expectations, it could lead to a higher inflation reading, potentially reducing the likelihood of a rate cut. Conversely, if inflation remains within or below expectations, it could support the case for a rate cut, maintaining the current odds or even increasing them if inflation pressures are deemed manageable.
Several other economic indicators have shown positive trends. The S&P A/D line formed a trading range starting in late January, with a new uptrend created on April 23. The S&P A/D line made a new high as the resistance at line b was overcome. The NDX 100 A/D line moved back above its WMA the week of April 25, and made a new high just three weeks ago (line c).
The Dow Jones Transportation Average and Dow Jones Utility Average both had a 1% increase for the week. The bullish percentage in the American Association of Individual Investors (AAII) survey declined to 41.4% last week, down from 45%, while the bearish percentage rose to 35.6% last week, up from the prior week's 33.1%.
Shelter prices are also expected to move lower, and core good prices and health and travel services are anticipated to be higher in addition to the CPI increase. New tariff threats on Canada and Mexico have raised concerns of more tariff chaos in the weeks ahead.
The AAII Bull-AAII Bear declined to 5.8%, but it had reached -40% at the March-May lows, an historically low level of bullish sentiment. The Invesco QQQ Trust (QQQ) has outperformed the SPY by about 5% since the April lows. The positive readings from the A/D lines suggest only a 2-3% pullback at this time, but the stock market gave up some of its gains on Friday, resulting in a mixed weekly close.
The performance after a Zweig Breath Thrust (ZBT) signal, as on April 25, has an average 6-month return for the S&P 500 of 14.8%, and an average 12-month return of 23.4%. The SPDR Gold Shares (GLD) had a 0.7% increase for the week. FactSet's consensus estimates predict a 2.6% increase in the CPI on an annual basis for Tuesday, up from 2.4% in May. If the CPI increases, the Fed has the room to hold off longer on cutting rates.
- The current bond futures markets suggest a 60% probability of an interest rate cut in September, but a potential surge in CPI could alter this sentiment, possibly reducing the likelihood of a rate cut due to higher inflation readings.
- Among various economic indicators, the Invesco QQQ Trust (QQQ) has exhibited significant outperformance compared to the SPY by approximately 5% since the April lows, which could be influenced by the sentiment in the stock-market, including the AAII Bull-AAII Bear ratio and the performance of ETFs like QQQ and SPY.
