�۶���Ƶ

Podcast: (5 min)
Podcast:JumpStart: Tariff threats on Russian oil, semis, pharma, and Swiss gold (5 min)
Podcast: Investors Club: Semis tariffs, margin pressures, and tech's growth outlook (13 min)
Video: The AI Show: CIO's Sundeep Gantori on GPT5 and 15% payment on AI chips to China (3 min)

While the 90-day extension of the trade truce between the US and China has cleared a risk event for this week, investor sen timent could face another test today with the release of the consumer price index (CPI) for July. S&P 500 futures are 0.2% lower ahead of the US market open on Tuesday.

June’s CPI, published last month, showed rising core goods inflation as tariffs started to feed through into retail prices. Market consensus now points to a 0.3% month-over-month increase in core CPI for July, which would mark the biggest gain since January this year.

Pending details of the report, we think increases in price pressure are likely to continue through the rest of this year and into 2026. But we still expect the Federal Reserve to resume gradual policy easing in the coming months.

Overall inflation should rise modestly amid slower increase in shelter costs. While higher core goods inflation is expected, core services inflation looks set to slow further, which should help to prevent overall inflation from rising too dramatically. In particular, shelter inflation, which accounts for more than 35% of the CPI and has been the biggest single driver of overall inflation, should also slow further. As US growth falls below its 2% trend rate, we believe a softer economy would help to offset some of the inflationary pressure driven by tariff hikes.

A softer labor market and slower growth should clear the path for Fed easing. The latest labor report showed that job growth is on a clearly downward trend, with the three-month moving average of payrolls marking the slowest pace of growth since the pandemic. This, in our view, provides further evidence of a weaker labor market that the Fed needs to justify cutting interest rates, despite higher inflation. Earlier this month, the ISM services business activity survey reading came out weaker than expected, adding to concerns over a slowing economy.

Although higher US tariffs are a headwind for the economy, we don't expect them to precipitate a recession. Details of certain sectoral tariffs remain unclear. While we expect more sectoral tariffs with US trading partners, there is a risk of misunderstanding, miscalculation, and renewed flareups in trade tensions without signed memoranda of understanding or written agreements. However, the additional time for negotiations with China is an encouraging sign that a sign ificant disruption in global trade flows may be avoided. We also think there is a high likelihood the Supreme Court will rule that tariffs levied under the International Emergency Economic Powers Act (IEEPA) are illegal, and that the Trump administration is less likely to risk upsetting the economy and financial markets further ahead of the midterm elections next year given Republicans’ narrow majorities in Congress. While we now expect the US effective tariff rate to remain in the high teens for the next several months, we think it will eventually settle back around 15% by mid-2026.

So, with overall inflation likely under control amid a slowing economy, our base case remains that the Fed will resume rate cuts at the September meeting and continue cutting for a total of 100bps. We like medium-duration quality bonds for investors seeking portfolio income amid falling cash rates.