CPI Shows Uptick, but Consumers Keep Driving Growth
Market Recap for the Week of July 20, 2025
The Consumer Price Index (CPI)—more commonly known as inflation—was released for the month of June. According to this measure, prices rose 2.7% over the previous 12-month period, up from last month’s reading of 2.4%. This is not the direction we want inflation to be heading. A move down toward 2% would indicate greater price stability. While 2.7% is not excessively high, it’s still a step in the wrong direction.
Much of the increase in inflation came from energy prices, which rose nearly 0.9% in just the month of June. Energy prices had been falling over the past twelve months, but energy is notoriously volatile, so I wouldn’t read too much into this spike.
Retail sales rose 0.6% in June, showing that consumers are still out there spending. Despite all the uncertainty surrounding tariff policy under the current administration, we haven’t seen a major consumer slowdown yet. Nearly 70% of U.S. economic activity is driven by consumer spending, so as long as the consumer remains healthy, there’s a good chance the broader economy will stay in good shape.
Year-to-date, U.S. stocks—as measured by the S&P 500—are up about 7%. While these are solid returns, it’s worth noting that many international markets have outperformed the U.S. this year. Several European stock markets are up more than 20%, with Germany’s market rising nearly 35%. This is a strong case for maintaining a globally diversified portfolio.
“Inflation ticked up to 2.7%, but strong consumer spending keeps the economy moving forward.”
Chart of The Week
This week’s chart, shared by Ben Carlson of A Wealth of Common Sense, highlights how quickly the market recovered from recent turmoil. It shows five recent market environments where the market dropped by at least 15%, and how many trading days it took to recover. Pay special attention to the black line, which represents the market’s movement this year. If anything, this is yet another compelling argument against trying to time the market.
The commentary in this blog is for informational purposes only and should not be taken as personalized investment advice
Chart Source: https://awealthofcommonsense.com/2025/07/animal-spirits-a-25-year-bull-market/
