Much needed inflation relief

Good morning and happy CPI day, markets enthusiasts. Max Adams filling in for Phil Rosen today. We've got a big economic data point headed our way this morning and markets are bracing for impact.?

After June's Consumer Price Index reading of 9.1% — the fastest increase in 41 years —?there's been a chorus of commentators saying that inflation has surely peaked and that we're headed lower from here.??

But not everyone is so sure and there's a lot to keep in mind in this discussion.?

So let's get right into it.?

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1. Today's inflation reading is a critical moment for markets and the economy.?June's reading of 9.1% was jarring, and in the month since,??a number of top commentators ?have said that prices will fall from here.?

But not everyone is convinced. About 50% of investors surveyed by investment management giant State Street?say that inflation has yet to peak , and that rising prices are keeping them up at night. Investors are so shaken, that?about two thirds say they expect their current investments to lose value.

Economists surveyed by Bloomberg are expecting year-over-year CPI to show inflation increased by 8.7% in July, down slightly from June's figure. Wells Fargo, for its part this week said that?it expects inflation to fall to 5% by October , driven lower by falling gas prices. But even then, higher housing costs will prevent prices from falling much further.

And then there is the dreaded "S" word.?According to the world's largest asset manager, markets are headed for a period of stagflation ?and investors need to defend their portfolios from low growth and persistent inflation. Low-volatility stocks and fixed income are ways to do this, BlackRock said Tuesday.?

Meanwhile, in an op-ed, Nouriel Roubini this week wrote that the era of stagflation is upon us and central banks have set a trap for themselves.?

"During the Great Stagflation, both components of any traditional asset portfolio — long-term bonds and US and global equities — will suffer, potentially incurring massive losses," Roubini said.?

In other news:

2. Bank of America has a list of consumer discretionary stocks set to outperform before possible rate cuts by the Fed.?The US central bank may not yet be done tightening, but that day will arrive in 2023.?Here are seven stocks to own before that date.?

3. The CEO of a national homebuilder says 2023 could see a much more normal housing market.?Tri Pointe Homes is a $2 billion builder doing business across the US.?Read why its chief executive, Doug Bauer, thinks the market is headed back toward "equilibrium."

4. A fund manager who's beaten 99% of peers over the past year shares his top energy picks.?Stan Majcher says the energy sector remains attractive as global energy supplies will be tight for some time.?Here are his top three picks from the industry that he says are overlooked.?

5.?Lumber has gained nearly 20% in two days.?It's a big reversal for the commodity, which has tumbled in 2022 as the housing market cools off.?According to one CEO, US housing is on track to stick a soft landing.

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This newsletter was curated by Max Adams. Thoughts or questions? Sound off in the comments section below.