Inflation is cooling. Here’s what will determine the next big winners in the market

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In October 1973, war in the Middle East created an energy crisis that Americans could see with their own eyes.

After Arab oil producers imposed an embargo on the United States, gasoline supplies shrank and prices rose. Drivers waited in lines that stretched around the terminal, wondering if the station would run dry before they got to the pump.

Inflation is no longer an abstract number buried in a government report.

Posted on gas station signs. It was eating into family budgets. He was sitting in a row of cars that were barely moving.

More than 50 years later, it seemed as if history might repeat itself.

War broke out in the Middle East. Oil prices rose. Gas prices followed. As inflation began to ease, fears of another energy shock resurfaced.

Then the story changed.

Oil prices reversed course. By late June, the price of crude oil had fallen again near the levels at which it had traded before the fighting began. Gasoline prices followed, although drivers were still paying more than before the conflict.

This reversal was clearly evident in this week’s inflation reports.

So do the latest data mean that the threat of inflation has already passed, or has its shape merely changed?

per day Market 360I’ll explain what the latest Consumer Price Index (CPI) and Producer Price Index (PPI) reports reveal about inflation, why oil and gasoline prices have reversed course and why rapidly changing conditions like these can make it very difficult to know when to buy, sell or simply hold steady.

And then, I’ll show you how Precursor intelligence The system helps me track the most significant shifts and identify stocks that could lead the market’s next move.

The CPI provides good news

Let’s start with the Consumer Price Index, which provided some encouraging news.

Consumer prices fell 0.4% in June, marking the first monthly decline since 2020. Economists had expected a decline of only 0.2%.

On an annual basis, this brought the rate down to 3.5%, down from 4.2% in May – and below expectations of 3.8%.

The core CPI, which excludes food and energy, was unchanged. Economists had expected an increase of 0.2%. This brought the annual rate to 2.6%, down from 2.9% previously.

The main reason for this decline was gasoline prices, which fell by 9.7% with the decline in oil prices. Food prices rose by a modest 0.2%.

But the most important number to me is the equivalent rent to owners.

This measure estimates how much homeowners would pay to rent their homes. It rose just 0.2% in June after reaching higher levels in the previous months.

This is important because housing has been one of the most stubborn sources of inflation. Any sign of rental pressures easing is good news for consumers, interest rates and the Federal Reserve.

In fact, I think this report has effectively taken another Fed rate hike off the table.

Whatever the speakers on television may say, inflation is falling short of expectations. Market prices also fell, which is another positive for stocks.

The next day’s Producer Price Index gave us more reasons for optimism.

The good news continues with the PPI

Producer prices fell by 0.3% in June, exceeding economists’ expectations of no change, and recording the first monthly decline since last August.

On an annual basis, prices slowed to 5.5%, compared to 6.0% in May. The basic details of the report were equally encouraging.

Energy prices fell by 6.4%, and food prices fell by 0.6% on a monthly basis. The core producer price index, which excludes food and energy, rose a modest 0.2%.

Energy remains the wild card

Now, it’s important to remember that May’s PPI tells a very different story.

Wholesale prices jumped 1.1% that month, largely due to higher energy prices after the conflict with Iran began.

But as you can see in the chart below, crude oil has subsequently given up much of that initial rally. Countries found alternative ways to transport energy supplies around the Strait of Hormuz, fears of a long-term outage eased, and oil prices fell.

This reversal helped lower consumer and wholesale inflation in June.

But I will not declare victory yet.

WTI was trading near $65 before the conflict. It briefly fell below $70, but prices have since started to rise again. I still expect energy prices to remain flat through Labor Day.

So, energy remains the trump card.

However, the latest numbers are encouraging at the moment. Inflation was lower than expectations at the consumer and wholesale levels. This removed the threat of another interest rate hike by the Fed, while market prices began to fall.

This is good news for stocks.

But the speed of the reversal also holds an important lesson for investors.

The lesson behind the numbers

The speed of this reversal holds an important lesson for investors.

Economic reports tell us what really happened. The market is always trying to figure out what will happen next. The May Producer Price Index reflects the initial rise in energy prices. The June Consumer Price Index and Producer Price Index accounted for the decline. As the crude oil chart above shows, prices have already started moving again.

That’s why I don’t build my portfolio around the latest titles. On any given day, markets can swing on news about interest rates, geopolitics, or countless other developments. But once the dust settles, profits and fundamentals will ultimately rule.

Stocks with the strongest earnings, sales growth, and direction are the most likely to rise over time.

The hard part is identifying those companies before Wall Street goes wild.

That’s exactly why I developed it Precursor Intelligence (PI) system.

It helps me track shifts in institutional buying and combine those signals with the factors that matter most, including strong sales growth, accelerating earnings and positive direction.

When those signals line up, that’s when I really start to care.

It’s a disciplined approach I use when picking my stocks Accelerating profits file.

The results speak for themselves. Here are 10 of the biggest winners currently on my buy list:

These gains did not come from chasing headlines or reacting to every market swing. They come from identifying fundamentally superior companies with strong institutional support, then giving their dividends time to do the heavy lifting.

These are exactly the types of companies I want to own as earnings season rolls around — and you should, too.

In my final presentation, I’ll show you how My PI system It helps me identify those opportunities before the broader market catches on.

Click here to watch it now.

sincerely,

Louis Navellier

editor, Market 360