Stocks were essentially flat this week as investors digested new inflation data and continued tensions in the Middle East.
MACROECONOMIC UPDATE
- The National Federation of Independent Businesses (NFIB) Small Business Optimism Index rose from 97.4 to 99.8 – just above its historical average of 98.0.
- Existing Home Sales fell -1.7% in July. The rate of sales remains broadly in line with the level of the last few years as high mortgage rates continue to weigh on buyers.
- The year-over-year rate of the Consumer Price Index (CPI) ticked down from 3.5% to 3.4% while the Core rate, which excludes the volatile food and energy components, inched lower from 2.6% to 2.5%. The decline in the headline number was largely driven by falling oil prices, but volatility in energy costs is likely to continue and the Fed’s battle against inflation remains far from over.
- The Producer Price Index (PPI) showed slightly cooling, but still high, inflation as the annual rate moved down from 5.5% to 4.7%. While price increases are easing, elevated inflation higher up the supply chain is likely to trickle down to consumers in the months ahead.
- Consumer Sentiment fell from 55.2 to 51.0 in its preliminary August reading as views on personal finances and business conditions deteriorated. It continues to sit near all-time lows.
TECHNICAL UPDATE
- The InvesTech AI Index hit a new high for the first time since November 2025 as investors piled back in to the AI theme. However, the Gorilla Index remains below its high from late last year. We are closely watching these indicators as the market battles for direction.
- Bearish Distribution in the InvesTech Negative Leadership Composite (NLC) moved to -4.6 as leadership deteriorated slightly. While a reading of at least -50 is needed to confirm that danger lies directly ahead, the persistence of negative leadership is a reminder that significant risks remain. As a result, this indicator is essential to watch for an early warning that the bull market has run out of gas.
INVESTECH MODEL FUND PORTFOLIO
Following the 3% increase to FNDF (an international value fund) earlier this week, the Model Fund Portfolio is comprised of 62.5% long positions, 5% in an inverse index ETF, 5% in an intermediate Treasury ETF, and 27.5% cash held in short-term Treasurys or a money market fund. This results in 57.5% net equity exposure.