Inflation struggle persists among American households

What happened: A majority of Americans are grappling with affordability issues, particularly with groceries and gas, as evidenced by a Harris Poll (June 2023). Inflation fears persist, with median expectations for the next year rising to 3.7% (New York Fed, June 2023). President Trump's remarks on inflation sparked criticism, with Senator Bernie Sanders highlighting the struggles of working families. Consumers also dread rising healthcare and rent costs. The housing market remains a significant burden, with home prices soaring and a shortage of affordable homes. Treasury Secretary Scott Bessent faced backlash for claiming grocery prices were decreasing, contradicting consumer experiences.

Market impact: Retail and consumer goods sectors are affected as households tighten spending due to higher prices. Dollar Tree's expansion of higher-priced items reflects this trend. Healthcare and real estate investment trusts (REITs) may face headwinds due to affordability concerns. Inflation expectations influence bond yields, impacting sectors sensitive to interest rates like financials and utilities.

What to watch next: The Consumer Price Index (CPI) report on July 12, 2023, will provide insights into inflation trends. The Federal Reserve's next policy meeting on July 26, 2023, may offer clarity on its response to inflation expectations. Additionally, watch for earnings reports from major retailers and consumer goods companies, such as Walmart and Procter & Gamble, scheduled in late July and early August, which could offer more color on consumer spending trends.