Good morning, traders,

If you’ve been in the game a while, you know inflation data can be like a Rorschach test because everyone tends to see what they want to see. 

The latest numbers from July are no exception. 

On paper, they came in pretty much where economists expected Tuesday … but the details tell a slightly more complicated story.

The Bureau of Labor Statistics reported that headline CPI — that’s the version including food and energy — was up 0.2% in July and 2.7% year over year. 

That’s right in line with forecasts. 

Core CPI, which strips out the noisy food and energy categories, rose 0.3% for the month, matching expectations, and came in 3.1% higher than a year ago. 

That annual number was a tick above the 3% forecast and the largest monthly core increase since January.

So, here’s the big question: Is inflation “hot” or “cooling”? 

The answer is neither, and here’s how to trade it. 

Political Breeze vs. Hurricane

To sum it, inflation isn’t hot or cold. 

It’s sticky. 

We’re not seeing runaway prices, but we’re also not breaking through the Fed’s comfort zone. 

And Trump’s much-hyped tariffs aren’t hammering consumer costs just yet. 

That doesn’t mean they won’t — it just means that for now, their effects are more of a light breeze than a hurricane.

Digging into the categories, services prices are no longer helping offset goods inflation the way they did earlier this year. 

Shelter costs rose 0.2% for the second month in a row — steady but not easing. 

Transportation services jumped 0.8% in July, a sharp move compared to June’s 0.2%. 

Medical care services also gained 0.8%, up from 0.6% in June. 

Those are meaningful jumps, and traders who follow the stickier parts of the inflation basket know these numbers don’t turn on a dime.

The Bigger Picture

This matters to traders for a couple key reasons. 

First, inflation direction drives Fed thinking. The Fed isn’t reacting to a single month’s print, but when core inflation ticks up for consecutive months, it raises eyebrows in Washington. 

It’s too soon to expect an immediate rate hike based on July alone, but this data does take some of the pressure off the Fed to cut rates. 

That could influence bond yields, the dollar, and by extension, equity valuations.

Second, sector rotation thrives on inflation trends. 

If inflation stays sticky but not explosive, certain areas like utilities and consumer staples may lag while cyclical names with pricing power — think industrials and select tech — could see better relative performance. 

For traders, that’s a green light to look for long setups in companies that can pass on costs without losing customers.

Here’s where I’m paying attention:

• Transportation — The jump in transportation service costs could be an early tell for supply chain tightness creeping back in. That’s bullish for certain freight and logistics names, but also a cost headwind for retailers relying on just-in-time delivery.
  
• Healthcare — Medical service costs accelerating could boost certain healthcare providers and insurers who benefit from higher reimbursement rates.
  
• Housing — Shelter is still inching higher, which supports homebuilder margins for now, but could put a cap on consumer discretionary spending later.

Just Keep Watching

And the tariffs? Market chatter always overshoots the reality at first. 

Right now, their effect on prices is subtle, but the risk is asymmetric.  

A sudden spike in goods costs from a new round of tariffs could push core CPI well above the Fed’s comfort zone, forcing a faster policy response. 

That’s why traders can’t just watch the headline number.

So, Tuesday’s data releases don’t scream “trend change,” but they do tell us that inflation’s floor might be a little higher than the market’s been hoping. 

For traders, that means we stay alert for sector-specific opportunities and avoid getting lulled into thinking rate cuts are guaranteed.

Markets trade on the gap between expectations and reality. 

July’s CPI didn’t shock anyone, but it quietly adjusted the playing field. 

Stay street smart,
Jeff Zananiri

P.S. If you want to make some real money, Aaron Hunziger is going live in the APEX War Room Thursday at 4 p.m. to break down the trades he’s watching and the setups he’s targeting right now. 

You’ll see exactly how he’s positioning for the next market move — and why timing is everything this week. 

Don’t miss your chance to watch him map out his strategy in real time.

*Past performance does not indicate future results