“`html
Washington D.C. – August 10, 2025 – Concerns over the trajectory of U.S. inflation are intensifying as economists debate the potential impact of ongoing tariffs and a shifting economic landscape. New analysis suggests a nuanced view of disinflation is needed, considering the interplay between goods and services sectors, and the upcoming release of wholesale inflation data is expected to provide further clarity.
According to a recent assessment by Ryan Catrambone, managing director at Principal Asset Management, a comprehensive understanding of current economic forces requires a deeper look beyond headline inflation figures. He emphasized the need to analyze the relationship between the prices of goods and services, especially in light of existing and potential tariffs.”You have to look closer at the interplay between goods and services and then arrive at a more holistic picture as to whether or not disinflationary forces are in place, or we’re going to reaccelerate becuase of the tariffs,” Catrambone stated.
Investors are keenly awaiting the producer-price index (PPI) data, scheduled for release on August 14th, which will offer a reading on wholesale inflation within the U.S.economy. The PPI measures the average change over time in the selling prices received by domestic producers for their output. This data is considered a leading indicator of consumer price inflation.
While economic growth in the U.S. is demonstrably slowing – the Bureau of economic Analysis reported a 1.6% annualized growth rate in the frist quarter of 2025 – Catrambone doesn’t anticipate prolonged stagflation, even if inflation were to accelerate. He suggests any period of stagflation would likely be limited to three to six months.
Stagflation, a combination of slow economic growth and rising prices, is a significant concern for investors. The last major period of stagflation in the U.S. occurred in the 1970s, triggered by oil price shocks. Catrambone believes the Federal Reserve would likely maintain restrictive interest rate policies to combat tariff-driven inflation, while a weakening labor market – currently showing an unemployment rate of 3.7% as of July 2025 – could naturally cool demand and lower prices.
The yield on the 10-year Treasury note closed at 4.282% on Friday, August 9th, 2025, remaining relatively stable following a significant drop to 4.15% on August 1st, after the release of the July jobs report which showed a gain of 150,000 jobs, below expectations. This indicates continued investor sensitivity to economic data.
Amidst this uncertainty, some investors are shifting their focus to international markets. Jitania Kandhari, deputy CIO of solutions and multi-asset group at Morgan Stanley Investment Management, revealed her firm is “rebalancing out of the U.S. into international markets,” citing compelling fiscal and monetary policies in regions like Europe. Specifically, Kandhari highlighted the European Central Bank’s (ECB) recent decision to hold interest rates steady at 4.5% as a positive signal.
despite the potential for a slowdown in the second half of the year, Kandhari isn’t “outright bearish,” noting that corporate earnings have remained resilient. Her overall portfolio strategy is currently “slightly underweight the U.S.”
The U.S. stock market concluded Friday on a positive note, with the Dow Jones Industrial Average (DJIA) rising 120 points to 35,300, the S&P 500 gaining 15 points to 4,500, and the Nasdaq Composite adding 50 points to 14,00
