So Bilal, thank you so much for sticking with us through the break. So let's take a look now at inflation. We're going to be getting a lot of inflation data out this week. Now headline CPI running at 3.4%. And when we look at PCE at least July's PCE that was up 3.7% from the year prior. And energy is doing a lot of that inflating.
So I'm curious to know how differently should we think about inflation since the pressure is coming from this external energy shock? Right. Instead of this broad based price pressures that we're seeing across the economy?
Look, that's been the story for the back half of the year. And really for most of the year. Right. Energy has been driving that. I mean, at this point, Iran is literally a double edged sword at this point. And the market has to decide at what point will we start to look at other areas to actually consider de-risk in the portfolio.
But the truth of the matter is you have one day on you have something actually materially, um, uh, coming to market as far as like some act of diplomacy coming out of the white House when it comes to that war. And then on the other end, you actually have several analysts, energy analysts specifically that actually say the golf flows are starting to open back up, which actually lowers Iran's possible leverage in this case of reaching a deal.
And that means the US is not in a hurry to rush to a deal. But the point of the matter is diesel still up. That means it costs more to get goods and services across the country. And at the end of the day, those costs are being passed off to the end investor. But if I'm a trader and I'm thinking about how do I hedge this bet I would actually keep a hedge on when it comes to energy.
So speaking about the energy inflation, it obviously hits the consumer in a way that feels fairly visible, right? They're feeling it at the gas pump. They feel it on utility bills as you were saying. They feel it in those transportation costs. So I'm curious to know if that's part of the reason that we're seeing, you know, in the charts that we're seeing that essentially people are still spending, but they don't feel good about it because a lot of their money is being eaten up by things that they have to pay for.
They got to pay for gas to get to work, right? They got to pay their gas bill. They got to pay for their utilities. So they still want to spend and they choose to keep spending, but they hate every single time that they do.
Yeah. And I'm glad you bring that up. Right. So this is that narrow, that narrative of the K shaped economy. And the recovery is exactly that. On the lower end you still see discounters, you see the discount grocers. Those companies are actually still doing fine. Right. And you see the CarMax of the world.
You're going to continue to see, again, a very selective buyer on the lower income side of things. But at the same time, if you've been an investor and you have a good exposure to equities, you likely have actually outperformed and participated in this market rally. But the challenge is that's very bifurcated.
And that, uh, that consumer experience is very different. So I'm glad you brought that point up.
All right. So this week we get PCE. We get consumer spending. We get the jobs report. And the back half of the week I'm curious to know what number matters most for at least in relation to the consumer story. If it can keep going, is it going to be the inflation? Is it going to be real spending, or do you think it's actually going to be the labor market?
You know look I think it always leads with labor, right. Because that's how people will continue to obviously fund their lives. But more importantly, I think it's a totality of the entire picture. Remember, the fed is going to be looking at all this data to make its decision. Obviously, if they're going to continue to raise rates, and right now it's likely pointing that they will continue on that path going into November.
Right. Which is obviously in an election period. That's a that's a very important focus for the entire market. Last week was somewhat quiet, and we were trying to figure out what will we be paying attention to. Right now, if I'm looking at where the market is going to be stressed, it's going to be great sensitive areas.
So you think small caps, excuse me? You think obviously some energy names you'll continue to see focus their rights. I would be mindful of obviously holding securities in that space. And then again I would just be looking at broadening out my market equity exposure.
All right. Before I let you go, Bilal, I want to announce something that we're going to do every single week with you, which is going to be your call of the week. So if you're positioning around the consumer right now, talk to me a little bit about where you're seeing the opportunity, where you're seeing some calls going ahead.
Couple of things. One, I'd be looking at consumer staples. Again this is the wants versus the needs when it comes to discretionary going into this fall. The second thing is, and that is obviously if energy prices remain elevated. The second point is I would look to the front part of the curve, as well as the intermediate part of the curve.
Five and a quarter ten year treasury looks very appealing. And again, I mentioned $100 billion has flown into that for the top half or for the first year to date exposure. The last point, and I think this is the most important, I would be focused on dividend paying equities and thinking about how do I get exposure to high coupons on either growth names and or dividend positions.
So that direction we offer, obviously the defined income boost, which is a target income suite of ETFs and high growth tech names that pays a distribution twice a month. I would be looking at names like that and or obviously other dividend payers. That's my call.
Yeah, we've looked a lot of especially talking about those yields. Looking at the curve, I never thought I would see the day when fixed income would get so sexy and get so much time from us on not only the show, but also others. Thank you so much. Bilal Little, global ETF strategist and Direction. I'll be excited to see you next week right here with me at the Stock Exchange.
Oh, I miss you, Chris. I'll be back.
