Each month, CAISSA performs an analysis of prevailing global events, assessing their potential influence on our clients’ wealth plan. We are diligently having strategic discussions with our portfolio managers, ensuring that our position remains informed and aligned with current market dynamics.

Below, you will find CAISSA’s perspective on key topics markets are currently digesting.

Producer Prices Outpace Consumer Prices: Cost Pressures Building Upstream

The Producer Price Index (PPI) is rising at a faster pace than the Consumer Price Index (CPI). In other words, input costs at the wholesale level are increasing more quickly than the prices consumers ultimately pay at the retail level.

CAISSA Perspective: This divergence matters because it puts pressure on corporate profitability. If companies are unable to pass higher input prices to consumers, their profit margins shrink potentially weighing on earnings. On the other hand, if companies raise prices to offset higher costs, they risk seeing a demand drop from consumers. The Federal Reserve has remained cautious in cutting interest rates, closely monitoring the impact of the aggressive tariff measures introduced earlier this year. These tariffs have added to cost pressures across supply chains. Encouragingly, this week’s data showed a modest 0.1% decline in PPI, an unexpected easing that offered some relief to investors and further increased the likelihood of rate cuts starting in September.

Corporate Bonds Rally as Spreads Compress, Favoring Quality

Credit spreads have tightened to near historic lows, meaning investors are receiving relatively little additional yield for taking on more credit risks.

CAISSA Perspective: In this environment, the risk/reward trade-off favors higher-quality issuers. Investment grade corporate bonds offer stability, consistent income, and are backed by companies with stronger balance sheets and lower default risk. Favoring quality can help investors capture steady income while reducing exposure to sectors or issuers that may be more vulnerable in the event of economic slowdown or renewed market volatility. 

Breaking the “Lost Decades” Narrative

The Nikkei Index’s move above its 1989 high signals the end of a era. After more than three decades of essentially flat price returns, with only modest gains when dividends are included, Japanese equities have finally overcome this symbolic barrier. 

CAISSA Perspective: International stocks are becoming more attractive thanks to corporate governance reforms, improving fundamentals, and supportive monetary policies. These positive trends have sparked renewed International investor interest broadly, and it shows with international stocks seeing their best returns in years. Having a globally diversified portfolio helps capture these tailwinds while helping reduce concentration risk in U.S. equities.