As the first half of the year closed, inflation data continued its gradual path towards 2%, the results of large companies such as Fedex and Nike were dissimilar and the US political establishment had its dose of reality between the presidential candidates, current President Joe Biden and former President Donald Trump, after last Thursday during the first debate (of three to be held) the mental health of the current president generated a political crisis in the country, a topic that we will address in greater detail below. It was in this environment that the movement of the main US stock indexes in the last week of June was practically sideways, allowing the Dow index to gain +3.8% so far this year, the S&P 500 to climb +14.5% and the Nasdaq, led by an incessant demand for artificial intelligence, accumulated a rise of +18.2% (and +28.6% in 12 months). Another big winner in the first half of the year was the Japanese equity market whose main Nikkei stock index returned +19.1% while the appetite for Latin American markets led to an average adjustment of -4.3% with the Brazilian exchange rate registering a 15% depreciation leaving the real at BR$5.59 to the dollar. 

In the sovereign fixed income market, rates below 1-year closed above 5%, while the 10-year rate closed at 4.41%, adding almost 53 basis points so far this year. In the world of commodities, oil prices closed the semester at almost US$82 per barrel, up +14.6%, while the main agricultural products (corn and wheat) cushioned the inflationary impact with average adjustments of -10%.

This week ahead will be cut short due to the Independence Day holiday on Thursday, July 4th, and everyone will be waiting for the employment figures on Friday. For now, it is estimated that the economy would have generated 180 thousand new jobs, the unemployment rate remains at 4% and wage inflation eases below 4% (down to 3.8% from 4.1%). On the corporate side, there will be no relevant quarterly report, but we have already started the week with the announcement of the purchase of Spirit Aerosystems by Boeing for US$4.7 billion, thus reconfiguring the relationship of one of its main suppliers for the airframe of the well-worn Boeing 737 Max. Meanwhile, investment giant BlackRock announced the purchase of Preqin, an information provider, for US$3.2 billion as it seeks to consolidate its information capabilities.

At the same time, the market will continue to digest last Friday's Supreme Court decision after overturning the concept of "Chevron Deference", in which regulatory entities, for 40 years, had the ability to interpret and set the implementation of regulations exempted from the legal scope. This led to an over extension of measures that could be outside the legal scope according to the Supreme Court, thereby returning the power to define the detail of regulations within the legal scope back to the courts rather than the regulatory scope. This will reduce the power that certain regulatory bodies such as the CDC in the health arena, the EPA in the environmental arena, and the FDA in the food and drug arena. This could open an unprecedented space for innovation since some regulations established by these institutions favor the corporate "establishment" by setting barriers to entry without legal approval by people who were generally not democratically elected (the heads of these entities). For example, under this authority, the CDC instituted that all companies in the United States must force their employees to get vaccines for Covid, something that for many was outside the legal scope of this institution and could cite impositions of this style through each of these regulatory entities, depending on the political color of each presidency.  

On the macroeconomic front, last month's PCE inflation data was better than expected with headline inflation easing to 2.6% (from 2.7%) while core inflation, which excludes food and energy prices, eased to 2.6% (from 2.8%), giving the Federal Reserve (Fed) even more monetary leeway in the second half of the year.

On the corporate front, Fedex's share price returned +15% as sales came in above market expectations and the implementation of cost cutting was considerably better than expected. Meanwhile last Friday, Nike's share price plummeted -20% after sales came in below market expectations and the company announced an expected drop in sales for the year 2025 when the previous quarter it projected growth. It would appear that the adopted "direct to consumer" sales strategy coupled with lower demand in China did not bring the desired results. It would seem that the "direct to consumer" sales strategy, together with a lower demand in China, did not bring the desired results.  

Finally, in the political arena, without going into detail, throughout the weekend we saw how the major media outlets associated with the liberal wing of the Democratic Party including The New York Times, The Washington Post, The New Yorker, The Economist and Chicago Tribune among many others formally requested, through their editorials, that President Biden resign his presidential candidacy in pursuit of a candidate (anyone but Vice President Harris) who can stand up to Trump. There is no doubt that President Biden's mental capacity, for those of us who watched the presidential debate last Thursday and who will be voting at the polls in November, called into question his leadership ability. The decision of the Democratic party will not be easy and it may be that the discomfort generated by President Trump is enough for a political contest at the polls, however, the polls published over the weekend where more than two thirds of the adult population shows a high degree of concern about the senile dementia and/or advanced Alzheimer's of President Biden make his candidacy could be a resounding failure where the political judgment of the Democratic party itself will be in doubt. We will see what the next steps are, but the Democratic Party only has until August 19 to define a possible alternative, date on which its convention will be held to nominate its presidential candidate.

In conclusion, the first week of July will be focused not only on the previous month's employment data, but also on the political steps that will be taken regarding Biden's candidacy for the presidency of the country.

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