THE WEEK ON WALL STREET
Stocks were slightly lower last week, while looking past news of fresh U.S. tariffs on nearly two dozen countries. The S&P 500 Index fell 0.31 percent, while the Nasdaq Composite Index edged lower by 0.08 percent. The Dow Jones Industrial Average lost 1.02 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, slipped 0.43 percent.
FACT OF THE WEEK
The world’s first parking meter, known as Park-O-Meter No. 1, is installed on the southeast corner of what was then First Street and Robinson Avenue in Oklahoma City, Oklahoma on July 16, 1935.
The parking meter was the brainchild of a man named Carl C. Magee, who moved to Oklahoma City from New Mexico in 1927. Magee had a colorful past: As a reporter for an Albuquerque newspaper, he had played a pivotal role in uncovering the so-called Teapot Dome Scandal (named for the Teapot Dome oil field in Wyoming), in which Albert B. Fall, then-secretary of the interior, was convicted of renting government lands to oil companies in return for personal loans and gifts. He also wrote a series of articles exposing corruption in the New Mexico court system, and was tried and acquitted of manslaughter after he shot at one of the judges targeted in the series during an altercation at a Las Vegas hotel.
By the time Magee came to Oklahoma City to start a newspaper, the Oklahoma News, his new hometown shared a common problem with many of America’s urban areas—a lack of sufficient parking space for the rapidly increasingly number of automobiles crowding into the downtown business district each day. Asked to find a solution to the problem, Magee came up with the Park-o-Meter. The first working model went on public display in early May 1935, inspiring immediate debate over the pros and cons of coin-regulated parking. Indignant opponents of the meters considered paying for parking un-American, as it forced drivers to pay what amounted to a tax on their cars, depriving them of their money without due process of law.
Despite such opposition, the first meters were installed by the Dual Parking Meter Company beginning in July 1935; they cost a nickel an hour, and were placed at 20-foot intervals along the curb that corresponded to spaces painted on the pavement. Magee’s invention caught on quickly: Retailers loved the meters, as they encouraged a quick turnover of cars–and potential customers–and drivers were forced to accept them as a practical necessity for regulating parking. By the early 1940s, there were more than 140,000 parking meters operating in the United States.
MARKET MINUTE
The Return of the Tariffs
Stocks started the week lower after the White House posted letters to 14 countries announcing new tariffs, set to take effect August 1. They included 25 percent tariffs on South Korea and Japan.
Stocks dropped briefly midweek after the White House announced tariffs on seven additional countries. But as investors digested the news, markets gradually recovered, hoping the administration would dial back its steepest tariff rates again.
Markets also rallied on fresh AI trade enthusiasm and the latest Fed meeting minutes, which showed a majority of Committee members were open to adjusting interest rates later this year.
Markets opened higher on Thursday as investors shrugged off news of the 50 percent tariff on Brazil imports, announced shortly after Wednesday’s close. Momentum continued, and the S&P 500 and Nasdaq rose to fresh records.
Then, after Thursday’s close, the White House announced the U.S. was raising tariffs on Canadian imports to 35 percent and was preparing some other tariffs. Markets opened lower on Friday and trended sideways during the trading session.
The T Word
While tariffs drove market headlines last week, another “t word” made news: trillion.
More specifically, $4 trillion in market capitalization. The nation’s largest AI chip maker was the first company to breach that market cap level. It crossed the $4 trillion mark intraday on Wednesday, then closed above it for the first time on Thursday’s close.
So why does it matter when one stock hits such a milestone? For a market-cap weighted index like the S&P 500, a company valued at $4 trillion has an outsized effect on the overall index’s performance. The largest five companies in the S&P 500 comprise about one-third of the benchmark index.
FINANCIAL STRATEGY OF THE WEEK
Inflation & Your Money
"If the current annual inflation rate is 3 percent, why do my bills seem like they're 10 percent higher than last year?"
Many of us ask ourselves that question, and it illustrates the importance of understanding how inflation is reported and how it can affect investments.
What Is Inflation?
Inflation is defined as an upward movement in the average level of prices. Each month, the Bureau of Labor Statistics releases a report called the Consumer Price Index (CPI) to track these fluctuations. It was developed from detailed expenditure information provided by families and individuals on purchases made in the following categories: food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other groups and services.
How Applicable Is the CPI?
While it's the commonly used indicator of inflation, the CPI has come under scrutiny. For example, the CPI rose 2.4 percent for the 12 months ending in September 2024. However, a closer look at the report shows movement in prices on a more detailed level. Transportation services prices, for example, rose 8.5 percent during those 12 months. CPI is a basket of goods, and your basket of goods may not reflect the basket of goods represented by the CPI.
Are Investments Affected by Inflation?
They sure are. As inflation rises and falls, three notable effects are observed.
First, inflation reduces the real rate of return on investments. So, if an investment earned 6 percent for a 12-month period and inflation averaged 1.5 percent over that time, the investment's real rate of return would have been 4.5 percent. If taxes are considered, the real rate of return may be reduced even further.
Second, inflation puts purchasing power at risk. When prices rise, a fixed amount of money has the power to purchase fewer and fewer goods.
Third, inflation can influence the actions of the Federal Reserve. If the Fed wants to control inflation, it has various methods for reducing the amount of money in circulation. Hypothetically, a smaller supply of money would lead to less spending, which may lead to lower prices and lower inflation.
Empower Yourself with a Trusted Professional
When inflation is low, it's easy to overlook how rising prices are affecting a household budget. On the other hand, when inflation is high, it may be tempting to make more sweeping changes in response to increasing prices. The best approach may be to reach out to your financial professional to help you develop a sound investment strategy that takes both possible scenarios into account.