Summer Liquidity
August 11, 2025
Core CPI will be the focus tomorrow where we look for a +0.33% MoM increase, which equates to +3.1% on a YoY basis (a tick higher than consensus. We see the headline rate rising +0.26% MoM and +2.8% YoY (in line with consensus). While inflation has been sliding higher recently, we have yet to see evidence of an inflation shock (core or headline print of +0.5% MoM). Markets should remain unbothered by a gradual rise, especially if it’s primarily coming from tariffs. In our view, the risk/reward for tomorrow’s report is skewed to the upside but a core MoM CPI rate north of +0.35% would likely generate some near-term downside in US equities and a core CPI print above +0.40% could take 2%-2.75% out of the SPX.
Fund flows remain favorable given that ~85% of the S&P 500 are in an open buyback window, up from ~60% the week of August 1. By this Friday, the window will be open to ~90% of the SPX. However, buybacks and long only managers will be doing most of the heavy lifting for the time being as CTA positioning looks increasingly full and speculative demand is waning.
Equity market liquidity tends to suffer from mid-August through Labor Day weekend as attendance and volumes drop. Shallower market depth usually leads to dislocation, greater single stock volatility and increased likelihood of consolidation. In broad terms, the SPX keeps its bullish trend above ~6200 with more specific technical support in the 6105-6140 range.
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