Deflation in the US in June: What It Means for Your Investments

The Consumer Price Index (CPI) in the United States recorded deflation in June, coming in below market expectations. The reaction was immediate: the Nasdaq rose by 0.9%, the S&P 500 advanced by 0.38%, and the Dow Jones closed slightly up by 0.02%, limited by a 24.9% drop in IBM following disappointing preliminary results.

More than the number itself, the data reignited a debate that will define the direction of global portfolios in the second half of the year: will the Federal Reserve have room to cut interest rates before the end of the year? The answer, for now, is a cautious "maybe."

What the June CPI Really Showed

The deflation data in the CPI provided immediate relief to US Treasury yields, which fell after the announcement. Goldman Sachs responded by lowering its projection for the core PCE index in June from 0.24% to 0.18%. The PCE is the Fed's preferred metric for measuring inflation, making this revision particularly relevant.

However, the reaction within the central bank itself was cautious. Kevin Warsh, the chairman of the Federal Reserve, stated that he does not consider the "mission accomplished" and that there is still much work ahead. Austan Goolsbee, president of the Chicago Fed, echoed this sentiment. The message is clear: a good data point does not change the trajectory of monetary policy on its own.

Warsh also emphasized distancing any political reading from the process, declaring that his goal is to eliminate politics from within the central bank. This statement is not accidental. With Donald Trump pressuring for lower interest rates and revising geopolitical stances that affect oil prices, such as the Strait of Hormuz issue, the Fed is walking a fine line between economic data and political noise.

Banks Shine, IBM Plummets: What the Earnings Reports Reveal

The second-quarter earnings season has begun to gain momentum, and the contrast between sectors is striking. Goldman Sachs surged 9% after exceeding projections, while JPMorgan rose 2.5% and Bank of America climbed 1.9%. The major American banks are riding a wave of heated financial activity, with trading and investment banking revenues above expectations.

In contrast, Citigroup fell 5.3% after signaling headwinds in its credit card division, an indicator that deserves attention. When consumer credit begins to show stress, it is an early sign of a slowdown at the retail end. Wells Fargo dropped 0.2% even with results above consensus, suggesting that the market had already priced in the good performance.

The biggest negative highlight was IBM, which plummeted 24.9% after preliminary adjusted profit and revenue results fell short of forecasts. The blame fell on the infrastructure division, which performed poorly. This drop was the largest on the Dow Jones and S&P 500 for the day and raises questions about the ability of legacy tech companies to capture value in the current artificial intelligence cycle.

Semiconductors Recover While AI Debate Persists

While IBM sank, the semiconductor sector experienced a day of significant recovery. The ADRs of South Korea's SK Hynix rose 27%, partly driven by statements from Masayoshi Son, CEO of SoftBank, who called the idea of a bubble in artificial intelligence investments "absurd."

Son's statement is relevant because SoftBank is one of the largest global investors in AI, with billions allocated to chips and infrastructure. When the biggest bettor in the sector says there is no bubble, the market listens. However, it is worth remembering that Son made similar statements before the dot-com bubble burst and the WeWork crisis. The history demands skepticism.

Another point that went unnoticed: shares of Lucid Group plummeted 16% after rumors that the electric vehicle manufacturer was considering filing for bankruptcy. The company denied this, but the movement illustrates the fragility of growth companies that have not yet achieved sustainable profitability, a theme we have been following in technology coverage.

What This Means for Investors in Brazil

Deflation in the US has a cascading effect. Lower US interest rates reduce the opportunity cost of investing in emerging markets, which directly benefits Brazilian assets. If the Fed indeed starts a cycle of cuts in the second half, foreign capital flow to B3 is likely to intensify.

For those investing in fixed income, the scenario is one of caution. Treasuries with falling yields make Brazilian bonds, which still pay high premiums, more attractive in relative terms. For equities, the data is positive for interest-sensitive sectors such as technology and consumption.

In the crypto market, the reading is similar. Historically, expectations of monetary easing in the US coincide with moments of appreciation in risk assets, including bitcoin and ethereum. With the CPI pointing downward, the macro environment becomes more constructive for this asset class.

The point of caution is that a single data point does not define a trend. The Fed made this explicit. Warsh and Goolsbee were clear in stating that the battle against inflation is not over. Investors who build positions solely based on this CPI risk being surprised if the next indicators do not confirm the direction.

The second half promises to be volatile. Earnings season, elections on the horizon, geopolitical tensions, and a divided Fed form a cocktail that demands tactical positioning, not euphoria.