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Today in the Market (8/11/2023)

Good Evening! On Friday, the stock market exhibited a variety of performances, with some stocks experiencing gains while others faced losses. This occurred as investors considered the significance of inflation indicators and disinflation signals presented in the reports for July.

The Dow Jones exhibited a 0.30% increase, whereas the S&P 500 experienced a modest decline of 0.11%. The Nasdaq Composite declined the most by 0.68% during the trading session.

DOUBLE DIGIT GROWTH RATE

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According to the analysis conducted by the WSJ on the financial statements of 50 flagship schools, it was observed that there was a 38% increase in spending at the median flagship school(refers to the most renowned and typically the oldest public university in each state) from 2002 to 2022. Furthermore, this increase in spending was ultimately carried by the students, consequently contributing to the ongoing student debt crisis, which currently stands at a staggering $1.6 trillion.

What are they spending it on? According to an analysis of data from the Knight-Newhouse College Athletics Database, it was observed that over the course of 20 years, there was an approximate 40% increase in the salaries and benefits of the median flagship institution. Additionally, there was a significant 50% rise in expenditure on athletic coaches, and significant resources were allocated towards new construction and renovations, amounting to millions of dollars.

Guess who paid for it? In order to accommodate the financial demands, each educational institution experienced a significant rise in tuition and fee revenue per student, with growth rates reaching double digits.

Why is it happening? Universities are incurring significant expenses due to the absence of regulatory oversight. According to the research conducted by economist James V. Koch, it was observed that 98% of cost-increasing proposals are approved by trustees of large public universities.

POSSIBLE COMPLICATIONS

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The potential escalation of energy prices may have implications for the Federal Reserve’s approach to its interest rate policy. The most recent data on Consumer Price Inflation for July indicates a slight rise of 0.2%. However, the situation is further complicated for central bankers aiming to control price pressures due to another episode of increasing price inflation in energy commodities.

Let’s look into the number! According to the most recent Consumer Price Index (CPI) report, there was a significant increase of 3.0% in the price of fuel oil for the month. However, it is interesting that fuel oil experienced a substantial decline of 26.5% when compared to the previous year. In the same way, the consumption of utility gas experienced a 2.0% increase in July, yet it exhibited a significant decline of 13.7% from the previous year. The gasoline component, which has attracted significant attention, experienced a substantial decline of 19.9% compared to the previous year. However, it displayed a marginal increase of 0.2% over the month.

What does all of this mean going forward? The isolated increase in energy subcomponents every month does not inherently give rise to worries. However, the current short-term charts of crude oil, natural gas, and the broader commodity complex indicate a strong bullish attitude. These charts suggest the possibility of significant future increases in inflation statistics in the coming months.

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