Tom Essaye in Barron’s: Hot PPI Report Threatens Stock Rally Momentum
Surging producer prices raise stagflation concerns for equity markets
Stocks’ Rally Could Stall After Hot PPI Report
Sevens Report founder Tom Essaye said Friday that July’s hotter-than-expected Producer Price Index poses a serious threat to the stock-market rally.
The headline PPI jumped by the most since March 2022, rising more than four times the consensus estimate. Essaye warned that the upside surprise introduces risks that had not been on investors’ radar.
Rising producer prices, he explained, could pressure corporate earnings while increasing the likelihood the Fed faces a “mandate dilemma” if inflation rises just as labor-market data weakens. That would be the “textbook definition of stagflation.”
“If stagflation emerges in the second half of 2025, equities are well over their skis,” Essaye noted, pointing to the S&P 500’s 22-times multiple on what may be overly optimistic 2026 earnings forecasts.
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