The latest July CPI report, released on Thursday, indicates a 3.2% increase in the US inflation gauge, which falls below initial expectations. The core CPI is also below the estimate. Adjusted for inflation, real wages experienced a 0.3% month-on-month growth and a 1.1% rise compared to the previous year. Does it mean that the US is leaving challenging economic times behind and heading towards a period of prosperity? Let's delve deeper into the details.

In July, the consumer price index saw a 3.2% year-on-year rise, surpassing the June reading by 0.2%. While some view this development as a sign that inflation has lost its grip on the US economy – given that the rate has significantly dropped from its 40-year highs in mid-2022 – it still remains notably higher than the Federal Reserve's desired 2% threshold.

Persistent high inflation – specifically grocery, gas, and rent prices – has burdened the American population for over two years. Since March of the previous year, the Federal Reserve has implemented 11 interest rate hikes, bringing rates to their highest point for the past 22 years. And it seems like it’s too early for ‘mission accomplished’ yet. Doubts persist regarding the Federal Reserve's timeline for concluding its ongoing cycle of rate increases.

The easing of inflation concerns has had a positive impact on the investment landscape. The Nasdaq Composite Index experienced an increase of approximately 1%, same as the other major benchmarks. The S&P 500 opened with a gain of around 0.5%, while the Dow Jones followed a similar trajectory, starting the session up by just over 0.5%.

Whereas, the big tech players were not so lucky this week, with shares of Nvidia (NASDAQ:NVDA), Meta (NASDAQ:META), Netflix (NASDAQ:NFLX), and Tesla (NASDAQ:TSLA) going negative.

Nvidia / Meta / Netflix / Tesla Stock Chart by TradingView
Nevertheless, the inflation report, showing moderate price growth, has encouraged investors to take on more risk in the stock market. Besides, market participants demonstrated confidence in precious metals. XAUUSD surged by approximately $10 at the start of Friday's trading, reaching a session peak of $1,920 per troy ounce.
XAUUSD Chart by TradingView
Although it might not be a significant shift, that looks promising. In the past month, gold prices have decreased from their July peak of $1,987 to $1,910.

Taken together, these factors raise hopes that the Federal Reserve might be able to manage a smooth economic transition. However, as always, it's wise to conduct your own analysis before making trading decisions, as this approach will help reduce potential losses. Ultimately, the most valuable investment is the knowledge that can be practically applied.