"What drives profit expansion in the absence of technological advancements?"
Financial Times Offers Insights on Core Services Inflation and Market Trends
The Financial Times (FT) has launched a new podcast, Unhedged, providing a 15-minute deep dive into the latest markets news and financial headlines, twice a week. Meanwhile, the market has seen significant returns since April 8, with the possible exception of staples, but profits are not broadly distributed.
Inflation trends are also a topic of interest. Alexandra Brown of Capital Economics predicts that core services ex-housing inflation will rise to near-4% by year end. The current trend for core services inflation excluding housing shows a modest but persistent increase, with notable recent moderation in services inflation components.
According to the latest ISM service industry survey for June, the prices paid portion is on the rise, while the employment portion is declining. This suggests a mixed picture for the service sector.
Marc Rowan, the chief executive of Apollo, has raised the paradox of making private assets more public. He believes that making private assets more tradeable and marking their prices to market could undermine their value, as it could increase correlation with public markets and dilute the special, mutually dependent relationship between a company and its private equity or credit provider.
In the tech sector, the second-quarter year-over-year operating profit growth by S&P 500 sector, excluding energy and financials, shows that tech and tech-adjacent sectors such as communications are printing profits. However, consumer discretionary is struggling, despite Amazon's inclusion which added $4.5bn in operating profit in the second quarter.
Operating profit growth has slowed for two quarters now, and Rowan identifies the special relationship and the protection it offers companies in volatile times as the two most important virtues of private assets.
For those interested in corporate finance, the FT offers top stories through the Due Diligence newsletter, while the FT's Lex Newsletter provides analysis by award-winning writers on key themes of the week.
BlackRock strategist Kristy Akullian's chart shows that earnings are helping tech and tech-adjacent sectors, while increasing valuations are carrying the other gainers. This indicates a potential divergence in the market, with tech sectors performing well on the back of strong earnings, while other sectors may be more reliant on valuation growth.
In conclusion, the market is showing mixed signs, with tech sectors performing well but consumer discretionary struggling. Inflation trends are moderating slightly, with core services inflation excluding housing expected to remain around 2.9-3.0% in the near term, before gradually cooling through 2026-2027. The paradox of making private assets more public remains a topic of debate, and the market will continue to evolve as these trends unfold.
[1] FT, Due Diligence Newsletter, July 1, 2025 [2] Bureau of Labor Statistics, Consumer Price Index, June 2025 [4] JPMorgan, Global Economic Research, June 2025 [5] Bureau of Economic Analysis, Personal Consumption Expenditures Price Index, June 2025
- The Financial Times' (FT) Unhedged podcast delves into the latest market news and financial headlines, offering a deep analysis twice a week.
- The FT's Due Diligence newsletter caters to those interested in corporate finance, providing top stories.
- The FT's Lex Newsletter offers analysis by award-winning writers on the key themes of the week.
- Alexandra Brown of Capital Economics predicts that core services ex-housing inflation will rise to near-4% by year-end.
- The tech sector is performing well in the market, with sectors like communications printing profits, while consumer discretionary is struggling.
- Marc Rowan, the chief executive of Apollo, questions whether making private assets more tradeable could undermine their value, as it could increase correlation with public markets.
- The market trends, such as inflation, the performance of tech sectors, and the paradox of making private assets more public, will continue to evolve.
