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Markets await inflation report, meme stocks surge and is the 60/40 portfolio still viable? Inflation outlookFinancial markets seem to be in [View in browser]( [Bloomberg]( Markets await inflation report, meme stocks surge and is the 60/40 portfolio still viable? Inflation outlook Financial markets seem to be in a holding pattern ahead of crucial inflation data for July that are due on Wednesday. Consumer prices rose 8.7% after climbing 9.1% in June, according to the median forecast of economists. Meanwhile, consumer expectations for price increases [declined sharply]( in the Federal Reserve Bank of New York's latest survey. While that may give policy makers some comfort, the surge in energy prices is raising the [cost of everything]( from bread to sugar, which will keep price pressures on the boil. Meme frenzy Meme stocks are back in the spotlight as some of the most popularly traded stocks on forums such as WallStreetBets [surged yesterday](. Bed Bath & Beyond closed up almost 40% on the day, while cinema chain AMC Entertainment rallied as much as 24% at one point. Short covering from institutional investors is one reason suggested for the rapid rise in such stocks. Equities in general are still expected to rise by [strategists at JP Morgan](, but Chief Global Markets Strategist Marko Kolanovic recommends trimming positions. “With commodities lagging other risky assets, we shift some of our risk allocation from equities to commodities,’’ he said. 60/40 survey This week's MLIV Pulse survey revolves around the 60/40 portfolio. Respected for decades for providing a decent profit and pleasantly low volatility, the 60/40 portfolio generated a 11.5% loss so far this year. Is it still a viable investment strategy? Over the next ten years, do you expect the 60/40 portfolio to provide returns on average above inflation? Are Treasuries the best risk-free asset in fixed income allocations over the next six months? It takes one minute to participate in the MLIV Pulse survey, so please [click here]( to get involved anonymously. US futures drop US e[quity-index futures]( and the dollar slipped. S&P 500 contracts fell 0.1% as of 6:15 a.m. New York time while Nasdaq futures were down 0.4%. European stocks also dropped, led by tech, travel & leisure and miners. Treasuries dipped, with the 10-year benchmark yield rising three basis points as traders await Wednesday’s inflation report to gauge the path of Federal Reserve tightening. Coming up... Key US data releases on the day before Wednesday’s CPI report include nonfarm productivity and unit labor costs. In company statements, Coinbase's partnership with BlackRock will likely be a major focus when the largest US cryptocurrency exchange delivers second-quarter results. Emerson Electric, Alcon and Ralph Lauren are also among companies slated to report earnings. Kenya holds a presidential election. The US sells $42 billion in 3-year notes. What we've been reading Here's what caught our eye over the past 24 hours. - [Carlyle's billionaire founders]( reached a breaking point with the CEO. - An [FBI raid]( focused on material Trump brought from the White House. - Trump says he was too busy to [sue Clinton]( sooner. - Tornado's crypto token [TORN nosedives]( after US sanctions. - A what-if DC [war game]( maps the huge toll of a future US-China war. - Grease star [Olivia Newton-John]( dies. - Corporate America fumes over Biden's [tax and climate package](. And finally, here’s what Joe’s interested in this morning Yesterday we got some interesting news. Inflation expectations are tumbling. The latest NY Fed Survey of Consumer Expectations indicated big drops [in expected inflation on both the 1-year and 3-year horizons](. For the Fed, one of their big fears is that inflation expectations become unanchored, creating some persistent self-fulfilling upward price spiral. So it's notable and important that this is not happening, at least according to this survey. Speaking of inflation expectations, [yesterday we published our interview with Goldman Sachs Chief Economist Jan Hatzius](, who expressed surprise that these measures were so low, given that inflation itself is at its highest level in over 40 year: "If you had given me all of the inflation related indicators, other than the expectations measures a year ago, and had asked me to predict the expectations measures, I would've given you a much higher number." It really is kind of odd! Inflation is super high. And not only that, the whole "transitory" messaging was a debacle. We also know that inflation is a huge, top-of-mind issue for the general public. And yet when asked where inflation is going to go a few years out, the outlook is pretty subdued. One way to interpret this is that the Fed has A LOT of credibility with the public, that there's such confidence that things will normalize. There's something else I'mthinking about, though this is a bit more speculative: When the pandemic hit in March 2020, and we saw the biggest wave of layoffs in US history, the public's perception of the health of the labor market tumbled. But it didn't fall quite as far as you might expect. In fact it only fell back to 2014 levels. Labor market perceptions never got anywhere near as bad as they were in the depths of the Great Financial Crisis, despite the unemployment rate having gone way higher. In other words, the public correctly perceived the employment weakness of Spring 2020 to be, well, transitory. Perhaps the public is correctly making the same assessment now about elevated prices. Read the [full Hatzius transcript here](. Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwar]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. 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