**US Retail Sales Performance** Retail sales, not including gas and autos, increased by 0.2%. This is lower than last month’s revised growth of 0.6%. The retail sales control group grew by 0.5%, beating the expected 0.4%. The prior month’s figure was revised to 0.8%. Year-over-year, retail sales rose by 3.92%, down from a revised 4.35% the previous month. Although retail sales met predictions, the growth shows a decline from the revised data of last month. The July retail sales numbers indicate that consumers might be pulling back. The strong upward revisions for June 2025 suggest that spending was more robust than we thought. However, the year-over-year growth is noticeably slower now. This hints that the momentum we saw in the first half of the year is waning. **Consumer Slowdown and Inflation Impact** We’re observing this consumer slowdown alongside steady inflation. The latest Consumer Price Index report indicates core inflation remains high at 3.8%. This puts the Federal Reserve in a difficult position, trying to control inflation while avoiding a sharp economic downturn. The market is currently anticipating a 50% chance of a rate cut by December, making this mixed data even more uncertain. With this slowing trend, we need to pay attention to potential weaknesses in consumer discretionary stocks. Traders might think about purchasing put options on retail ETFs, which would gain value if these consumer-driven sectors decrease in the upcoming weeks. This strategy focuses on the belief that spending on non-essential goods will decline first. The uncertainty around the Fed’s next steps is likely to increase market volatility. This makes it appealing to prepare for higher volatility, possibly through buying options on the VIX index. Our strategy bets on larger market swings, without a specific direction, as investors digest this conflicting economic information. This situation resembles what we experienced in 2023, when speculation about Fed policy caused significant fluctuations in the bond market. Therefore, we are closely monitoring options on Treasury bond ETFs. Any further signs of economic weakness might trigger a rush to bonds, making call options a way to profit from a possible drop in interest rates. Create your live VT Markets account and start trading now.

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