Welcome to “The Week Ahead” where each Friday we take a moment to provide our thoughts on what we can expect in markets and the economy for the week ahead.

Last week the iPhone celebrated its 10th anniversary. Data from the Pew Research Center captures how Americans today are increasingly connected to the digital world. 95% of Americans now own a cellphone of some kind, up from 62% in 2002, while 77% of Americans own smartphones, up from 35% as recently as 2011. One-in-ten American adults are “smartphone-only” internet users – they don’t have traditional home broadband service. Technology, and the smartphone specifically, have continued to disrupt the status quo – let’s take a look at all the devices that aren’t needed anymore due to that iPhone in your pocket!

Traditional Wireline Phones, Fax Machine, Compass, Camera, Alarm Clock, Watch Radio, MP3 Player, CD Player, BlackBerry, Dictation Machine, Game Console, Rolodex, Notepad, Calendar, Stapler, Newspapers & Magazines, Encyclopedia, GPS Unit, Calculator, Television, DVD Player, Video Conferencing, Shopping Stores/ Malls, Photo Album, Taxi, Printer, Event Tickets, Credit Cards/ Reward Cards, and more

Based on research by KPCB, Deloitte, Statistic Brain Research Institute, and Frictionless Data – an iPhone in 1991 storage and computing cost dollars would be worth $1.44 million (that’s per phone!). What does this mean? Innovation in technology, historically, has proved to be deflationary, exerting downward pressure on prices. This could explain, partially, why inflation hasn’t picked up to the 2% target adopted by the Fed as the long-term target back in 2012. Over the last fifty years inflation has averaged 4.1%, heavily skewed by the Great Inflation of the 1970s. It is notable that inflation was just starting to trend over 2% from December 2016 to April 2017 after spending most of 2015 flat. May CPI came in at 1.9% and it will be interesting to see what the June reading will be next week. The FOMC minutes released this week show members viewing the slowdown in inflation as transitory and idiosyncratic factors (wireless telephone services and prescription drugs were singled out), a relatively hawkish surprise as many expected a stronger response after three consecutive soft CPI reports. Inflation is difficult to prepare for and tends to be confirmed after the fact. We began transitioning part of our fixed income allocation at the start of the year to prepare for a more inflationary environment on the belief that it is better to have fire insurance before the fire, not after.

Data deck for July 8-July 14: