After experiencing its worst first-half decline since 1970, the S&P 500 jumped 9.2% in July. Impressive yet depressing at the same time considering how much further it has to go just to get back to breakeven. If you are wondering why stocks rallied, you might conclude that something positive must have happened on the inflation front. Actually, the inflation data reported in mid-July was the worst in 40-plus years. Ditto any positive thought on the economy; Q2 GDP reported late in July was negative, meaning the economy had met the textbook definition of a recession. The market’s ability to shake off the data and finish the month in rally mode likely reflected a few factors. For one, the sky does not appear to be falling on the consumer economy. Lower-income consumers are struggling with reduced purchasing power, but most consumers are benefiting from full employment and rising wages. Equally important, the markets are starting to believe that the Fed’s aggressive action will help contain inflation. Finally, consumers may be learning to live with higher interest rates – particularly if, as some investors now suspect, rates hit a plateau and begin to fall next year.