Spirit’s Cash Warning and July’s Inflation Miss Point to the Same Problem

Core inflation came in at 0.3% monthly Tuesday, pushing the annual rate to 3.1%. Not the disaster some expected from tariffs, but not the relief Powell needs either. Medical care costs jumped 0.6% in a single month. The CME FedWatch tool shows about 60% odds for a September cut, though by the time you read this, who knows where it’ll be.

But here’s what caught my attention: Spirit Airlines filed an 8-K Monday warning they might not make it through the next twelve months. Five months after exiting bankruptcy with $350 million in fresh capital.

Connect those dots.

The Numbers Don’t Support September Cuts

July’s CPI report was supposed to show tariff damage. Instead, we got mixed signals that make the Fed’s job harder, not easier. Core came in at 0.3% monthly – the hottest reading since January. Strip out the noise and look at services: medical care up 0.6%, transportation services edging higher at 0.2%.

These aren’t tariff impacts. These are wage pressures working through the system.

The headline number held at 2.7% annually because energy prices dropped 1.1% for the month. Gasoline fell 2.2%. But the Fed doesn’t set policy on gas prices. They watch core services, and core services are accelerating.

Yet futures markets price September cuts at 60% probability, up from 40% just last week. Why? Because one weak jobs report in July has everyone convinced Powell will panic.

I’m not buying it. Neither are the banks extending credit at 8% when they could wait for lower rates. Neither are landlords pushing through 5% rent increases in non-controlled markets. The people with actual money on the line aren’t acting like rate cuts are coming.

Spirit’s Collapse Tells You Who’s Out of Money

Spirit Airlines emerged from Chapter 11 on March 12. They converted $795 million of debt to equity, raised $350 million in fresh capital, and promised a turnaround focused on “premium” offerings.

Five months later, they’re warning about “substantial doubt” regarding their ability to continue operations. Blamed it on weak leisure travel demand that “persisted in the second quarter.”

Let me translate: The customers who flew Spirit in 2021 and 2022 can’t afford to fly anymore.

This isn’t complicated. Spirit’s median household income customer is around $48,000. After eighteen months of 5% services inflation eating into wages, after student loans restarted, after credit cards hit 28% APR, these households stopped flying to Orlando.

Meanwhile, Delta’s load factors are at record highs. United can’t add premium seats fast enough. The bifurcation isn’t coming – it’s here. Half the country is tapped out while the other half books European vacations.

Spirit is just the first casualty you can see in public filings.

Goldman’s Tuesday Revision Reveals the Distribution Game

Goldman raised their S&P 500 target to 6,600 Tuesday morning. David Kostin’s note cited “reduced policy uncertainty” and “resilient corporate earnings.” It’s their second upward revision in two months, putting them near the top of Wall Street targets.

Interesting timing.

See, Goldman just finished helping several large institutional clients reduce equity exposure in July. The firm’s prime brokerage arm reported hedge fund gross exposure dropping for six consecutive weeks through month-end. Their wealth management division has been rotating high-net-worth clients into structured notes and alternative investments since June.

So why publish a bullish target while facilitating client de-risking?

Because someone needs to buy what institutions are selling. Retail sees a 6,600 target from Goldman Sachs and thinks the coast is clear. Meanwhile, the smart money that actually talks to Goldman’s institutional sales desk is lightening up.

This isn’t conspiracy. It’s how distribution works.

The Trades That Actually Make Sense Here

Forget trying to game September’s Fed meeting. The real opportunity sits in three disconnects the market hasn’t priced:

Services inflation stays sticky through 2026. Healthcare workers got 4–5% raises this year. Those costs flow straight into medical CPI. Apartment rents in Austin, Phoenix, and Miami are still climbing 4–6% annually despite the construction boom. Buy floating-rate loans from regional banks trading below book value. Own apartment REITs in non-rent-controlled sunbelt markets. Skip the duration bet everyone else is making.

Consumer spending splits permanently. Spirit can’t fill planes at $89 fares. Walmart’s seeing traffic decline in discretionary categories. But Restoration Hardware just raised guidance and LVMH can’t keep champagne in stock. Short the middle-market retailers like Gap (GPS) and Kohl’s (KSS). Own the extremes—Costco (COST) for the affluent mass market, and luxury names for the truly wealthy.

Volatility is mispriced for what’s coming. The VIX at 15 with services inflation accelerating, consumers bifurcating, and the Fed trapped between inflation and recession? That’s a gift. December VIX calls at 20 cost almost nothing. January 2026 VIX calls at 25 are basically free. When the Fed either cuts into inflation or holds while consumption collapses, volatility explodes.

Why September Doesn’t Matter

The Fed might cut 25 basis points in September. Markets are pricing 60% odds, and Powell hates surprising markets. But what then?

Cut again in November with services inflation still running 3%? Hold rates at 4% while Spirit and its peers collapse? There’s no good option here.

The setup reminds me of 2007. Not the crisis part—we’re not there. But the part where the Fed cut rates in September thinking they could thread the needle, only to realize they were already behind the curve in both directions.

Spirit’s warning isn’t about one airline. It’s about half of America running out of runway. Goldman’s target isn’t about market optimism. It’s about institutional distribution. The inflation data isn’t about tariffs. It’s about wages and rents that won’t compress regardless of Fed policy.

Position for the reality, not the narrative. The biggest money already is.

Stay sharp. Stay sovereign.

— Reed

Reed Holloway writes for Wealth Creation Investing on the intersection of financial sovereignty, economic policy, and systemic risk. His work exposes government overreach, defends hard-asset strategies, and challenges the narratives that mask deeper economic instability. His analysis focuses on what sovereign wealth funds and major institutions are actually doing with their money, not what they’re saying at conferences.