From the desks of Stanley Katz & Lauren Madera
GONE ARE THE DAYS OF ORTHODONIC EMBARRASSMENT! HAPPY INTERNATIONAL RETAINER DAY CELEBRATING THOSE COMMITTED TO POST-ORTHODONTIC CARE!
Markets reversed course this week (DJIA: -0.93%, S&P 500: -1.55%, Nasdaq: -2.90%), as last week’s AI and semiconductor chips rally became this week’s biggest headwind. The Nasdaq and S&P 500 bore the brunt of the selling, dragged lower by their outsized weighting in large-cap tech and AI-linked shares. The energy sector was a notable exception to the broader pullback, correlated as of late to American-Iranian interactions. Escalating tensions kick oil prices higher. Higher oil prices propel energy sector valuations. This cycle has become so familiar that Wall Street coined a clever acronym for the trade: NACHO (aka Not a Chance Hormuz Opens). Predictably, investors stomached some NACHOs this week. Markets found some footing mid-week, though, supported by stronger-than-expected bank earnings and softer June inflation data.
The June Consumer Price Index (CPI) brought a rare piece of good news this week, coming in below expectations. In the latest episode of Schwab’s “On Investing” podcast, Liz Ann Sonders and Collin Martin unpacked the report and the caveats that came with it. The headline decline was driven partly by the June pullback in oil prices, a tailwind that has since reversed. Core inflation remained sticky, and the CPI components that map to the Federal Reserve’s preferred measure, core Personal Consumption Expenditures (PCE), showed some of the hotter readings in the report. Sonders and Martin also discussed the latest National Federation of Independent Business (NFIB) small business survey, in which inflation has leapfrogged taxes as the single most important concern. In essence, good news with fine print. Will NACHO derail July’s inflation read? We’ll find out in a month.
Beneath the week’s turbulence, J.P. Morgan Asset Management sees a more encouraging story in global corporate earnings. In a recent piece, the firm examines what is driving a meaningful surge in earnings across global markets. The breadth of the story goes well beyond U.S. large-cap tech. Analysts now project double-digit earnings growth across the U.S., Eurozone, and Japan for 2026, with emerging markets leading the pack. Importantly, much of this year’s returns have been powered by actual earnings growth rather than expanding multiples (the price investors are willing to pay relative to earnings) — a more durable foundation than valuation expansion alone. The AI capital expenditure boom is the most visible driver, but J.P. Morgan identifies several others, including currency tailwinds for international exporters, broad sector strength, and improving corporate governance practices, particularly in Japan. For investors looking past the headlines, it’s a compelling read.
Below are links to a number of third-party research reports that we have read and analyzed over the past week. We hope you will find the information interesting, useful, and worthwhile.
Schwab:
J.P. Morgan Asset Management:
BlackRock:
First Trust:
Capital Group:
Stanley Katz & Lauren Madera, Financial Advisors
ClientFirst Financial Strategies, Inc.
937-293-5500
Source for weekly stock market returns: Barron’s.
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