From the desks of Stanley Katz & Lauren Madera
MARKET COMMENTARY FOR PSYCHIC DAY 2026. WE SAW THIS COMING.
Markets snapped back this week (DJIA: +1.04%, S&P 500: +1.05%, Nasdaq: +1.59%), though the gains masked a turbulent ride. Earnings and a pivotal Federal Reserve decision set the tone. On the earnings front, concerns about artificial intelligence (AI) spending weighed on markets early before Microsoft’s stronger-than-expected Azure cloud results led a sharp Thursday rebound. And in the middle of it all, the Fed announced their rate decision from July’s Federal Open Market Committee meeting. Policymakers held the benchmark rate unchanged at 3.50%–3.75%, but the decision wasn’t unanimous. Three committee members broke ranks and voted for a hike, a sign that the inflation debate inside the central bank is intensifying. In response, the 30-year Treasury bond yield briefly climbed above 5.2% for the first time since 2007. June’s core personal consumption expenditures (aka PCE, the Fed’s preferred inflation gauge) rose just 0.1%, below expectations, while second-quarter gross domestic product (GDP) growth came in at a softer-than-expected 1.5% annual rate. All this to say, it was the kind of week where the headline numbers told you very little about what it took to get there.
Two forces are testing markets despite a broadly strong earnings season, and Argus Research addresses both in their latest weekly commentary. The first is the war with Iran, which has proven stubbornly resistant to resolution. Brief ceasefires have sent oil and bond yields lower, only for hostilities to resume and both to reverse course. The second force at play is Chinese AI. Argus calls this the “second DeepSeek moment.” Recall January 2025, when China’s DeepSeek AI model shocked markets with the possibility that AI can be developed at a fraction of what U.S. companies were spending? Apparently, newly released Chinese models are renewing skepticism that the billions U.S. companies have committed to AI infrastructure are warranted. The dynamic is driving meaningful sector rotation, with energy leading the third quarter and information technology trailing significantly. Argus’s report offers a grounded perspective for investors trying to reconcile a market that appears to be rotating rather than retreating.
For investors trying to make sense of the Fed, J.P. Morgan Asset Management offers some insight in their latest piece. The firm notes that internal disagreement at the Fed is historically common when inflation is elevated. And importantly, the three dissenting votes came from rotating bank presidents rather than the more entrenched Fed Governors who typically set the committee’s direction. J.P. Morgan’s base case remains no rate hikes in 2026, though they acknowledge a September hike as a real possibility depending on incoming data. Even if that happens, it is unlikely to be the start of a prolonged hiking cycle. Their broader message is one of cautious calm: a divided central bank is unsettling, but it doesn’t necessarily foretell significantly higher rates from here. Psychic Day pun for the close!
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.
Argus:
J.P. Morgan Asset Management:
Van Eck:
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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