• Stocks edge higher on softer inflation data – U.S. equity markets closed higher on Wednesday following a producer price index (PPI) report that came in below expectations for June. From a leadership perspective, consumer discretionary and communication services led markets higher, each gaining over 1%. Overseas, Asian markets closed higher overnight, led by a rebound in South Korea’s KOSPI Index, while European markets closed slightly lower. Bond yields declined following the inflation report, with the 10-year Treasury yield closing at 4.55% and the 2-year Treasury yield at approximately 4.14%. The decline in yields likely reflected easing concerns that the Fed will need to tighten monetary policy in the near term to combat inflation. In commodity markets, oil prices edged higher as investors continue to monitor renewed tensions in the Middle East.
   
• Wholesale prices moderate in June – Headline producer price index (PPI) inflation slowed to an annual gain of 5.5%, down from a 6.0% annual gain in May, and declined 0.3% on a monthly basis in June. Leading the monthly decline in headline prices was a 1.4% decline in goods prices, driven largely by a fallback in energy prices. Encouragingly, inflationary pressures also eased outside of the energy component, with core PPI rising 0.2% for the month, below expectations for a 0.4% increase. Combined with yesterday’s softer-than-expected consumer price index (CPI) report, we believe the June inflation data suggest that the pickup in headline inflation since February is not becoming entrenched beyond categories directly affected by higher energy prices. With this data in hand, we expect Fed policymakers to take a patient approach to further policy adjustments in the near term. Bond markets are pricing in a hold at the July 29 meeting, along with roughly even odds of a rate hike versus a hold in September. In our view, if inflation continues to moderate, the bar for an additional rate hike remains high. As a result, our base case calls for the Fed to remain on hold in the near term.
   
• Consumer check-in ahead – In addition to key inflation data, this week will also provide insight into the health of the consumer. Retail sales for June will be released tomorrow morning and are expected to show a monthly increase of 0.3%, while control-group retail sales—which exclude spending in more volatile categories such as gasoline stations, motor vehicle and parts dealers, building materials, and food services—are expected to rise by 0.4%. Consumer spending has remained solid through the first half of the year, with households likely supported by elevated tax refunds this spring, along with favorable labor-market conditions, helping offset the impact of higher oil prices. While households will not have the benefit of tax refunds to help support spending in the second half of the year, we believe steady labor-market conditions—characterized by moderate hiring growth and low levels of layoffs—will continue to help support household spending and broader economic activity over the remainder of the year.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.} 

• Markets close higher on cooler-than-expected CPI report – U.S. equity markets advanced on Tuesday after the June consumer price index (CPI) report showed inflation cooling more than expected. Bond yields declined in response, with the 10-year U.S. Treasury yield near 4.58%, as markets appeared to reassess whether softer inflation may give the Federal Reserve more flexibility to hold interest rates steady in the near term. International equity markets also finished mostly higher across Asia and Europe. In energy markets, WTI oil prices rose to near $80 per barrel amid renewed tensions in the Strait of Hormuz. Meanwhile, the U.S. dollar weakened against major currencies, consistent with lower Treasury yields.
   
• CPI report shows inflation pressures easing –Headline CPI inflation slowed to 3.5% year-over-year in June, below forecasts for a more modest decline to 3.9%. The moderation was broad-based, with price pressures easing across several major categories, including shelter, food, energy and transportation. Core CPI, which excludes the more volatile food and energy components, cooled to 2.6% year-over-year, compared with expectations that it would remain unchanged at 2.9%. The breadth of the slowdown is particularly encouraging to us because it suggests that disinflation is extending beyond a narrow range of categories. We believe these readings should help alleviate concerns that elevated inflation is becoming entrenched and give the Fed greater flexibility as it evaluates incoming data. However, a single favorable report is unlikely to change the direction of monetary policy. The Fed will likely look for confirmation in upcoming inflation, employment and wage data. Attention now turns to the June producer price index (PPI) report – to be released Wednesday - which is expected to show headline wholesale inflation cooling modestly but remaining elevated at 6.4% year-over-year.
   
• Major banks kick off earnings season with solid results – Several major banks opened second-quarter earnings season this morning with stronger-than-expected results. Bank of America, CitiGroup, Goldman Sachs, J.P. Morgan, and Wells Fargo each exceeded analysts' earnings-per-share and revenue estimates. These results help provide an encouraging start to a season in which S&P 500 companies are forecast to deliver year-over-year earnings growth of 21%. Energy companies are expected to post the strongest growth, benefiting from higher oil prices during the quarter, followed by the technology and materials sectors. Earnings gains are also forecast to be broad-based, with 10 of the 11 sectors expected to report year-over-year increases. If realized, we believe wider participation could help reduce the market's reliance on a small group of mega-cap companies and help reinforce the benefits of portfolio diversification.

Brian Therien, CFA;
Investment Strategy

^{Source for all data: FactSet.} 

• Stocks close lower with geopolitical tensions in focus – U.S. equity markets closed lower on Monday, as escalating tensions between the U.S. and Iran sent oil prices higher and weighed on investor sentiment. Over the weekend, the U.S. carried out additional military strikes against targets in Iran, while Iran responded by launching strikes against U.S. facilities in several Gulf countries. President Trump also announced Monday that the U.S. would reinstate its blockade on Iranian shipping, contributing to a further rise in oil prices and bond yields as geopolitical tensions re-escalated. From a market-leadership perspective, defensive sectors—including utilities and consumer staples—outperformed, as did the energy sector. Technology was a notable laggard, weighed down by weakness among semiconductor companies as investors continue to reassess whether the robust pace of spending on components needed for the AI buildout can be sustained. Technology weakness was particularly acute overseas, with South Korea’s KOSPI Index—which is heavily weighted toward semiconductor companies—falling nearly 9% overnight. Looking ahead, investors face a week packed with corporate earnings reports and economic data, with all eyes on bank earnings and the June consumer price index (CPI) report tomorrow.
   
• Price check ahead – Inflation will be front and center for investors this week, with June consumer price index (CPI) data due tomorrow. Headline CPI is expected to post a modest monthly decline, likely driven by a fall in oil prices, while rising 3.8% on an annual basis. Core CPI, which excludes food and energy, is expected to increase 0.3% for the month and 2.9% from a year ago. The run-up in prices over recent months has led investors to recalibrate their expectations for Federal Reserve interest-rate policy. Bond markets are now pricing in one Fed rate hike by the end of this year and an additional hike in 2027. While we acknowledge that upside risks to inflation have increased—particularly amid ongoing uncertainty in the Middle East—we believe the current backdrop warrants a patient approach from the Fed, and we expect it to remain on hold in the near term. Core goods prices posted their lowest reading in more than a year in May, while recent home-price data point to further shelter disinflation ahead. Additionally, labor-market conditions have come into better balance and, in our view, are no longer a meaningful source of inflationary pressure. The number of job openings is now only slightly higher than the number of unemployed workers, compared with 2022, when job openings were nearly double the number of unemployed workers. Although geopolitical uncertainty remains a risk, our base case is that oil prices will remain well below their March peak of more than $100 per barrel. Against this backdrop, we believe the Fed can remain patient and keep rates on hold in the near term.
   
• Second-quarter earnings preview – In addition to inflation data, corporate earnings will be in focus for investors, with Bank of America, JPMorgan Chase, Goldman Sachs, Wells Fargo, and Citigroup all scheduled to report results tomorrow, kicking off the second-quarter earnings season. For the quarter, analysts expect the S&P 500 to post year-over-year earnings growth of 22%, driven by strong profit growth in the technology and energy sectors. Technology earnings are expected to grow by roughly 61% from a year ago, bolstered by continued spending related to the AI buildout. Meanwhile, energy earnings are expected to more than double, benefiting from higher oil prices during the second quarter. For the full year, S&P 500 earnings are expected to grow by 24%. If realized, that would mark the strongest annual profit growth since 2014, excluding the post-pandemic recovery period. We continue to believe the economic environment remains supportive of equities, underpinned by stable labor-market conditions and resurgent manufacturing activity. In our view, these conditions should support solid earnings growth over the coming quarters and provide a favorable environment for equity markets.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.} 

• Stocks edge higher to close out the week – U.S. equity markets closed higher on Friday, with investors awaiting a busy week ahead of economic and earnings data, headlined by U.S. bank earnings and consumer price index (CPI) inflation for June. From a leadership perspective, most S&P 500 sectors finished the day flat to higher, led by communication services and materials. Contrarily, health care was the only sector to finish in the red. Bond yields were little changed on the day, with the 10-year U.S. Treasury yield finishing at 4.56% and the 2-year yield at 4.2%. Geopolitical tensions remain in focus after a re-escalation in military activity between the U.S. and Iran this week. However, with no incremental news flow on the conflict, oil prices were little changed Friday, with WTI crude oil closing just below $72 per barrel.
   
• Investors eye a busy week ahead – Key economic data and corporate earnings results will likely be front and center in the week ahead. On the economic front, we’ll get a read on inflation, with the consumer price index (CPI) out on Tuesday and producer price index (PPI) inflation for June out on Wednesday. We’ll also get a look at recent consumer spending trends, with retail sales for June due Thursday, along with a slew of housing market data on Friday. Corporate earnings will also be in focus, with several large U.S. financial services institutions slated to announce second-quarter results and analysts calling for S&P 500 second-quarter earnings growth of nearly 25%. On the economic side, we’ve seen resilient activity in recent months, characterized by stable labor-market conditions, solid consumer spending trends, and a resurgence in manufacturing activity. This has come despite persistent inflationary pressure, with headline and core CPI posting annual gains of 4.2% and 2.9%, respectively, in May — well above the Federal Reserve’s 2% inflation target.
  
  In our view, the current economic backdrop remains favorable for equity markets, underpinned by healthy economic activity and stable earnings growth. Specifically, we believe opportunities are attractive in U.S. large- and mid-cap stocks — which should benefit from strong earnings momentum, along with a solid economic backdrop, in our view — as well as in emerging-market equities, which can provide investors with global exposure to the technology and AI theme while the MSCI Emerging Markets Index trades at a slight discount to its 10-year average forward price-to-earnings multiple.
   
• Higher interest rates weighing on housing – After a surge in activity coming out of the pandemic, driven by low borrowing costs and households that were flush with cash, housing-market activity has stagnated in recent years as households adjust to higher home prices and higher borrowing costs. We saw further evidence of this yesterday, with existing home sales for June falling by 2.4% for the month, below expectations, albeit modestly higher on a year-over-year basis. Since 2023, monthly existing home sales have run at an annualized rate of roughly 4.1 million, well below the 2015–2019 average of roughly 5.4 million. While this could, in part, reflect low levels of inventory for existing homes in recent years — as existing homeowners have been reluctant to sell homes with below-current-market mortgage rates — new home sales show a similar pattern, trending roughly sideways since 2023. While we don’t expect borrowing costs to return to 2021 levels, we think there is hope for improvement on the affordability front, particularly as annual wage growth has outpaced home-price growth, as measured by the S&P/Case-Shiller U.S. National Home Price Index, for 15 consecutive months. Should this trend continue over time, it could provide improvement at the margin for housing-market activity. From an economic standpoint, while housing-market activity could remain subdued this year, the good news, in our view, is that we’ve seen solid trends in other drivers of growth, such as household consumption and business investment, which we believe will be the primary drivers of economic growth over the remainder of the year.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.} 

• Stocks edge higher – U.S. equity markets traded higher Thursday, supported by gains in the technology sector which helped lift broader indexes. The Nasdaq outperformed, gaining more than 1%, while the S&P 500 posted a 0.8% advance. Overseas, markets were broadly higher as well, with Asian equities led by a gain of more than 1% in Japan’s Nikkei, while European markets also traded higher. On the economic front, initial jobless claims for last week came in slightly below expectations at 215,000, pointing to continued stability in the labor market. Additionally, existing home sales for June were weaker than expected, falling 2.4% for the month, as the recent run-up in longer-term interest rates has likely weighed on housing activity. Bond yields finished the day slightly lower, with the 10-year Treasury yield settling around 4.55%. In commodity markets, oil prices closed lower, though investors continue to monitor this week’s geopolitical flare-up between the U.S. and Iran, which has helped push WTI crude oil higher by more than 4% for the week.
   
• Positioning portfolios amid the recent rotation – After a strong run in technology stocks following the March lows, markets have experienced a rotation into more value-oriented sectors since the beginning of June. Health care, financials and industrials have been among the top performers over this period, while technology has lagged, declining by roughly 5% through yesterday's close. Even so, the sector remains up more than 17% year-to-date. In our view, the weakness in technology reflects a combination of profit-taking after a sharp rally from the March lows and growing scrutiny around whether the current pace of AI-related capital spending can be sustained — and ultimately generate an adequate return — particularly as elevated memory prices increase the cost of the AI buildout.
  
  Despite these concerns, fundamentals within the technology sector remain solid. Earnings growth is expected to remain robust in 2026, and there are limited signs that companies are meaningfully slowing AI-related spending. In fact, estimates continue to point to substantial capital spending tied to AI infrastructure, while analysts expect technology and communication services to grow profits by 52% and 23% respectively in 2026. Against this backdrop, we remain overweight technology-heavy asset classes such as U.S. large-cap stocks and emerging-market equities. However, we recommend balancing this exposure with overweights to more economically sensitive areas, including U.S. mid-cap stocks. At the sector level, we continue to recommend an overweight to communication services, which has lagged year-to-date but offers exposure to several AI-related beneficiaries. We also favor industrials, which should benefit from continued infrastructure spending and an ongoing rebound in manufacturing activity.
   
• Jobless claims remain contained, signaling steady labor-market conditions – Initial jobless claims for last week came in at 215,000, slightly below expectations of 220,000 and modestly lower than the prior reading of 217,000. So far in 2026, initial claims have averaged roughly 213,000, well below the 30-year median of more than 300,000. This suggests that layoffs remain contained, a view reinforced by the unemployment rate declining to 4.2% in last Friday’s June employment report. While 2025 was characterized by both low hiring and low firing — with nonfarm payroll growth averaging roughly 10,000 per month and initial jobless claims averaging 226,000 — labor-market conditions have improved this year. Job growth has strengthened, while both the unemployment rate and initial claims remain contained. Over the past three months, nonfarm payrolls have increased by an average of 111,000, compared with an average monthly gain of 92,000 year-to-date. Overall, we would characterize labor-market conditions as stable. Low unemployment and modest hiring growth should continue to help support economic activity over the remainder of the year.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.}