Weekly Perspective - July 1, 2026

Proprietary survey data held steady at 51.6 in the most recent week - solid, if not spectacular. The story underneath is a familiar split: front-end consumer data softened in April and May as gasoline prices, interest rates, and weather weighed on spending. Retailers, restaurants, and home builders have been the weakest pockets. Higher-income-focused companies continue to outperform lower-income peers.

But the back end of the economy tells a different story. AI capital expenditure is lifting industrials and transports on better volumes and pricing. Trucking surveys have surged to 55, cap goods and chemicals are re-accelerating, and employment data - while moderating slightly - remain broadly solid. Memorial Day weekend brought some stabilization in consumer-facing data, helped by better weather and more reasons to shop.

Kevin Warsh’s debut as Fed Chair was a sharp break from his predecessors - Bernanke, Yellen, and Powell. He delivered a deliberately hawkish message focused on restoring inflation credibility, while offering no forward guidance, no commentary on current economic conditions, and no clarity on the Fed’s reaction function. The risk now is a “credibility trap”: unless inflation moderates over the next few prints, Warsh may have no choice but to hike - possibly twice.

Both July and September rate hikes are now live possibilities. The September dot plot showed a 9-9 split among Fed officials on whether to hike or hold this year. Warsh himself submitted no dot, but his press conference was resolutely focused on price stability. The working framework is a two-phase Fed: hawkish now to rebuild credibility, then a potential pivot toward accommodation in 2027 as AI disinflation arguments take hold through expert task forces Warsh has convened.

Globally, the Bank of Japan raised rates to the highest level since 1995 - yet the yen failed to strengthen. In the UK, a new Prime Minister is expected, with tax policy posing more of a growth risk than a direct bond market confrontation.

The market’s wall of worry has shifted. Where bull markets recently climbed concerns around oil and geopolitics, attention is now turning to monetary policy and supply dynamics. SpaceX’s unexpected debt offering so soon after its equity IPO was a reminder that capital markets issuance remains elevated. Warsh himself is being priced as a volatility increaser.

Yet the fundamental case for equities remains intact. Earnings power is strong, recession risk is low, and the AI theme - both the stocks and the earnings they generate - continues to be the primary market driver. The current environment looks more like a digestion phase after a furious rally off the March 30 low: the market is reassessing incoming data, not reversing course.

Survey and performance figures as of June 30, 2026. Year-to-date unless noted.

Crude oil has collapsed nearly $50 from recent highs, driven by peace dynamics and a dollar that has broken out of a 12-month trading base. The yen and euro are testing critical support levels. This matters across asset classes: a stronger dollar sends commodities lower (helpful for inflation and rates), while favoring U.S.-focused risk assets - particularly small caps.

Semiconductors, which led the meteoric rally, are easing from overbought conditions as the broader market digests these cross-currents. Once this digestion phase runs its course, the bull trend should resume across growth and value, large and small, domestic and foreign.