Perspectives & News

Markets finished July with mixed results as strong corporate earnings and continued investment in artificial intelligence were offset by slower economic growth, renewed energy-price pressure, and a more divided Federal Reserve. The S&P 500 was approximately flat for the month after a volatile path, while smaller companies remained one of the stronger areas year-to-date. Fixed income continued to provide income, but Treasury yields moved higher late in the month as oil prices and inflation concerns resurfaced. July reinforced the central tension of 2026: corporate fundamentals remain constructive, but the macroeconomic margin for error has narrowed.

The first half of 2026 was a good reminder that successful investing requires distinguishing between sensational headlines and the long-term forces that drive portfolio returns. At the beginning of the year, investors questioned whether the U.S. economy could avoid recession, whether inflation would continue to moderate, and whether market leadership would broaden beyond the Magnificent 7 (“Mag 7”, comprised of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla). Six months later, many of those questions have been answered—although not always in the ways consensus expected.

I am not surprised with the three-year 80%+ gain of the US equity market (SP 500)! Corporate profits and labor productivity gains were fairly well forecasted in our outlook from early June of 2022: we stated that inflation was transitory rather than structural (CPI hit a 9% annualized rate in May of 2022) and that once the Federal Reserve started withdrawing the excess fuel and increasing the price of fuel (fuel being the money supply and interest rates being the cost of fuel) that inflation would start it’s descent to the 2-3% level. We made assumptions that the pressure of wage increases were going to subside, consumers and corporations were in great financial shape due to the massive amount of liquidity injected into the system, and that Government spending would likely stay excessive, all contributing to an the economy that had lots of positive support rather than believe what most economists said: “we are headed into a recession”. As we noted at that time, “this is the most predicted recession that will never happen.” Wow, was that last statement ever more right!!!

Presidential elections in the U.S. can elicit strong emotions and anxiety for investors and often bring significant attention to the stock market, as investors anticipate how political outcomes might influence economic policies. Historically, market behavior around election time follows certain trends, driven largely by uncertainty and speculation about future policy changes.

In this month’s MCF Perspective Moment, Dave Harris, CEO, provides an update on interest rates and how the rate of change to money supply affects the economy. Dave also provides helpful historical context on consumer confidence and data showing how the S&P 500 has trended as we enter the third year of the presidency.