Comments based on information available as of 5:15 am CT on 7/2/2026
Growth: From a Sprint to a Jog
The labor market remains on solid footing, but it is starting to jog rather than sprint. ADP reported private employers added 98,000 jobs in June—down from 122,000 in May and shy of expectations—with nearly half the gains concentrated in education and health services. Meanwhile, the ISM Manufacturing Employment Index ticked up to 49.7. While still technically in contraction, it is knocking on the door of expansion and continuing its “less bad” trajectory. Put it together, and you get a picture of a jobs market that is solid but softening. Employers aren’t laying people off in droves; they are simply hiring with more deliberation, and it is taking job seekers longer to land a role. As long as wage growth chugs along, it can support continued consumer spending without forcing anyone to hit the panic button—especially since every hour worked can now buy a few more gallons of gasoline than it did just a couple of months ago.
Inflation: Disinflation on the Horizon
The big surprise for the summer might be the disinflationary story. It remains tentative, and markets are on tenterhooks waiting to see if high energy and semiconductor inflation has seeped irreversibly into core inflation, but inflation expectations have moved notably lower alongside oil prices. The national average price for a gallon of regular gas has now fallen for six consecutive weeks, sliding from a May peak near $4.57 to under $3.90 as normalizing crude supply works its way to the pump. And it isn’t just energy, as the ISM Manufacturing Prices Index plunged 9.1 points in June to 73, marking the largest single-month drop since July 2022. Yes, a reading of 73 still means raw material prices are rising, but the direction of travel matters enormously. The energy shock that dominated the spring is unwinding and the cost pressures manufacturers spent months agonizing over are finally decelerating. Consumers feel gasoline prices in their bones week after week, and six weeks of relief goes a long way toward repairing both household budgets and inflation psychology.
Policy: Holding Cards Close to the Vest
Fed Chair Warsh made his international debut at the ECB’s forum in Portugal this week. If investors were hoping for a roadmap, they were left wanting—by design. Warsh flatly refused to signal the path of rates, offering “no forward guidance,” and remarkably, the world’s other major central bankers cheered him on. ECB President Christine Lagarde said her one regret was feeling bound by forward guidance, while the heads of the Bank of England and Bank of Canada chimed in with sympathy. But read between the lines, and the message was less hawkish than the silence suggests. Warsh noted that inflation expectations and risks have moderated in recent weeks. A month ago, a rate hike this year felt like a slam-dunk prediction, but today, with energy prices falling and inflation expectations easing, it is merely one scenario among several, which represents a real shift.
Looking Ahead: Prove It or Lose It
Earnings season kicks off in a couple of weeks, and while every earnings season is billed as the most important of all time, this one truly carries high stakes. After a recent wobble in mega-cap valuations, investors are shifting their mindset from faith to verification. Hyperscalers have committed staggering sums to capital spending, and any whiff of hesitation—such as a trimmed capex forecast or a cautious tone about AI monetization—could prove damaging to the market’s leadership. The flip side is that a reaffirmation of continuity, with no change in spending and no worries over monetization, could be spectacular for those same leaders. Because there is an incredibly wide range of possible outcomes for this specific sector, it is a “prove-it-or-lose-it” moment, which makes a strong case for diversifying your portfolio beyond just a single theme.
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