Comments based on information available as of 5:15 am CT on 7/10/2026
Growth: No Longer a Balancing Act
For years the growth story leaned almost entirely on services, but manufacturing is beginning to pull its weight. The Institute for Supply Management Manufacturing Purchasing Manager Index climbed back above the expansion-contraction line in January and has held there since, driven by new orders. That’s a forward-looking gauge, since factories don’t ramp production lines for demand they don’t see coming. The services side has stayed comfortably in expansion. Together, the two suggest an economy broadening out rather than balancing on a single leg.
Inflation: Getting Back on Track
Disinflation means lower inflation, not lower prices. Falling oil, and the lower gasoline prices that follow, made it look like we could get back onto the disinflationary track, a move that looks tentative but still likely. The clearest evidence came from the ISM Manufacturing Prices Paid index, which tumbled hard in one of its steepest single-month drops in years. That index sits at the front of the inflation pipeline, capturing what manufacturers pay for inputs before those costs reach finished goods, so a drop this steep could be a leading indicator that the spring’s goods-inflation pressure is unwinding at the source.
Policy: Personnel Is Policy
There’s an old Washington adage that personnel is policy: who you put in the room matters more than any mission statement. Fed Chair Kevin Warsh clearly subscribes to it. Rather than rewrite the Fed’s frameworks by decree, he stood up a series of task forces and handed them the real work, which makes their composition the single most important factor in determining what the monetary policy framework looks like in the future. He has appointed an all-star cast with a Nobel Prize winner, former heads of central banks, technology experts, data experts, the author of the best-selling economics textbook, among others. Expect to hear more about “reaction functions” than “forward guidance,” and more about how a large Fed balance sheet distorts markets and economic decisions. Expect, too, a greater focus on the supply side
rather than just the demand side of the economy, and on how real-time transaction data can be a better read on economic health than stale unemployment rates. Warsh isn’t remaking the Fed in his own image by decree, but by one task force at a time, each headed by a heavyweight.
Looking Ahead: A Race Not Worth Winning?
The most fascinating and potentially most dangerous dynamic heading into the back half of the year is the collision course inside the AI industry. On one side, the model providers are locked in a brutal price war: the cost of tokens has fallen more than 20% since May as the leaders and a swarm of cheaper challengers race to undercut one another. On the other, the same ecosystem is running the most expensive arms race in corporate history, with hyperscalers guiding toward more than $600 billion in capital spending this year alone. Firms are spending unprecedented amounts to build capacity while slashing the price of the very product that capacity produces. You can win the market-share race and still find the prize wasn’t worth the price. It doesn’t have to end badly, but a sprint with this much capital and no brakes rarely ends quietly, which may be one more argument for owning more of the market than a single theme.