Comments based on information available as of 5:15 am CT on 7/17/2026
Growth: Rosy Beige Book
The American economy is flashing genuinely encouraging signals as the second half of 2026 gets underway. Retail sales rose 6.7% year-over-year in June, and it’s not just higher gasoline prices at work. Even excluding gas station sales, spending rose solidly. Despite low consumer sentiment, the American consumer is still doing what it does best: consume. The Federal Reserve’s July Beige Book painted a corroborating picture. Economic activity expanded at a slight to moderate pace across nearly all twelve Fed districts, employment rose on balance with five districts reporting job gains, and consumer spending held up despite some trade-down toward lower-cost goods. Layered on top of that macro foundation, a historically strong start to second quarter earnings season is delivering a corporate confirmation of the data.
Inflation: It Could Have Been Worse
This week’s inflation data offered a welcome reprieve, particularly given how much worse it could have been. Headline CPI (consumer price index) fell 0.4% month-over-month in June, its largest one-month decline since April 2020, pulling the year-over-year rate down to 3.5%. Core prices were flat on the month, easing the annual core rate to 2.6%. Headline inflation remains elevated, but well below what many feared. The Beige Book added a telling detail: while business input prices rose moderately, some firms absorbed cost increases rather than passing them on in a sign that consumers are pushing back on higher prices. For now, the data suggests the worst-case scenario of a full-blown tariff- and war-driven price spiral has not materialized. Falling energy prices and a cautious consumer are pushing inflation in the right direction.
Policy: The Buck Stops Here
Chair Warsh testified before Congress this week and said, “There are a lot of things that are happening that are out of our control… But inflation is a choice. This isn’t a time for us to pass the buck and blame others.” The echo of President Truman, who kept a sign reading “The Buck Stops Here” on his Oval Office desk as a declaration that ultimate accountability rested with him, was hard to miss. The broader message to markets is that this Fed chair is not looking to make excuses. The central bank’s institutional credibility, dented by 63 months of inflation running hotter than its target, will be rebuilt through sustained action, not reassuring words. When Warsh says the buck stops with the Fed, he means it in the most literal policy sense: rate hikes remain on the table, and the burden of proof for avoiding them rests with the data.
Looking Ahead: Conviction Trumps Beats
Earnings season is off to a historically strong start. With roughly 9% of S&P 500 companies having reported, about 88% have beaten EPS estimates. That is a pace that ranks among the best on record. The market’s reaction has been anything but uniform. In a high-expectations environment, the quality of the result and forward guidance matter far more than the headline beat. Companies that paired strong earnings with raised guidance and clean cost structures were rewarded handsomely. Those whose beats came with rising expense outlooks or cautious guidance were punished despite strong top-line numbers. Misses have been met with historic severity, underscoring how little margin for error exists at current valuations. The early verdict is that beating expectations is a necessary, but not sufficient, condition. The market is demanding beats accompanied by conviction about what comes next.
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