Macro & Market Musings | 7/24/26

Comments based on information available as of 5:15 am CT on 7/24/2026

Growth: Defiantly Strong

The US labor market is refusing to roll over. Initial jobless claims plunged 22,000 to 187,000, the lowest level since September 1969. This is not a one-week fluke. Claims have been lower than expected for three consecutive weeks. Continuing claims, a proxy for the total pool of unemployed workers collecting benefits, held near 1.796 million, which is historically low and consistent with an economy where, whatever else is going wrong, people are keeping their jobs. The year began with widespread fears of an AI-driven and uncertainty-induced displacement wave. Instead, the labor market is delivering its strongest signal of resilience in more than half a century.

Inflation: Turning Back the Clock

Oil is back up and the inflation clock is being rewound. Brent crude surged 7% on Thursday to settle at $100.69, its highest close since May 22. Iran-backed Houthi militants attacked two Saudi Arabian tankers in the Red Sea, opening a dangerous new front in the Middle East conflict. The move capped a stunning five-session rally of nearly 20%, as escalating hostilities in the Strait of Hormuz and now the Bab el-Mandeb Strait have created a “two chokepoint problem” for global oil supply. The European Central Bank acknowledged Thursday that “the full inflation impact of the energy shock has yet to play out,” and global bond markets are already repricing with higher yields. We have been here before. Things can turn quickly, so reacting to every headline can be costly as well as dizzying.

Policy: Choosing between one of two mistakes

The Federal Reserve faces a genuinely difficult problem heading into its July 28–29 meeting. It does not know how long oil prices will stay elevated. The textbook case against hiking into a supply shock, like the current surge in oil prices, is well established. Raising rates cannot produce more oil, and tightening financial conditions in response to a geopolitical disruption risks crushing demand unnecessarily. With the labor market and spending holding up, they may think there’s little risk to hiking. The real boogeyman the Fed may be worried about is inflation expectations: if consumers and markets begin to believe that $100 oil is the new normal, second-round effects like wage demands and services repricing can make higher inflation expectations become self-fulfilling. Hiking into a supply shock would be a policy mistake,  but a Fed that allows expectations to become unanchored would be making a bigger one.

Looking Ahead: Too Much of a Good Thing

The AI (artificial intelligence) spending blitz is entering territory that is making even the most committed bulls uncomfortable. Rising capital expenditures when free cash flows are negative is a different setup than when free cash flows were abundant. The concern is not that AI is a bad investment; it is that the scale and pace of commitment has outrun any reasonable near-term return horizon. Big Tech has already doubled its collective debt load over five years to fund this buildout. Infrastructure beneficiaries remain well-positioned, but even they are at the whims of the shifts in plans of the big spenders. Market prices are beginning to reflect the worry that AI ambition can become excessive.

This material is provided for informational and educational purposes only and should not be construed as personalized investment, legal, or tax advice. Information presented is general in nature and may not be appropriate for all investors. Investment recommendations, if any, are not intended for any specific individual or situation and should not be relied upon as the sole basis for making an investment decision. All investments involve risk, including the possible loss of principal. Past performance is no guarantee of future results.