Comments based on information available as of 5:15 am CT on 7/31/2026
Growth: Only Part of the Story
The economy grew at a 1.5% annualized pace in the second quarter, down from 2.1% in the first. That’s the headline. The better story is underneath it. Private-sector demand accelerated sharply, consumer spending remained surprisingly resilient, and business investment continued to benefit from the AI buildout. The unusual twist is that the same surge in technology investment that is helping support economic activity is also muddying the GDP math through imports since imports are a subtraction from GDP calculations. The economy isn’t booming like it was, but it isn’t nearly as weak as the headline growth rate suggests.
Inflation: Taking a Breather
For the first time in years, the Fed’s preferred inflation gauge declined on a monthly basis. Lower energy prices did most of the work as gasoline prices retreated following the temporary easing of tensions in the Middle East. That’s encouraging, but investors shouldn’t confuse relief with resolution. Services inflation remains elevated and both headline and core measures are still well above the Fed’s target. Inflation is moving in the right direction, but the last mile remains the hardest.
Policy: Say Anything
The Fed left rates unchanged, but the real story was Chair Warsh’s continued effort to say less rather than more. Forward guidance is out. Data dependence is in. But we don’t know what, or how much, data matters. The logic is understandable: don’t make promises you may not be able to keep. But without clarifying why action was or wasn’t taken already, it’s hard to see how statements about being committed to hitting its inflation target aren’t just a bluff. That’s probably why Treasury yields jumped as much as they did. Saying nothing might have been better than saying anything at all.
Looking Ahead: Builders vs. Buyers
The second half of 2026 is shaping up to be a period where the headlines and the underlying trends may tell different stories. Growth appears better than the GDP data suggest. Inflation looks better than it did a month ago, but not good enough for the Fed. Policymakers are deliberately providing less guidance, while markets are demanding more. And within technology, the AI winners are beginning to distinguish themselves from the rest of the field as not all AI stories are created equal. For the past two years, markets largely treated AI as a single theme. Increasingly, investors are separating the builders from the buyers. In an environment like that, investors may need to spend less time reacting to headlines and more time understanding what’s happening beneath them.
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