Macro & Market Musings | 8/7/26

Comments based on information available as of 5:15 am CT on 8/7/2026

Growth: Dog Days of Summer

The week’s two Institute for Supply Management (ISM) surveys agreed on the big picture: the economy is picking up speed. Manufacturing jumped to its strongest reading in more than four years with production and new orders accelerating and growth spreading across most industries. Services logged its 25th straight month of expansion with business activity and new orders both firming. The employment indexes told different stories. Manufacturing’s employment index actually moved back into growth, the first time in more than 30 months. But the services employment index slipped back into contraction. With manufacturing representing less than a tenth of U.S. jobs, it won’t be the tail that wags the economic dog.

Inflation: Relief, Rented Not Owned

Last month’s inflation improvement leaned heavily on falling energy prices, and this week was a reminder of how quickly that support can be repossessed. Hopes for a diplomatic reopening of the Strait of Hormuz pulled oil lower early in the week and helped push stocks to records. By Thursday, the picture had blurred, oil jumped back above $80 per barrel, and Treasury yields climbed with it. The underlying inflation problem hasn’t changed: services inflation remains sticky and the recent progress in the headline numbers rests partly on a geopolitical situation that can reverse in an afternoon.

Policy: Nature Abhors a Vacuum

The Fed didn’t meet this week, but the silence from the top left room for others to talk. Regional Fed officials began filling the guidance gap, with one newly minted president arguing current rates are sufficient to bring inflation back to target. The bond market is less sure. Long-term Treasury yields touched fresh 2026 highs. This is the cost of the “say less” strategy we discussed last week: when the Fed won’t define its reaction function, markets will price one for it. Lately, they’ve been pricing a hawkish one.

Looking Ahead: No Participation Trophies

Markets enter the back half of the summer near record highs and the foundation under those records is real: earnings are strong, layoffs are scarce, and inflation is off its worst levels. But the margin for error is thinner than the index levels suggest. Long-term yields are sitting at their highs for the year, oil has been on a wild ride, and a labor market with little hiring offers little cushion if demand cools. Meanwhile, this earnings season made one thing clear: investors are no longer handing out participation trophies. In this type of market, it’s important to own the businesses that can deliver even when the headlines don’t cooperate.

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.