🔎July 2026 Market Strategy
Waiting for the narrative pivot...
In my June 2026 Market Strategy, I argued that inflation is dead and that most investors are hopelessly behind the curve on this realization. I viewed a downward impulse to interest as the obvious next step which will liberate consumers and boost the revenues and earnings of those companies that serve them. As a result, the corporate capex party will end because investors will drop the shares of the big spenders to chase the stocks of companies that will have a sustainable earnings acceleration from bombed out levels: B2C. Let’s see how the picture has evolved since then.
TLDR Summary
There are cracks in both the AI Trade and in the Debasement Trade. The share prices of hyperscalers are falling. This is highly problematic for the AI economy as a whole. Falling share prices imply a rising cost of capital and a rising cost of capital disincentivizes spending.
Gold and Bitcoin are in a bear market as well. Spot inflation is surprising to the downside. Inflation expectations are falling. The yield curve is flattening. Credit demand is cooling.
GDP growth will likely disappoint. But that’s actually good news for Main Street because most of the recent growth is of speculative nature. It stems from massive corporate investment in a distinct corner of the economy with little ripple effect into the rest of the economy.
Interest rates will fall once the penny drops in consensus opinion. And that will provide much needed relief for US households. I know I keep repeating myself here. But this is the most important narrative pivot in the making in a long time. Waiting for that to unfold requires patience.
