AE Wealth Management: Weekly Market Insights | 7/19/26 – 7/25/26

Weekly Market Commentary

THE WEEK IN REVIEW: July 19-25, 2026

Markets finally take notice — and it’s not pretty

Perhaps because the data was light last week, markets started paying more attention to what’s going on with Iran. They were already skittish over worries about big tech profitability and the dizzying amounts being laid out for AI infrastructure. Then worries arose that China has yet another AI agent that is better and cheaper, just like DeepSeek claimed in January 2025.¹ DeepSeek turned out not to be the threat markets feared, yet it was enough to cause a panic.²

The new AI news from China forced the markets to question big tech valuations and current spending. After all, if the Chinese can deliver the same or better results cheaper, then markets are asking why we’re valuing our companies at their current levels. That was the pall hanging over the markets the past few weeks.

Then the memorandum of understanding (MOU) between the U.S. and Iran fell apart. The Iranians have continued to attack shipping in the Strait of Hormuz (Persian Gulf) or the Bab el-Mandeb Strait (Red Sea), and the price of oil climbed back up as a result. West Texas Intermediate (WTI) was trading at almost $92 per barrel, while Brent North Sea Crude was trading at over $100 per barrel.^3,4

Prolonged higher oil prices and the prospect of higher inflation sent yields higher even as stocks sold off. We’ve discussed previously that yields should decline as stocks sell off because people flock to the safety of bonds when stocks are shaky. But that doesn’t hold when you have skyrocketing energy costs. Generally, in this scenario, stocks sell off because profits decline as a result of increased energy costs, while bond yields go up because of investor demand for higher yields in anticipation of increased future inflation.

Markets have been hanging in there and had mostly moved from the Iran conflict, but that was when oil was dropping from $90 to ~$65 per barrel. That all changed last week as strikes by both the U.S. and Iran continued. It made markets nervous — and no amount of assurances from the president, U.S. Central Command or the Navy can soothe those nerves. With the 10-year U.S. Treasury note rising to over 4.7% and oil back up over $90 per barrel last week, the market finally woke up to how serious things are getting.⁵

The Fed, Iran and inflation … oh my!

Kevin Warsh’s second meeting as Federal Reserve chair should be eventful. The last meeting was active enough, but now the environment has deteriorated even more. This Fed is now Kevin Warsh’s, and things need to be addressed.

The July Fed meeting is scheduled for this Tuesday and Wednesday, and the call for rate increases is getting louder. This isn’t about dramatics or cosplay from an opposition faction led by former Chair Jerome Powell. This is the reality of high oil and gas prices, a climbing 10-year Treasury rate and inflation over 4%.⁶ It took exactly one week of sustained military action against Iran after the MOU unraveled to undo all the improvements we saw with inflation.

The Fed won’t see the current numbers at this meeting, but all you have to do is look at where inflation was in April and May (3.8% and 4.2%, respectively)⁶ and not the latest CPI reading when oil had tanked to $68 at the end of June. It’s not likely that the Fed will move rates at this week’s meeting, but if Warsh and the Fed don’t address the threat of renewed inflation and the need to tame it quickly, we could be in a nasty spot.

Two things need to happen quickly. The first is a durable conclusion to the Iran conflict. The second is that the Fed should never have cut rates last year, and had rates remained where they were, that would have buried inflation. But what about the economy — wouldn’t keeping rates higher cause a slowdown? In our view, with all the tariff and government shutdown noise, no one would have really noticed if rates had stayed where they were.

Coming this week

• The Fed meets this week on Tuesday and Wednesday, with a rate decision immediately following the conclusion of the meeting. Right now, the odds of a rate cut are 0%, and the odds of a quarter-point rate hike are just under 38%.⁷
• Data will start on Monday with the latest durable goods numbers. We’ll also see wholesale and retail inventories, plus the Case-Shiller home price index and consumer confidence on Tuesday. MBA mortgage applications will follow on Wednesday.
• Thursday will feature personal consumption expenditures (PCE), the Fed’s preferred measure of inflation. It should be better (just like the Consumer Price Index was a couple of weeks ago), but it’s a dated reading. Personal income and spending are also watched carefully by the Fed.
• As if Thursday wasn’t busy enough, we’ll also get weekly job claims and the first reading of second-quarter gross domestic product (GDP).
• We’ll end the week with the University of Michigan consumer survey.
• Second-quarter earnings reports are in full swing, with 27% of S&P 500 companies reporting results.⁸ So far, 86% of companies have stated positive earnings per share (EPS), and 80% have reported positive revenue. Earnings growth for Q2 for the S&P 500 is 37.9%, up from 27.7% last quarter. If 37.9% is the actual growth rate for the quarter, it will mark the highest earnings growth for the index since the third quarter of 2021.
• For the current quarter, nine S&P 500 companies have issued negative EPS guidance, and 11 have issued positive guidance. Valuation is still historically high for the S&P 500, with the forward 12-month price-to-earnings (P/E) ratio at 20.1 versus 21.4 last quarter, down mostly due to the stock market’s performance in March after the turmoil in the Middle East. Although this P/E ratio is a little higher than the 5-year average (19.9) and the 10-year average (19.0), P/E may jump again next quarter due to the market’s recovery since the March lows.

Sources:

¹ Kai Nicol-Schwarz. CNBC. July 23, 2026. “Moonshot AI accessed Nvidia’s chips despite Chinese export ban, White House official says.” https://www.cnbc.com/2026/07/23/moonshot-kimi-nvidia-ai-chips-export-ban.html. Accessed July 27, 2026.

² Haze Fan and Pei Li. The Japan Times. July 27, 2026. “DeepSeek said to have told backers of funding pause after viral posts.” https://www.japantimes.co.jp/business/2026/07/27/tech/deepseek-funding-pause-viral-posts/. Accessed July 27, 2026.

³ Yahoo! Finance. “Crude Oil Sep 26 (CL=F).” https://ca.finance.yahoo.com/quote/CL%3DF/. Accessed July 27, 2026.

⁴ Yahoo! Finance. “Brent Crude Oil Last Day Financ  (BZ=F).” https://finance.yahoo.com/quote/BZ=F/. Accessed July 27, 2026.

⁵ Yahoo! Finance. “U.S. 10 Year Treasury.” https://www.cnbc.com/quotes/US.10. Accessed July 27, 2026.

⁶ Trading Economics. “United States Inflation Rate.” https://tradingeconomics.com/united-states/inflation-cpi. Accessed July 27, 2026.

⁷ CME Group. “FedWatch.” https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html. Accessed July 27, 2026.

⁸ John Butters. FactSet. July 24, 2026. “Earnings Insight.” https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_072426.pdf. Accessed July 27, 2026.

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