Weekly Perspective — July 10, 2026

If you only read the housing headlines, you would think the expansion is fading. Homebuilder activity fell to its softest reading in roughly a year and a half as higher rates keep weighing on buyers and builders. That weakness is real.

It is also not the whole story. Employment and manufacturing continue to look solid, helped in part by the AI infrastructure buildout flowing through industrials and related supply chains. Airlines and premium travel remain healthy. Retail is mixed, but no longer clearly deteriorating. Business surveys are still in expansion territory. This is not a recession setup. It is a K-shaped, rate-sensitive soft patch sitting on top of a still-functioning labor and production economy.

Fed minutes this week showed officials still worried about inflation — but without the urgency of a committee preparing to hike next week. Most can picture a path where inflation cools enough to leave rates alone, and a path where it does not. That framing makes a July move unlikely. September is where the debate gets serious.

Chair Warsh is also assembling working groups on communications, AI and productivity, and inflation forecasting. The direction of travel is familiar from his early weeks: less forward guidance, more emphasis on credibility. Growth into year-end still looks respectable. Inflation should ease somewhat, but it will not vanish as a market concern — and bond markets will keep trading that uncertainty into the fall.

The first half was strong: the S&P 500 up about 10%, the Nasdaq and small-cap Russell closer to 20%. The more important story is participation. Financials and healthcare have pushed to new highs. Nine of eleven S&P sectors are higher. A bull market driven by a handful of mega-cap names can work for a while. A bull market with breadth usually lasts longer — and feels less fragile when those leaders pause.

Consumer discretionary remains the weak link, where higher rates and uneven household spending still show up. Oil has been noisy amid geopolitical headlines, but prices near current levels are not the kind of shock that typically derails equities the way a move toward $95 would. Cautious sentiment into earnings season is often constructive: markets rarely rally hardest when everyone already feels comfortable.

Performance figures first-half 2026 as of July 10, 2026.

Chip demand remains strong heading into earnings season. Companies are raising prices more broadly, lead times are stretching, and AI-related end markets continue to lead. That is the part of the story that still looks early and powerful.

What is changing is the phase of the spending cycle — not whether AI matters. Some inventory is building in pockets of the supply chain. The largest cloud companies are unlikely to accelerate capital spending at the same breakneck pace forever. At the same time, competition among AI models remains intense, enterprises are still early in putting AI to work against real labor and productivity goals, and supply constraints — memory, chips, and related hardware — look set to persist into next year.

Geopolitical headlines around Iran will likely remain part of the backdrop. The practical read: expect noise, watch energy prices, and size reactions to the facts — not every flare-up needs a portfolio rewrite. In years when corporate earnings grow at a solid clip, stocks have historically tended to grind higher over time. That remains the core case.

The subtler risk for many investors is not missing AI. It is owning too little of everything else while financials, healthcare, and smaller companies quietly catch up. Leadership can rotate without the bull market ending. Diversification is how you participate in that without having to call the top in any one theme.