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RoboStreet – Markets remain near record highs as cooling inflation, easing Treasury yields and strong AI-driven earnings fuel the rally, while weakening labor data, volatile oil prices and next week’s Fed minutes will test whether the bulls can maintain control.
Markets are ending another eventful week near record territory as cooler inflation, lower oil prices, easing Treasury yields and continued enthusiasm around AI have outweighed concerns about a weakening labor market, tariffs and the ongoing conflict with Iran. The S&P 500 closed Thursday at a new all-time high of 7,798.99, while the VIX remains near 15. The biggest question now is whether the economy is simply cooling enough to keep the Federal Reserve on hold—or beginning to slow enough to threaten earnings and consumer spending.
And remember, we’re not talking about day trading here. I’m looking for 50-100% gains within the next 3 months, so my weekly updates are timely enough for you to act.
The long-term trend remains intact, with the major indexes trading near all-time highs and the VIX around 15. My longer-term SPY outlook continues to favor the $760-$780 area, while $700-$720 remains an important support zone over the next several months.
The biggest change in the market narrative has come from economic data.
Last week’s July employment report showed the economy unexpectedly losing 23,000 jobs versus expectations for roughly 80,000 new positions, while previous months were revised lower by a combined 103,000 jobs. That shifted the debate from whether the Fed should raise rates toward whether it can tighten further without putting additional pressure on an already cooling labor market.
Inflation data reinforced that argument this week. July CPI increased just 0.1% month-over-month and 3.4% annually, while core CPI rose 0.2% for the month and 2.5% from a year earlier. Energy prices declined, easing fears that the earlier oil shock would immediately produce another acceleration in inflation.
Thursday brought additional relief. The Producer Price Index was unchanged in July, while annual producer inflation slowed to 4.7% from 5.5% in June. Stocks responded by pushing the S&P 500 to another record as expectations for a September Fed hike declined.
But inflation hasn’t disappeared.
Three Fed officials dissented at the July meeting in favor of a 25-basis-point hike, illustrating how divided policymakers remain. The market currently likes the combination of weaker employment and cooler inflation because it reduces pressure on the Fed without yet signaling recession.
In other words, bad economic news has once again become good market news—but only up to a point.
If labor-market deterioration begins meaningfully affecting consumption and earnings, that narrative can change quickly.
The bond market remains one of the most important signals to watch. The 10-year Treasury yield continues to experience significant volatility, and falling yields helped support this week’s strength, particularly in technology and growth stocks.
The biggest risk remains that interest rates stay higher for longer.
Even if the Fed doesn’t hike in September, that doesn’t automatically translate into aggressive easing. Inflation remains above target, tariffs present potential pricing pressure, and another energy shock could quickly complicate the outlook.
That brings us back to Iran and the Strait of Hormuz.
Oil has experienced major swings as markets react to negotiations, shipping disruptions and developments surrounding the Strait. Falling crude provided an important tailwind this week by reducing inflation concerns, although renewed geopolitical escalation could quickly reverse that benefit.
The relationship remains straightforward:
Iran and Hormuz ? oil ? inflation ? Treasury yields ? Fed policy ? stocks.
As long as oil moderates, it works in the bulls’ favor. A sharp reversal remains one of the largest near-term risks.
Corporate earnings provide another important source of support.
AI infrastructure and technology remained areas of strength this week, helping drive the Nasdaq and reinforcing the broader AI investment theme. Results across networking, semiconductors, data centers and related infrastructure continue to demonstrate significant corporate spending.
That matters because this isn’t purely a Fed-driven rally.
Corporate profits and AI investment continue to provide fundamental support underneath technology shares. With stocks near records and volatility exceptionally low, however, expectations are elevated. Companies delivering strong results are being rewarded, while disappointing guidance can produce abrupt selloffs.
The next major test could come from the American consumer.
With employment slowing and consumer sentiment under pressure, retail spending becomes increasingly important. Next week’s earnings from Walmart, Target, Home Depot, Lowe’s and TJX should provide a broad look at consumer behavior.
Rather than viewing these as isolated reports, I will be watching them collectively as a real-time health check on the economy.
Resilient spending combined with cooling inflation would strengthen the soft-landing argument. Meaningful deterioration would raise concerns that July’s weak employment report represents the beginning of a broader slowdown.
Tuesday brings Housing Starts, Building Permits, Industrial Production and Capacity Utilization.
Wednesday’s FOMC minutes could be the week’s most important macro event. With three policymakers favoring a hike in July, investors will closely examine the depth of inflation concerns inside the Fed—and whether recent labor-market weakness could change that calculus.
Thursday brings Initial Jobless Claims, followed Friday by preliminary Manufacturing and Services PMI readings.
Combined with major retail earnings, we should finish next week with a clearer picture of whether the economy is experiencing a healthy moderation or something more concerning.
For now, the bulls remain in control. Stocks are trading near record highs, the VIX remains subdued, inflation is showing signs of moderation, Treasury yields have eased, and corporate earnings—particularly across AI and technology—continue to support valuations. That combination keeps me firmly in the MARKET BULLISH camp. I believe the long-term trend remains intact, with SPY capable of reaching the $760-$780 range over the coming months, while $700-$720 remains an important support zone.
The market has gotten much of what it wanted: cooler inflation without clear evidence of recession. The challenge now is keeping that balance intact. Higher-for-longer interest rates, renewed inflation, tariffs, another oil spike tied to Iran and the Strait of Hormuz, or a deeper labor-market slowdown could quickly test investor confidence.
Until those risks materially change the underlying trend, I continue to favor the bullish side—but with stocks near record highs and volatility low, disciplined risk management remains essential. The bulls are in control, but the incoming data will determine whether they can stay there.
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In this environment, a disciplined, insight-driven framework matters more than ever—one that cuts through the noise, respects the bond market’s influence, manages rate and employment risk, and helps you position proactively for the opportunities and pivots that tend to define the first quarter.
As we move through the second half of 2026, investors continue navigating a market that appears calm on the surface but remains highly sensitive beneath it. Geopolitical developments in the Middle East, shifting tariff policy, and an uncertain Federal Reserve path continue to influence investor sentiment as inflation gradually cools, but interest rates remain elevated. Meanwhile, economic data has become more mixed, with the labor market showing signs of moderation while corporate earnings continue to demonstrate remarkable resilience.
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And remember, we’re not talking about day trading here. I’m looking for 50-100% gains within the next 3 months, so my weekly updates are timely enough for you to act.
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