Weekly Market Update July 20, 2026

Inflation has been running above the Federal Reserve’s target rate of 2.0%. However, the Consumer Price Index (CPI) did moderate notably in June from a very high May figure. Specifically, the CPI fell 0.4% on a month-to-month basis, the biggest drop in six years. The core CPI, which excludes the food and energy components, was unchanged. On a 12-month basis, the CPI and core CPI rose 3.5% and 2.6%, respectively, with both readings coming in below forecast. Likewise, the Producer Price Index (PPI) fell 0.3% last month, with lower oil prices playing a big role. That said… 

The geopolitical landscape remains unsettled. Talks between the United States and Iran to end the war recently broke down after Iran violated a ceasefire agreement, firing at ships passing through the Strait of Hormuz. That act brought retaliatory military action from the U.S. and an announcement that the blockade preventing ships from freely entering the key waterway was again in place. This put upward pressure on oil prices, which had fallen in June on hopes that a peace deal would soon be reached. An extended period of higher crude prices would make the Fed’s task of reining in inflation more difficult and might push the central bank to raise the benchmark short-term interest rate later this year, despite the easing pace of price growth in June. In the meantime, the Treasury market seems to be doing the work for the Fed, with yields rising this month. 

Second-quarter earnings season is underway. The major banks got the reporting season off to a rousing start, easily surpassing revenue and profit expectations. In general, Wall Street is forecasting that profit growth for the S&P 500 companies exceeded 20% in the three-month period, powered by spending on artificial intelligence (AI) infrastructure (i.e., memory
and processing chips and data center construction). This technology growth continues to provide support for stocks, along with some volatility, even as concerns
about excessive AI capital spending build.

Conclusion: Stocks should remain the primary investment in one’s portfolio, especially with earnings growth for the S&P 500 companies forecast to exceed 20% this year. At the current market multiple, this profit growth would suggest more upside for the index to year’s end.

Source: Valueline.com