On Calm Markets and Crosscurrents*
Week in Review — July 13, 2026
Here's a puzzle worth sitting with for a moment: last week, the ceasefire in the Middle East was declared over, U.S. forces struck hundreds of targets across three nights, and oil rose about five percent — and the stock market went up.
If that seems strange, you're paying attention. It is strange, at least by the logic of headlines. By the logic of markets, though, it makes a kind of sense. Markets don't price events; they price changes in expectations about supply and demand. Oil at roughly $72 a barrel — well above where it sat before the conflict began, but nowhere near the peaks touched in the frightening early weeks — is the market's way of saying it believes the world's energy supply, while strained, remains intact. Diplomatic channels stayed open even as the strikes resumed, and the physical flow of tankers, which we watch far more closely than we watch press conferences, is the referee that ultimately settles the question. For now, the market has chosen to look through the noise toward the earnings season that begins this week.
We'd gently note that "looking through" and "resolving" are not the same thing.
Our internal conditions gauge, which we score each week across dozens of measures of the consumer, business activity, inflation, and financial markets, came in essentially neutral for the second straight week — a shade below zero, after six weeks of steady improvement earlier in the spring. A neutral reading sounds unremarkable, but the details underneath it are telling a more interesting story. The American consumer, remarkably, keeps spending — weekly retail figures actually accelerated, and layoffs remain historically low. At the same time, inflation expectations, measured both by financial markets and by surveys of ordinary households, turned back up last week. And credit — the borrowing that fuels tomorrow's spending — cooled noticeably on both the business and household sides of the ledger in the same month.
Strong spending, firming inflation, slowing credit. That combination is why we remain positioned for an economy that muddles through with growth on the soft side and inflation on the sticky side, rather than for either a boom or a bust.
The most underappreciated story of the week came from Japan. Japanese government bond yields touched their highest levels in thirty years — and then fell sharply in a single day when the finance minister suggested the government would encourage the nation's pension funds, including the largest pension fund on Earth, to invest more of their money at home. Why should an investor in California care? Because for decades, Japanese savings have flowed outward and helped finance borrowing across the globe, very much including our own Treasury market. If even a portion of that money begins heading home, it matters for interest rates everywhere. Nothing changes overnight — pension mandates move at a glacial pace — but when the world's largest creditor nation starts talking this way, we listen.
Speaking of interest rates: our own thirty-year Treasury bond was auctioned last week at the highest yield since 2007. Notably, demand was actually solid — buyers showed up willingly. But they showed up at a price. That, in a sentence, is the story of government borrowing in this era: the money is there, and it costs more than it used to.
The week ahead is a consequential one. Tuesday brings the June inflation report and, the same day, the new Federal Reserve chairman's first testimony before Congress. Markets currently lean toward the Fed raising rates again this year to combat inflation that remains well above target. We remain politely skeptical — not of the inflation problem, which is real, but of this Fed's appetite to hike into a softening job market and an election-conscious Washington. Tuesday should be illuminating on that score.
As always, we're not positioned for one outcome — we're positioned for a range of them, with the portfolio's various exposures deliberately balancing one another. Weeks like the last one, when frightening headlines and calm markets coexist, are precisely why.
The above reflects the opinions of Private Wealth Advisors and is provided for informational purposes only. It is not intended as investment advice or a solicitation to buy or sell any security. Past performance is no guarantee of future results. Please consult your advisor regarding your individual circumstances.
*Research and drafting support provided by AI tools under the direction and review of Marty Mazorra, Chief Investment Officer. All views, analysis, and conclusions are those of PWA's investment team.
No comments:
Post a Comment