Market Insights 7/20/26
Observations & Insights – July 20, 2026
A Big Thank You to all that attended our Cars & Coffee this past Saturday. The next 3rd Saturday Cars & Coffee will be August 15th.
The Bull Takes a Breather
U.S. stocks pulled back last week, with the S&P 500 falling -1.3% and the Nasdaq dropping sharply by nearly -3% amid a severe rout in semiconductor, AI, and large-cap tech shares. Conversely, the energy sector rallied as oil (WTI crude) jumped 9.3% due to escalating U.S.-Iran tensions, while defensive sectors like health care and staples outperformed
Key Points
- Stocks fell in a volatile week. The S&P 500 lost -1.3% while the Nasdaq dropped almost -3%.
- Banks kick off earnings season with strong numbers.
- AI is no longer just a large cap growth story, it is everywhere.
- We are raising our target on the S&P 500 for 2026.
Observations: Markets Pause as Earnings Take Center Stage
Markets took a breather this week after a powerful run to new highs, with the S&P 500 posting its first weekly decline in three weeks and the technology-heavy Nasdaq leading the pullback. Much of the weakness was concentrated in the AI trade as investors took profits in some of the year's biggest winners following a remarkable advance. While the headlines focused on the selloff in technology, the broader market remained relatively resilient, with financials, energy, industrials, and healthcare generally holding up better than high-growth technology shares.
The week's most important economic report was the June Consumer Price Index (CPI), which reinforced the view that inflation continues to move gradually in the right direction. Core inflation came in softer than many economists expected, suggesting that pricing pressures remain contained despite solid economic growth. The report supports the narrative that the Federal Reserve can remain patient rather than feeling pressure to tighten policy further. While one month's data never makes a trend, the inflation backdrop continues to look far healthier than it did just a year ago.
Retail sales also surprised to the upside, reminding investors that the U.S. consumer remains remarkably resilient. Despite higher interest rates and ongoing geopolitical uncertainty, household spending continues to support economic growth. Combined with cooling inflation, this reinforces the possibility of a "soft landing", an environment where inflation moderates without a meaningful recession.
Second-quarter earnings season also began on a solid note. Large U.S. banks broadly exceeded expectations as investment banking, trading activity, and capital markets remained healthy. Results from JPMorgan Chase, Goldman Sachs, and Bank of America highlighted the strength of the financial system and suggested that corporate America entered the second half of the year from a position of strength.
Technology earnings were more mixed. Taiwan Semiconductor delivered another strong quarter and continued to report robust AI-related demand, although investors focused on higher capital spending plans rather than the company's impressive revenue outlook. Several semiconductor and AI-related stocks experienced sharp volatility as investors questioned how long the extraordinary pace of AI infrastructure spending can continue. In our view, this appears to be more of a valuation reset than a deterioration in the long-term AI investment story.
Finally, geopolitical tensions returned to the forefront as renewed concerns surrounding Iran pushed oil prices sharply higher late in the week. While higher energy prices are worth monitoring, history suggests that temporary geopolitical spikes in oil prices rarely derail a fundamentally healthy U.S. economy unless they become prolonged. For now, markets remain focused primarily on inflation, earnings, and the Federal Reserve rather than geopolitical headlines.
Insights: Employment Weaker Than Expected
Are the latest economic data signaling a recession, or are they failing to capture an economy undergoing profound technological transformation?
While recent employment data appear unusually weak, we believe investors should look beyond the headlines. Artificial Intelligence, accelerating productivity, and structural changes throughout the economy continue to reshape traditional economic relationships. At the same time, policymakers are beginning to recognize the need for better data and more modern frameworks for evaluating economic conditions.
Rethinking The Federal Reserve's Framework
Kevin Warsh's proposed task forces for the Federal Reserve is an encouraging step toward modernizing monetary policy. In particular, we believe a greater reliance on private-sector data could improve policymakers' understanding of today's rapidly evolving economy.
Government statistics increasingly struggle to capture technological disruption, productivity gains, and new forms of entrepreneurship. As innovation accelerates, policymakers must supplement traditional economic indicators with more timely and comprehensive data sources. We believe better data can simply lead to better policy decisions.
Why We Remain Constructive on Growth
Despite widespread concerns about government debt, inflation, and slowing economic activity, we continue to believe the United States economy is positioned for stronger-than-expected growth.
We expect pro-growth fiscal policies, including deregulation and business investment incentives, to support higher returns on invested capital. Rather than focusing solely on government debt as a percentage of gross domestic product, we believe investors should also consider the nation's expanding productive capacity and wealth creation driven by innovation.
Innovation remains the defining characteristic of the United States economy, and we believe it will continue to attract capital from around the world.
Technology Is Driving Disinflation
Many investors continue to expect persistent inflation. We disagree.
Source: FRED
Artificial Intelligence, automation, robotics, and other disruptive technologies continue to improve productivity while lowering costs across industries. We expect productivity growth to accelerate meaningfully over the next several years, creating powerful disinflationary forces similar to those experienced during previous technological revolutions.
Alternative inflation measures also suggest that underlying inflation remains significantly lower than traditional government statistics indicate. As these productivity gains spread throughout the economy, we believe inflation will continue to moderate.
Looking Beyond a Confusing Jobs Report
The latest employment report presented an unusually mixed picture. Several employment measures weakened sharply while others remained relatively stable.
Source: FRED
Rather than viewing these data as clear evidence of recession, we believe they may reflect an economy transitioning toward Artificial Intelligence-enabled productivity. Businesses increasingly rely on Artificial Intelligence to accomplish more with existing workforces while entrepreneurs launch new businesses using technologies that traditional employment surveys may not fully capture.
We continue to monitor labor market developments closely, but we believe the current data likely understate the economic activity occurring throughout the innovation economy.
Consumers Face Real Challenges
Although consumer spending remains relatively resilient, households continue to face meaningful affordability pressures.
Low savings rates, elevated borrowing costs, and reduced housing affordability have weighed heavily on consumer sentiment. Many homeowners remain locked into existing mortgages because current interest rates make moving prohibitively expensive.
Even so, we believe improving productivity and moderating inflation could ultimately create a more favorable environment for consumers by supporting lower long-term interest rates and increasing purchasing power.
Innovation Continues to Lead the Economy
The most encouraging developments remain concentrated within the innovation ecosystem.
Capital expenditures tied to Artificial Intelligence continue to expand rapidly, reinforcing our view that this technology revolution remains in its early stages. Businesses continue investing aggressively across software, computing infrastructure, and automation, while declining costs for Artificial Intelligence capabilities should further accelerate adoption.
We believe these trends will continue transforming every sector of the economy and creating substantial long-term investment opportunities.
Markets Continue to Support Our Outlook
Despite geopolitical uncertainty and concerns surrounding private credit, financial markets continue to exhibit relatively healthy conditions.
Credit spreads remain contained, banking stress indicators remain subdued, and we see little evidence that current risks have become systemic. Meanwhile, we continue to believe the United States dollar will remain resilient as global investors seek exposure to the country's superior innovation ecosystem and attractive investment opportunities.
Economic headlines may continue to generate uncertainty, but we believe the underlying forces reshaping the economy remain firmly intact. As innovation accelerates and productivity improves, we expect investors who focus on long-term structural trends rather than short-term volatility to be best positioned to benefit from the next phase of economic growth.
Final Thoughts
Our theme heading into 2026 was riding the wave, and halfway through the year, that wave is still rolling. The S&P 500 returned 10.2% in the first half, and what matters most is that those gains came from fundamentals. Record earnings, expanding margins, and a still-accelerating AI investment boom did the heavy lifting.
The ride has not been smooth. Growth has slowed, inflation has climbed, the war with Iran added an energy shock, and bonds struggled. But the setup still favors stocks, and we are raising our full-year S&P 500 target to a total return of 15-18%.
It is our aim at Asbury Wealth Partners that you find the market commentary we provide informative and useful. As our success grows mainly through referrals from our clients, we encourage you to share this weekly newsletter with your friends, family, and colleagues. If you are a client, we thank you for your business and your confidence. If you are not yet a client, we encourage you to contact us today and explore how our team may be able to add value to your unique financial situation.
Thank You,
Jeff
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Jeffrey S. Markewich
Wealth Advisor
Off – 719-548-8103
Cell - 719-357-7747
Text – 702-493-9678
TF - 888-328-7655
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Jeffrey Markewich is a Registered Representative with, and securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
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The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
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The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services (Source: U.S. Department of Labor).
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