'Well, We're Waiting.'
— Judge Smails

U.S. Futures & World Markets

US equity futures are lower this morning on US-Iran headlines and weakness in semiconductor stocks. Crude oil is +3.5% after the two countries traded strikes over the weekend, while semis are under pressure after SK Hynix dropped 15% following its successful IPO on Friday. These moves are coming on summer trading volumes — Friday was the lowest volume day of the year, which means it doesn't take much to push stocks around.

As for what's ahead this week, tomorrow kicks off earnings season as the big banks start to report. On Tuesday, we'll get the June CPI data, giving the Fed a fresh look at inflation.

New Chair Warsh will give his first testimony to Congress this week. Will his comments infer that the Fed may hike rates soon? Will he tell Congress he plans to take a measured approach? "Well, we're waiting!" — Caddyshack clip

Datatrek Research made a good point on CPI, oil prices, and the lag effect: there was a 3–6-month lag in core CPI inflation after the 2022 oil price shock from Russia's invasion of Ukraine. Crude peaked in March and June, and core inflation peaked in September. Current market consensus says this pattern will hold in 2026, with core inflation topping out in September or October as long as oil prices don't materially increase from here.

CORE Headlines

• The U.S. and Iran trade fresh strikes as the IRGC declares the Strait of Hormuz "closed" and Iran attacks a commercial ship in the waterway. — Axios
• A southern route in the Strait of Hormuz remained open despite Iran's claim. — Bloomberg
• The 21st Century Road to Housing Act officially becomes law — reduces regulations to increase home supply and limits large institutional investors from purchasing single-family homes. — NBC
• MGM negotiating a possible deal with Barry Diller's People Inc. — WSJ
• South Korea stocks fall 9%. — Bloomberg
• Apple filed a lawsuit alleging that a senior OpenAI executive was involved in a monthslong campaign to steal Apple trade secrets. — WSJ
• Wall Street is sending a message to tech companies engaged in a historic borrowing spree for AI infrastructure that they need to slow down. — WSJ
• "Moana" live-action remake earned $43 million domestically for a production that cost about $250 million. — WSJ
• Fed Chairman Warsh will testify to Congress this week. — WSJ
• Ukraine's prime minister resigned after a little over a year in office. — WSJ

Charts & Data

S&P 500 stocks sorted by Q2 performance vs. Q3 QTD — a clear visualization of the early-quarter rotation driven by massive portfolio rebalancing. Bespoke Investment Research: the winners of last quarter are this quarter's laggards.

Blackrock compares the dot-com bubble with the AI trade today. The fundamental difference: real earnings growth underpins this cycle.

Hyperscaler debt issuance continues to grow, reshaping dynamics across financial markets. Torsten Slok, Apollo: "The AI trade across hyperscaler equity prices, credit spreads, CDS and earnings expectations — the signals that matter most as markets weigh the pace and payoff of AI investments."

The best business models according to Morgan Stanley. @InvestInAssets: a useful framework for thinking about which AI investments have durable competitive advantages.

Lower-income households experienced the biggest spending boost in June — narrowing the K in spending and wage growth to its smallest since July 2025. BofA via Daily Chartbook: "Spending up 4.8% YoY in June from 4.1% YoY in May." A broadening of the consumer story.

Relative to disposable personal income, credit usage remains measured and broadly in a downward trend. Yardeni Research via Daily Chartbook: consumer balance sheets remain healthy despite all the fear about higher rates.

Upside risks to inflation continue to outweigh downside risks to employment — FFR futures signal one to two rate hikes over the next 12 months. Yardeni Research via Daily Chartbook: the market is taking Warsh's inflation mandate seriously.

The stock market is now a significantly greater component of total household net worth than real estate — blows my mind. @thestalwart via Daily Chartbook: "The stock market is the economy." The implications for wealth effect and consumer spending are profound.

Goldman's high beta momentum long index attributes more of its risk to semiconductors and semicap equipment than at any other time in its history. Sherwood via Daily Chartbook: when the dominant factor unwinds, it unwinds fast.

VIX made a fresh 120-day low below 16 — the forward return profile for the S&P features above-average hit rates but below-average median returns. Daily Chartbook Studies: low VIX doesn't guarantee strong returns, but it rarely coincides with bear markets.

Q2 S&P earnings growth on track to be above 29% — highest since Q4 2021. John Butters, FactSet via Daily Chartbook: "Based on the average improvement during earnings season." The fundamental story remains very strong heading into the season.

Global semiconductor equipment sales on track for a record $156B in 2027. TS Lombard via Daily Chartbook: "A strong sign that capacity is being sought by chip makers." AI hardware demand stays structurally strong.

At today's build rate, it would take 12 years to clear the 338 GW data center project pipeline. Bernstein via Daily Chartbook: the AI infrastructure supercycle has no near-term ceiling.

Interesting Reads

• 20 lessons about China — China Talk via Tyler Cowen. "China has no interest in confronting the US Navy… and if they do, something will have gone very wrong."
• Asset allocation in retirement — A Wealth of Common Sense. Another reminder that no two clients are alike.
• What dietitians recommend drinking before bed for better sleep — Real Simple

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