Summary of Our Webinar Held on July 29, 2026
Twice a year, we take a formal reading of the economy and markets: once in January, to set the stage for the year ahead, and once at the midpoint, to see how the first half actually played out. On July 29, 2026, our Chief Investment Officer, Scott Manley, led our Mid-Year Economic Review webinar with an analyses of how the U.S. economy and markets performed through the first six months of the year, examining the key economic indicators, and looking ahead to what the second half may hold. His aim throughout was a straightforward one: to give you an honest, unbiased read, grounded in the numbers rather than the headlines.
You can watch a full replay of the webinar at the link below the agenda.
In this blog, we will discuss the following:
- Unemployment
- Consumer Spending
- AI Spending
- Federal Spending
- Corporate Profits
- US GDP
- Inflation
- Key Takeaways
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Unemployment
We begin where we always do, with unemployment.
Source: U.S. Bureau of Labor Statistics via FRED®
The pattern of the last several years has been steady: as long as most of the country is working, spending across the U.S. holds near record levels. In June 2026, the U.S. Bureau of Labor Statistics reported the unemployment rate at 4.2%, a historically low figure. From the same source, job openings for non-farm positions stood at 7.594 million, also a strong level. Together, these tell us that most who want work can find it, and that those whose positions are eliminated still have somewhere to land.
Consumer Spending
With so many of us employed, it follows that spending would stay strong, and it has.
Source: U.S. Bureau of Labor Statistics via FRED®
Personal consumption expenditures reached a record $22.059 trillion. Six years of rising prices account for part of that total, but even setting inflation aside, the dollars Americans spend keep climbing. We see it in daily life: local restaurants are full, the malls are busy, and the travel industry reports strong sales across airlines, hotels, and cruise lines. Do you see the same where you live?
That level of spending raised a natural question for us: how much of it runs on credit? The U.S. Bureau of Labor Statistics reports that credit card debt is at record levels, which gives us pause, as it may not be sustainable for consumers. So, we looked at the delinquency rate on consumer loans and found it still relatively low at 2.64%, below the average of the past 40 years. When that rate begins to climb, it can serve as an early warning of financial stress, so we will keep watching it.
AI Spending
Consumers are not the only ones spending.
Source: Chaikin Analytics
In their second quarter earnings reports, covering April, May, and June, the large technology companies made clear they are still pouring enormous sums into building out the infrastructure for artificial intelligence (AI). The amounts are large enough that investors and analysts have begun to ask whether the spending has gone too far. Only time will answer that.
Federal Spending
The third major source of spending is the one that concerns us most: the federal government, which continues to spend at an alarming and unsustainable rate.
Source: U.S. Bureau of Labor Statistics via FRED®
The graph below shows how far federal outlays now outpace the tax revenue coming in, with the deficit running close to $2 trillion a year. That gap acts as a form of stimulus, and it will keep propping up the economy for as long as it lasts. The day this level of deficit spending can no longer continue is the day we will watch most closely for the start of the next recession.
Corporate Profits
With consumers, AI, and the federal government all spending heavily, it is no surprise that companies are posting strong results. We are now in the middle of second quarter earnings season, and the profits reported so far have been very strong, with the S&P 500 at record levels overall. As of July 31, 2026, 288 of the 500 companies had reported. Of those, 88% beat earnings estimates, exceeding them by a median of 7%. The 12% that fell short missed by a median of 2%.
Taken together, the spending by consumers, AI companies, and the federal government is driving record sales and profits for most companies. On the strength of this data, the economy looks very strong to us at this point.
Source: Trading Economics, U.S. Bureau of Economic Analysis
Growth, though, has been uneven. The U.S. Bureau of Economic Analysis reported on July 30, 2026, that the economy expanded at an annualized 1.5% in the second quarter, down from 2.1% in the first quarter and short of the 2.1% that had been forecast. The economy is still growing, but the pace shifts from quarter to quarter, likely in response to world events such as tariffs and ongoing conflicts.
Inflation
That brings us to inflation. On July 14, 2026, the U.S. Bureau of Labor Statistics reported that consumer prices rose 3.5% over the 12 months ending in June, down from a 4.2% annual rate the month before.
Source: U.S. Bureau of Labor Statistics
Prices are still rising, but not as quickly as they were. Whether that easing holds is another question, and one we are watching closely, particularly given the pressure energy costs can put on the months ahead.
Source: U.S. Bureau of Labor Statistics
The price of oil has swung with the status of the war in Iran, and we will be continue to watch both the oil price and its effect on inflation over the coming months.
Even with this easing, prices are still rising, and the energy risk on top of it has raised the odds significantly in our view; that the U.S. Federal Reserve will raise interest rates once or twice before year end. Bond values tend to move inversely with interest rates: when rates rise, bond prices generally fall, and longer-term bonds feel the effect more than shorter term ones. With that risk in mind, over the past month we have shifted client portfolios out of longer-term bonds and into shorter term bonds, to lessen or eliminate the impact of rising rates on the bond funds in client accounts.
Key Takeaways
Having walked through the data, here is what stands out to us:
- Unemployment remains relatively low
- Low unemployment is driving record consumer spending, which is producing record sales for companies and lifting stock prices to or near record highs
- There is a potential for one or two rate hikes this year
- The stock market remains very expensive
- Not all stocks are participating equally
- We favor shorter vs longer term bonds
- The war in Iran adds uncertainty around oil prices and inflation for the second half of 2026
Nothing in this data suggests we are in a recession or on the verge of one. Even so, given the full picture and the high valuation of the stock market, we are positioned a little more defensively in client portfolios than usual. As noted, we have also moved toward shorter-term bonds, which tend to hold up better than longer-term bonds when rates are rising.
If you have questions about the economy, the stock market or your portfolio, please call your Wealth Manager, Elaine Manley, Scott Manley, Linda Tjiputra, we are happy to discuss this with you.
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