What Happened Last Week
- Broad Advance: Stocks moved higher last week, led by tech, but with broad-based strength under the surface.
- Benign Inflation Reports: The consumer and producer inflation reports modestly eased expectations of a September rate hike.
- AI Theme Earnings: Earnings releases from AI infrastructure names bolstered the case that sentiment in the theme has bottomed.
What We’re Watching This Week
- Earnings Week Six: Investors will watch retailer earnings closely for more color on last week’s surprise retail sales miss.
- Fed Minutes: The Fed’s July meeting minutes are published on Wednesday as investors look for any clues into Chair Warsh’s thinking.
- Catalysts Ahead: Positioning adjustments ahead of Nvidia earnings and the Fed’s Jackson Hole conference may influence trading this week.
Investment Management Team’s Views
Equities continued to grind higher last week, with technology leading the advance but participation extending well beyond the market’s largest names. The S&P 500 Index reached another all-time high on Thursday, while small caps also participated in what was otherwise a relatively quiet week. Perhaps more importantly for the AI trade, CoreWeave and Nebius, two of the “NeoClouds” at the center of July’s selloff, rallied sharply after earnings reinforced how strong demand for AI computing capacity remains. While AI infrastructure dominates the market narrative, earnings across other sectors have also generally exceeded expectations, giving investors reasons to rotate rather than reduce equity exposure when technology comes under pressure. With the market’s key thematic drivers intact, earnings supportive, and positioning considerably cleaner than a few weeks ago, the technical backdrop remains constructive heading into the quieter part of August.
July consumer inflation rose just 0.1% from the month prior while producer prices were unchanged, helping ease expectations for a September rate hike. Meanwhile, softer retail sales suggested consumption is moderating without yet pointing to a broader growth problem. Our view remains that inflation, rather than growth, is the more important constraint on policy, which makes the recent data encouraging. Oil remains vulnerable to headline-driven moves as tensions in the Middle East persist. Several important data releases still stand between now and the September Fed meeting, and Jackson Hole later this month will provide Chair Warsh another opportunity to shape expectations. As a result, even if inflation’s direction has improved, we expect elevated rate volatility to persist.
The week ahead is relatively light on major macro data, shifting the focus toward the consumer and positioning ahead of the next round of major catalysts. Lowe’s, TJ Maxx, and Walmart report this week, offering a nuanced read on spending behavior, pricing power, and how much higher energy costs are affecting households. The minutes from the Fed’s unusually divided July meeting arrive Wednesday. They could add further color on the committee’s reaction function, though we suspect investors will increasingly look beyond this week toward Nvidia earnings on August 26 and Jackson Hole on August 27–29. With the AI investment cycle and the path of monetary policy coming back into focus at nearly the same time, positioning ahead of those events could become an increasingly important driver of market action in the week ahead.