Author: Elizabeth Lamkin

Federal Reserve Signals & Market Volatility

Federal Reserve Chair Kevin Warsh’s highly anticipated Jackson Hole speech struck a distinctly hawkish tone. Reiterating the Fed’s firm 2% inflation target, Warsh raised the probability of another interest rate hike before the year ends. His comments—paired with a sudden surge in oil prices triggered by renewed geopolitical tensions between the U.S. and Iran—ignited fresh volatility across fixed income markets.

However, Fed Governor Christopher Waller offered a softer, more dovish perspective shortly after, indicating support for holding rates steady. Waller’s comments helped calm bond markets, pulling yields back down as rate-hike expectations cooled. Despite all the noise and headline risk, equity markets have remained essentially flat since mid-August.

MARKET SUMMARY: While Fed speeches and oil price spikes triggered short-term volatility in bond yields, stock markets have shown remarkable resilience, trading largely sideways since mid-August.

Strong August Jobs Report Keeps Rate Hikes on the Table

The latest employment data delivered a massive surprise. Non-farm payrolls jumped by 162,000 in August—roughly three times higher than consensus expectations—while figures from prior months were revised upward. Although recent month-to-month employment data has been choppy (the 3-month moving average sits at roughly 71,000), the overall labor market remains structurally sound and near full employment.

Key highlights from the August jobs report include:

• Unemployment Rate: Held steady at a low 4.1%.
• Wage Growth: Remained moderate at 3.1% year-over-year, suggesting minimal wage-driven inflationary pressure.
• Fed Implications: The strong headline job gain renewed upward pressure on interest rates and swung expectations back toward a potential rate hike.

Crude Oil Prices Surge: Energy Sector Outperforms

Energy markets have seen a sharp move. West Texas Intermediate (WTI) crude oil surged from its intraday low of $82.25 to a high of $93.14 per barrel. Key technical levels to watch:

• Key Resistance at $97: As long as WTI stays below $97, oil is expected to stay within a defined trading range. A breakout above $97 could open the door to test recent highs near $110–$117.
• Sector Impact: Higher oil prices raise broader inflationary concerns, putting upward pressure on bond yields. However, rising energy prices remain a powerful catalyst for S&P 500 Energy stocks—a sector where portfolio positioning remains overweight.

Treasury Yields & Bond Market Volatility

Despite non-stop debate over interest rate direction, the 10-year Treasury yield is essentially right back where it was in 2023. Long-term interest rates have traded within a consistent range for nearly three years, capped near 5.0% (a high reached in late October 2023).

From a technical standpoint, 10-year yields are forming a broad rectangular pattern. While an eventual breakout (higher or lower) will mark a major macro shift, a near-term breakout is unlikely.

Meanwhile, bond market volatility (as measured by the ICE BofA MOVE Index) spiked recently but appears set to retreat in the short term—a welcome relief for fixed-income portfolios. Key catalysts to watch this week include the upcoming Consumer Price Index (CPI) and Producer Price Index (PPI) reports, which will provide vital clues for the Fed’s upcoming policy meeting.

Corporate Earnings: High Margins, Higher Expectations

Strong corporate profit growth remains a primary cornerstone of the ongoing bull market, heavily fueled by rapid Artificial Intelligence (AI) adoption. For instance, Dell Technologies (DELL) recently reported Q2 earnings well above consensus estimates and raised its fiscal outlook, highlighting robust enterprise AI demand.

Key corporate finance trends driving market confidence include:

• Expanding Profit Margins: Consensus 12-month forward operating margins for the S&P 500 have expanded from 18.8% at the beginning of the year to 21.2%, with broad participation across most sectors.
• Broad Earnings Breadth: 82.2% of S&P 500 companies posted year-over-year profit growth in Q2 (up from 80.6% in Q1). While extreme breadth can sometimes precede market pauses, analysts expect earnings growth to peak several quarters out.
• Upward Earnings Revisions: Yardeni Research’s Net Earnings Revisions Index (NERI) reached +8.3% in August—a 57-month high marking 13 consecutive positive months. All 11 S&P sectors posted positive revisions, offering strong fundamental support for equities.

Could September’s “Pain Trade” Actually Be a Rally?

Historically, September has a reputation for being the toughest month for stocks, averaging a 2.7% decline over the past five years. However, entering September with deeply oversold technical readings across the S&P 500, Nasdaq 100, and Semiconductor ETF (SMH) creates prime conditions for a tactical rally.

TACTICAL OUTLOOK: If the consensus among investors is positioned for a September pullback, the true “pain trade” might actually be stock prices pushing higher into early autumn. Our year-end target for the S&P 500 remains 8,225 (a ~6% upside from current levels).

Disclosures & Disclaimer

Sanctuary makes no representation as to the accuracy or completeness of information contained herein. Any forward-looking statements are based on assumptions, may not materialize, and are subject to change without notice. The information is based upon data available to the public and is not an offer to sell or solicitation of offers to buy any securities mentioned herein. Any investment discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Investments are subject to risk, including but not limited to market and interest rate fluctuations. Any performance data represents past performance which is no guarantee of future results. Prices/yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request.

Comments regarding cryptocurrencies or cryptocurrency-based securities are for informational purposes only and do not constitute investment advice or a solicitation to buy or sell any cryptocurrency-related product. These products involve significant risks, including high price volatility, evolving regulations, limited market liquidity, and vulnerability to fraud and cyberattacks.

Securities offered through Sanctuary Securities, Inc., member FINRA/SIPC. Advisory Services offered through the SEC registered investment advisers Sanctuary Advisors, LLC and tru Independence. Sanctuary Wealth consists of the wholly owned subsidiaries: Sanctuary Advisors LLC, Sanctuary Securities, Inc., and tru Independence, as well as Sanctuary Alternative Holdings, Sanctuary Asset Management, Sanctuary Insurance Solutions, Sanctuary Global, and Sanctuary Global Family Office.

Softer Inflation Gives Summer Rally a Boost

Softer-than-expected Consumer Price Index (CPI) and Producer Price Index (PPI) readings last week reinforced the view that inflation pressures are moderating. This pushed interest rates lower, particularly the 2-Year Treasury yield.

The bumper crop of earnings that has been announced so far is averaging 30% above expectations—powering stocks to record highs. If this level remains as the actual “beat number” for the quarter, it will mark the highest earnings surprise reported by the S&P 500 index since FactSet began tracking this metric in 2008. Earnings are up 51% year-over-year, putting the index on track for a second consecutive quarter of earnings growth above 25% and a seventh consecutive quarter of double-digit growth. Revenues for the quarter rose more than 15% year-over-year, the strongest pace since the fourth quarter of 2021. Five sectors delivered at least double-digit revenue growth: Energy, Information Technology, Communication Services, Financials, and Real Estate.

Consumer Price Inflation Data Easing

The July CPI report showed headline inflation rising just 0.1% month-over-month and 3.4% year-over-year. The surprise was that the previous month’s reading was revised down to -0.4%. Core CPI (excluding food and energy) advanced 0.2% month-over-month and 2.5% year-over-year, the slowest annual core reading since early 2021. The softer inflation data eased concerns about interest rate hikes later this year.

PPI Confirms the Disinflationary Trend

The Producer Price Index (PPI) came in below expectations, with the month-over-month reading at 0.0% (versus the expected 0.2%) and the year-over-year reading at 4.7% (below the expected 4.9%). PPI excluding food and energy came in slightly above expectations, but the market focused on the softer overall data. Declining energy and food input costs are feeding through to wholesale prices, giving the Federal Open Market Committee (FOMC) additional flexibility on interest rate decisions. The market continues to lower expectations of an interest rate hike this year.

Retail Sales Come in Significantly Below Expectations

July retail sales came in significantly below expectations, declining 0.6% versus expectations for a 0.1% increase. A lower-than-expected number could be due to a drop in sales following the World Cup, which ended on July 19. This surprise is lowering interest rates while pushing out an expected interest rate hike. Federal Reserve Chair Kevin Warsh is believed to be more likely to favor cutting interest rates than raising them, and the latest data increasingly supports that view.

Wage Growth Is Falling Which Should Ease Inflation

Annual growth in weekly earnings of production workers continues to slow. Weaker wage pressures reduce one of the key arguments for additional rate increases and support the outlook for lower front-end yields. Wage growth is a key indicator of future inflation, and slowing wage growth signals that inflation should ease in the months or quarters ahead.

Two-Year Treasury Yields Breaking Down

Last week highlighted that the 2-Year Treasury yield appeared to be breaking down. Confirmation came from the weaker inflation and retail sales data. The target is a move toward 4.0%–3.8%. Lower interest rates are supportive of higher stock prices. Historically, the trend in the 2-Year has foreshadowed the direction of Fed interest rate policy.

The Odds of a Near-Term Rate Hike Are Receding

Market-implied odds of a 25-basis-point hike at the September, October, and December FOMC meetings have retreated sharply following soft inflation reports. September probability has fallen from a mid-July peak near 72% to roughly 32%. The term structure now shows December higher than September, suggesting the market sees a higher chance the Fed skips a hike at the September meeting and potentially acts later, if needed.

Earnings Are Extraordinarily Strong Across Sectors

Ten of the eleven S&P 500 sectors reported positive year-over-year earnings growth in the second quarter. Only the Healthcare sector had a decline in earnings.

• Energy and Communication Services had year-over-year earnings growth above 100%.
• Consumer Discretionary and Technology followed with 92% and 70% earnings growth, respectively.
• Part of the strength in 2Q earnings is coming from tariff refunds.

Revenue Growth Remains Powerful

S&P 500 revenue growth for 2Q26 reached 15% year-over-year, the highest pace since the fourth quarter of 2021. Energy led with more than 40% growth, followed by Information Technology with 36%. Strong top-line expansion provides a solid foundation for continued earnings momentum. Business backlogs have been rising, indicating demand remains strong within the economy.

Net Earnings Revisions Rise Sharply

Analyst net earnings revisions continue to rise substantially, supporting higher stock prices in the months ahead. Seasonally, earnings estimates tend to fall as we move into the third and fourth quarters. Estimates rising sharply now point to the strength of earnings power in this AI-driven business cycle. Revisions to earnings estimates are the strongest models for predicting the direction of stock prices. The rate of increases in earnings estimates for the S&P 500 is a strong confirmation that we remain in a secular bull market. The S&P 500 target for this year is 8,225, raised in June from 7,500.

Market Breadth Confirms Record Highs in Stocks

The S&P 500 cumulative advance-decline line has reached a new all-time high. Broad participation across stocks reduces the risk of a narrow, fragile rally and reinforces the secular uptrend. Commercial and Industrial (C&I) loans are expanding at an 8% annual rate. This indicates ongoing business investment and credit demand, consistent with an expanding economy, even if the pace remains below prior cycle peaks. This is bullish for bank earnings going forward.

Return on Equity Favors Technology

Return on Equity (ROE) is a key measure of how efficiently a company generates profits from shareholders’ capital and one of Warren Buffett’s preferred indicators of business quality. At 33%, ROE among Technology stocks remains substantially higher than the 20% for the broader S&P 500. This differential continues to support the sector’s long-term leadership within the secular bull market.

Technical analysis suggests gold prices have found a base near $4,000. The SPDR Gold Shares ETF (GLD) and related stochastic oscillators point to a very oversold and improving price momentum following the recent correction. The target on Gold remains $5,000, serving as a solid hedge in portfolios.

Junior Gold Miners Offer Leverage to Higher Gold Prices

Gold mining equities, particularly the more leveraged junior producers, stand to benefit if Gold prices resume their advance. The VanEck Junior Gold Miners ETF (GDXJ) shows similar technical oversold conditions, with price momentum starting to turn positive

Disclosures & Disclaimer

Sanctuary makes no representation as to the accuracy or completeness of information contained herein. Any forward-looking statements are based on assumptions, may not materialize, and are subject to change without notice. The information is based upon data available to the public and is not an offer to sell or solicitation of offers to buy any securities mentioned herein. Any investment discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Investments are subject to risk, including but not limited to market and interest rate fluctuations. Any performance data represents past performance which is no guarantee of future results. Prices/yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request.

Comments regarding cryptocurrencies or cryptocurrency-based securities are for informational purposes only and do not constitute investment advice or a solicitation to buy or sell any cryptocurrency-related product. These products involve significant risks, including high price volatility, evolving regulations, limited market liquidity, and vulnerability to fraud and cyberattacks.

Securities offered through Sanctuary Securities, Inc., member FINRA/SIPC. Advisory Services offered through the SEC registered investment advisers Sanctuary Advisors, LLC and tru Independence. Sanctuary Wealth consists of the wholly owned subsidiaries: Sanctuary Advisors LLC, Sanctuary Securities, Inc., and tru Independence, as well as Sanctuary Alternative Holdings, Sanctuary Asset Management, Sanctuary Insurance Solutions, Sanctuary Global, and Sanctuary Global Family Office.

Weaker Jobs Data, Lower Interest Rates: Earnings Are Abundant & Rotation Continues

The July labor report came in much weaker than expected, driving interest rates lower, while second-quarter productivity improved significantly and far exceeded expectations. Artificial intelligence (AI) may be an important contributor to these stronger productivity gains. Corporate earnings have been superb, driven by actual revenue growth. Margin debt (i.e., borrowing to buy stocks) likely eased in July as Technology stocks, particularly Semiconductors, pulled back. Even so, market rotation has broadened leadership and helped propel the S&P 500 to record highs — a seasonal pattern common during the summer months. The combination of market rotation and new highs indicates a strong bull market.

In July, we raised our year-end S&P 500 target to 8,225. From a technical perspective, the recent breakout to new highs points toward 7,900–8,000. We do expect volatility to continue, so maintaining a balanced portfolio remains as important as ever.

Earnings & Revenue Growth

Second-quarter results are mind-bending. Energy led all sectors with estimated year-to-year earnings growth of 147.0%, helped by elevated refining margins. Communication Services grew 117.0% on cloud and AI monetization gains, helped by Alphabet (GOOGL), while Information Technology grew at 70.4% on a clean sweep of earnings beats in Hardware and Semiconductors. Materials rose 41.7% on higher commodity prices and industrial demand. Healthcare lagged at -6.7%.

By the end of last week, 88% of S&P 500 companies had reported results. So far, overall earnings growth is running at 50.4%, an exceptionally strong pace, particularly given that the economy appears to be in the mid-to-late stage of the business cycle. That strength in corporate earnings growth provides a solid fundamental foundation for the market’s record highs, even as markets continue to navigate the conflict with Iran and the resulting higher oil prices.

The earnings surge is genuine. Revenue growth accelerated by nearly 5%, while profit margins expanded at one of the fastest rates excluding the pandemic and the Global Financial Crisis (GFC). Even after filtering out unrealized investment gains, the data continue to show robust underlying earnings growth.

We continue to believe the economy remains in the Inflation Boost phase, a concept we introduced in our May Monthly Report, in which moderate inflation supports pricing power, revenue growth, and ultimately stronger corporate earnings.

Labor Market & Productivity

• Surprising Softness: The July jobs report showed a loss of 23,000 positions against expectations of an 80,000 gain. Prior months were also revised lower. July seasonal adjustments are notoriously hard to model because of school calendars and summer patterns. The data also shows the unemployment rate remains low at 4.1%.
• Low-Hire, Low-Fire Dynamic: The data indicate a low-hire, low-fire environment rather than widespread layoffs. Emigration has replaced strong immigration flows. An aging population with Baby Boomers retiring continues to reduce the share of people working or looking for work.
• Rate Case Softens: This softens the case for near-term rate increases by the Federal Reserve (Fed). It also underscores the importance of productivity to economic growth.
• Productivity Surge: Second-quarter productivity rose 1.4% at an annualized rate, well above analysts’ expectations of 0.6%. We had anticipated continued improvement in productivity; many on Wall Street had not. We believe that AI is beginning to lift output per worker. Higher productivity helps companies grow profits without adding as many employees, supporting earnings strength.

Deleveraging, Speculation, & Sector Turning Points

Margin debt relative to the Wilshire Index climbed from 1.43% in September 2024 to 2.05% in June 2026, signaling increased speculation. As Technology stocks, particularly Semiconductors, corrected sharply during July, margin debt likely declined as investors reduced leverage. Even so, margin debt remains low relative to historical levels, which reduces the risk of forced selling during market stress.

Semiconductors Near A Turning Point Semiconductor stocks have experienced a 20%–30% correction driven by deleveraging. The sell-off has made valuations in the sector more attractive, and Semis now trade at a lower forward price-earnings multiple than the broader market. Semis responded to the short-term near oversold reading we highlighted last week. The weekly stochastic has not yet generated a buy signal, though we believe conditions are approaching one and remain bullish on the sector.

Metals and Mining Bottoming We believe Gold and Silver have bottomed. Copper continues to look stronger because of real demand from data-center construction, re-industrialization, and electric power needs. Industrial metals exposure offers a direct way to participate in physical demand tied to technology infrastructure.

Market Breadth & Global Outlook

The global secular bull market continues. The iShares MSCI EAFE ETF (EFA), which tracks developed markets outside the United States and Canada, has reached a new all-time high. The MSCI Emerging Markets ex-China Index (EMXC) remains in an uptrend following its recent correction.

Domestically, the Russell 2000 and the equal-weighted S&P 500 both hit new all-time highs. Sector rotation has lifted prices across more of the market while Technology and Semiconductors worked off earlier overbought positions. Broad participation provides a healthier foundation for sustained gains than narrow leadership by a handful of giant companies.

Sector Performance & Oversold/Overbought Readings

• Top Sectors: Information Technology returned to 1st place last week, followed by Healthcare (2nd) and Energy (3rd).
• Bottom Sectors: Utilities dropped to last place (11th), followed by Communication Services (10th) and Consumer Staples (9th).
• Overbought Conditions: Healthcare and Financials.
• Oversold Conditions: Communication Services and Consumer Discretionary (Consumer Staples and Utilities are near oversold).

Inflation Takes Center Stage

This week delivers important data on inflation and interest rate expectations:

• Wednesday: July Consumer Price Index (CPI) and Core CPI.
• Thursday: Producer Price Index (PPI).
• Friday: Advance Retail Sales.

Together, these reports will provide crucial signals on economic health, Fed policy, and the trajectory of interest rates while corporate earnings wrap up.

Disclosures & Disclaimer

Sanctuary makes no representation as to the accuracy or completeness of information contained herein. Any forward-looking statements are based on assumptions, may not materialize, and are subject to change without notice. The information is based upon data available to the public and is not an offer to sell or solicitation of offers to buy any securities mentioned herein. Any investment discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Investments are subject to risk, including but not limited to market and interest rate fluctuations. Any performance data represents past performance which is no guarantee of future results. Prices/yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request.

Comments regarding cryptocurrencies or cryptocurrency-based securities are for informational purposes only and do not constitute investment advice or a solicitation to buy or sell any cryptocurrency-related product. These products involve significant risks, including high price volatility, evolving regulations, limited market liquidity, and vulnerability to fraud and cyberattacks.

Securities offered through Sanctuary Securities, Inc., member FINRA/SIPC. Advisory Services offered through the SEC registered investment advisers Sanctuary Advisors, LLC and tru Independence. Sanctuary Wealth consists of the wholly owned subsidiaries: Sanctuary Advisors LLC, Sanctuary Securities, Inc., and tru Independence, as well as Sanctuary Alternative Holdings, Sanctuary Asset Management, Sanctuary Insurance Solutions, Sanctuary Global, and Sanctuary Global Family Office.

Fed Policy, Economic Growth & Sector Trends

The Federal Open Market Committee (FOMC) voted 9 to 3 to keep the federal funds rate in a range of 3.50% to 3.75%. The three dissenters are known hawks — policymakers who favor higher interest rates to fight inflation more aggressively.

Federal Reserve (Fed) Chair Kevin Warsh said the Committee remains fully committed to its 2% inflation goal and will not accept a higher target. He noted that, since the last FOMC meeting, markets have already tightened financial conditions on their own and that business investment, especially in technology, remains strong.

Reporters Play Hardball With Fed Chair On Interest Rates

Seven of the nine reporters who posed questions to Fed Chair Warsh after the latest policy meeting took an unusually confrontational approach. They repeatedly asked why rates were raised immediately, challenged the decision to hold rates steady, and showed far less deference than is customary for a Fed chair. (Yes, new Fed Chairs are always tested, but this seemed especially strident.)

Even the more measured questions from Nick Timiraos of The Wall Street Journal and Brian Chung of NBC carried a sharper edge to their questions than usual. In response, Warsh noted that he has held the job for only 8½ weeks while inflation has run above the Fed’s 2% target for more than five years.

Imports And Lower Government Spending Held Back Second-Quarter Growth

Second-quarter economic growth came in softer than most analysts expected. The official measure of total U.S. output, Gross Domestic Product (GDP), rose at only a 1.5% annual rate, lower than the expected 1.8%. Consumer spending stayed solid and continued to support the economy.

The weaker headline number was caused mainly by a larger-than-expected jump in imports and a small drop in government spending. Imports are subtracted from the GDP calculation, and they surged, which pulled the overall growth rate lower — even though American households kept spending.

AI Investment Rose, but Technology Imports Offset Much of the Gain

Companies spent heavily on artificial intelligence (AI) equipment and data center capacity in recent quarters. That capital investment normally adds to economic growth. At the same time, a large share of the servers, chips, and related gear was imported. Imports reduce the GDP total, so the investment boost and the import drag largely canceled each other out. In one recent quarter, the two forces were almost equal in size.

Core Consumer Prices Cooled, but Broader Inflation Pressures Reappeared

The Fed’s preferred inflation gauge, the core Personal Consumption Expenditures (PCE) price index, continued to match what economists had forecast and showed further cooling in June. That softer reading gave the Fed room to leave interest rates unchanged.

In contrast, the broader GDP price index, which covers all goods and services produced in the United States, accelerated to a 6.2% annual rate in the second quarter (up from its earlier peak of 9.4% in 2022). Two forces drove this increase:

• Energy Prices: Rose sharply due to ongoing conflict with Iran and related shipping disruptions.
• AI Import Volume: Reduced real GDP and, by simple arithmetic, pushed the price deflator higher.

Market Technicals: S&P 500 & Semiconductors Oversold

• S&P 500 Index: Had a 5% correction off its high, creating an oversold 14-day Stochastic reading while holding key support levels. The index needs to respond to this oversold level to avoid another leg down.
• Semiconductor Sector (SMH): The VanEck Semiconductor ETF corrected 25%, creating an oversold condition. Similar to the 1990s Dot-Com period (which saw 30%-50% pullbacks during an ongoing bull trend), semiconductors remain leaders of this secular bull market.
• WTI Crude Oil: Prices remain range-bound between the 100-day moving average ($90) and 200-day moving average ($76), indicating elevated energy costs ahead.

Disclaimer: Securities offered through Sanctuary Securities, Inc., member FINRA/SIPC. Advisory Services offered through SEC registered investment advisers Sanctuary Advisors, LLC and tru Independence. Information is based on public data and is not an offer to sell or buy securities. Past performance is no guarantee of future results.

Markets Navigate Oil Spike and Tech Earnings Pressure

Both the equity and fixed income markets were volatile last week due to higher oil prices and concerns over the ongoing large capex spending by some of the mega technology companies.

Oil prices surged last week as the U.S. continued its strikes on Iran — heightening supply fears again — while Iran-backed Houthi rebels claimed attacks on two Saudi oil tankers in the Red Sea. WTI crude oil prices surpassed resistance in the $80–$85 per barrel range, climbing as high as $93. However, with the prospect of negotiations, oil prices have collapsed and are trading in the low 80s.

Earnings also contributed to volatility within the equity market as both Tesla (TSLA) and Alphabet (GOOGL) announced continued heavy spending on capex, which is weighing on quarterly free cash flow. Investors now head into a heavy slate of earnings and central bank decisions with risk levels elevated and volatility likely to remain high as rotation continues across the equity market.

2-Year Treasury Yield Rises To Test Resistance

With higher oil prices raising concerns over inflation, the market has pushed interest rates higher. The 2-Year Treasury yield has retraced roughly 50% of its previous decline and is now testing resistance at 4.3%. If that level holds, the yield could retreat toward 4.0%. A decisive break above 4.3% would open the door to a move toward 4.8%–5.0%. Such a move would likely rattle the equity markets and extend the current correction.

10-Year Treasury Yield Also Testing Key Resistance

The 10-Year Treasury yield is testing key resistance near 4.8%–5.0%. We believe that if the strikes on Iran subside and oil prices decline, this test should prove successful. However, if the attacks continue and oil prices push higher, the risk is that yields could move higher.

S&P 500 Approaching Oversold: Needs To Rally

The S&P 500 is approaching oversold levels, but it needs to respond to prevent another down leg. Without a positive response, the Bears are likely to remain in control.

Nasdaq 100 With A Bearish Top

The Nasdaq 100 appears to have formed a top with risk of a deeper correction. The Semiconductors have the same pattern. We did highlight in our Mid-Year Outlook that the Bucking Bull would return. Without a rally soon, the risk is the correction in Technology will continue because the Nasdaq 100 is heavily weighted in Tech.

Tech Earnings Spotlight AI Capex Spending and Cash-Flow Concerns

Tesla (TSLA) and Alphabet (GOOGL) both reported second-quarter results that triggered sharp share-price declines despite underlying positive data. Tesla posted strong revenue growth, but adjusted earnings came in below consensus as profit margins declined, and the company generated negative free cash flow. Alphabet delivered solid revenue growth, beat earnings forecasts, led by strong results in Google Cloud, but raised its 2026 capital-expenditure forecast above expectations and also reported negative free cash flow for the first time.

Market reaction showed investors are increasingly focused on the scale of spending and concerned about free cash flow. The continued high capex spending shows the deep competition among the big Tech companies. They are operating in an environment where the winner takes all, and all are trying to be number one.

Competition Heats Up

Competition is heating up. Moonshot AI, a Chinese AI company, recently introduced its Kimi K3 large language model, which has drawn substantial attention as a potential challenger to U.S. frontier AI models such as Anthropic’s Claude. Reports indicate Kimi used high-end Nvidia chips — despite export restrictions — and relied on distillation (a machine learning technique where a large, complex teacher model trains a smaller, efficient student model to mimic its behavior) of existing U.S. models, following a path similar to DeepSeek 18 months ago. It is also expected that the Kimi K3 model learned and trained using the Claude LLM model without permission.

On a positive note, Intel (INTC) provided optimism last Thursday when it reported earnings that beat estimates on major fundamental metrics. Overall, the week reinforced that volatility remains within the major Technology companies, especially in semiconductors and technology hardware.

Rails Catch Ride On Consolidation Progress

Union Pacific (UNP), Norfolk Southern (NSC) and CSX (CSX) all advanced sharply last week. The catalyst was an agreement in which Canadian National Railway (CNI) said it would not oppose Union Pacific’s proposed acquisition of Norfolk Southern. Norfolk Southern also beat second-quarter profit estimates, while CSX raised its margin outlook and reported strong volumes.

These Rail stocks rose on the news, standing out against a weaker broader market. Their move signals that investors see tangible progress on consolidation and solid underlying demand in the rail sector. Railroads are a cyclical industry, and their strength suggests cyclical sectors remain well supported. It is also a sign that the economy is growing.

We remain positive on the Industrials sector where the Rails are positioned. This offers a reminder that selective industrial strength can appear even when headline indexes are under pressure. Sector rotation is keeping the equity market in a bullish pattern — at least for now.

Key Macro & Market Trends & The Great Wealth Transfer: How Big Is It Really?

Estimates of the coming intergenerational wealth transfer vary widely. Cerulli Associates projects that older generations will pass more than $100 trillion to heirs in the decades ahead. A more recent study from Visa puts the figure for Baby Boomer wealth transferred to Gen X and Millennials over the next 20 years at roughly $36 trillion.

The difference is large, yet both numbers point to a substantial shift of assets. For investors, this matters because the recipients are likely to reallocate portfolios, increase demand for advice, and influence long-term flows into equities and other risk assets. While the exact size remains debated, the direction of the transfer is clear and will unfold over many years.

Presidential Cycle Average Returns

Average equity returns across the four-year presidential cycle since 1952 show that performance so far in the current presidential term through the end of June 2026 is well above average performance for the mid-term year.

Japan Trade Data Shows Resilient Demand

Japan reported that both exports and imports grew in June at the fastest pace since November 2022, beating estimates. Exports rose sharply, helped by semiconductor shipments tied to artificial intelligence and data center demand. Imports also increased, driven in part by higher energy costs.

The figures point to continued underlying demand for Japanese goods and recovery in its economy. We believe these trends offer a constructive signal for trade and technology-related supply chains, supporting the broader global growth narrative.

Defense Stocks Remain Attractive

European defense stocks continued to draw investor interest last week on the back of ongoing rearmament efforts. Rheinmetall (RHM, Frankfurter Wertpapierbörse) is expanding gunpowder and ammunition capacity as Europe races to replenish stockpiles. The broader sector, including names such as Dassault Systèmes (DSY, Euronext Paris), Thales (HO, Euronext Paris), and Indra Sistemas (IDR, Bolsa de Madrid), has also benefited from the same multi-year spending push.

At the same time, U.S. defense manufacturers have been directed by the Trump Administration to increase production and replenish stockpiles of munitions expended in Ukraine and Iran. The dual pressure of European rearmament and U.S. replenishment creates a supportive backdrop for the sector on both sides of the Atlantic.

For investors, this remains a structural theme rather than a short-term trade. Spending commitments are multi-year, order backlogs are strong, and selective opportunities continue to exist even after the strong gains of recent years.

Sector Readings & Rankings

Energy was strongest last week, followed by Information Technology, then Industrials; this is the same order as the prior week. Technology is weakening, signaling a correction is in place. Consumer Discretionary was in last place, followed by Communication Services, then Consumer Staples.

Our sector model analyzes S&P 500 GICS sector classifications, using a weighted measure of price momentum across three time periods. We rank each sector from best to worst based upon the average of its 40-, 26-, and 13-week relative price performances. We rank each sector from 1 to 11, with 1 being the strongest and 11 the weakest.

Sector	Jul 24	Jul 17	Jul 10	Jul 3	Jun 26	Jun 19	Jun 12	Jun 5
Energy	1	1	2	5	3	5	2	2
Information Technology	2	2	1	1	1	1	1	1
Industrials	3	3	3	2	2	2	3	3
Healthcare	4	4	4	3	5	10	8	7
Real Estate	5	5	5	6	7	6	9	5
Financials	6	6	9	8	9	9	11	11
Materials	7	7	7	4	6	4	4	4
Utilities	8	10	10	10	4	11	5	10
Consumer Staples	9	8	8	7	8	7	7	8
Communication Services	10	9	6	9	10	3	6	6
Consumer Discretionary	11	11	11	11	11	8	10	9

Overbought / Oversold (OBOS) Sector Analysis

Healthcare was overbought last week, followed by Financials and Industrials as near overbought. Technology is correcting. Consumer Discretionary and Communication Services were oversold, while Materials and Consumer Staples were near oversold. We note that Consumer Discretionary was unusually oversold.

Our tactical sector rotation model uses the S&P 500 GICS sector classifications. We apply a 13-week rate of change methodology that normalizes the rankings from overbought (OB) to oversold (OS).

Rank	S&P Sector	Normalized Oscillator	Status
1	Healthcare	1.4363	Overbought
2	Financials	0.9724	Near Overbought
3	Industrials	0.6014	Near Overbought
4	Information Technology	0.3430	Neutral
5	Real Estate	0.3115	Neutral
6	Energy	0.1813	Neutral
7	Utilities	-0.3420	Neutral
8	Consumer Staples	-0.7405	Near Oversold
9	Materials	-0.8667	Near Oversold
10	Communication Services	-1.6772	Oversold
11	Consumer Discretionary	-2.5622	Oversold

Earnings, Data, And Rates, Oh My!

This week draws major earnings, key inflation data, and rate decisions from 3 global central banks. Buckle up!

This is the biggest week for second-quarter earnings with a third of the S&P 500 companies reporting. This also brings a dense cluster of policy decisions and data. The Federal Open Market Committee (FOMC) announces its rate decision on Wednesday, followed by the Bank of England on Thursday and the Bank of Japan on Thursday night into Friday. On Thursday, the June Personal Consumption Expenditures (PCE) price index will be released.

Earnings season continues with reports from major companies including Microsoft (MSFT), Meta Platforms (META), Amazon (AMZN), Apple (AAPL), ExxonMobil (XOM), and Chevron (CVX).

Expect increased levels of volatility this week as the Bull is expected to Buck. Remain Fearless.

Weekly Calendar (July 27–31, 2026)

Day	Economic Data / Events	Earnings Highlights
Mon (Jul 27)	8:30 AM Durable Goods	Universal Health
Tue (Jul 28)	8:30 AM Advance Economic Indicators Report, Wholesale Inventories, Retail Inventories 9:00 AM S&P Case-Shiller Home Price Index 10:00 AM Conference Board Consumer Confidence	Invesco
Wed (Jul 29)	2:00 PM U.S. Interest Rate Decision (FOMC)	Ares Capital, UBS, Microsoft, Meta Platforms
Thu (Jul 30)	8:30 AM Advance Estimate GDP, Weekly Jobless Claims, Personal Income, Consumer Spending, PCE Price Index	Apple, Amazon
Fri (Jul 31)	8:30 AM Employment Cost Index 9:45 AM Chicago Business Barometer (PMI) 10:00 AM U.S. Michigan Final Consumer Survey	Chevron

Disclosures & Disclaimer

Sanctuary makes no representation as to the accuracy or completeness of information contained herein. Any forward-looking statements are based on assumptions, may not materialize, and are subject to change without notice. The information is based upon data available to the public and is not an offer to sell or solicitation of offers to buy any securities mentioned herein. Any investment discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Investments are subject to risk, including but not limited to market and interest rate fluctuations. Any performance data represents past performance which is no guarantee of future results. Prices/yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request.

Comments regarding cryptocurrencies or cryptocurrency-based securities are for informational purposes only and do not constitute investment advice or a solicitation to buy or sell any cryptocurrency-related product. These products involve significant risks, including high price volatility, evolving regulations, limited market liquidity, and vulnerability to fraud and cyberattacks.

Securities offered through Sanctuary Securities, Inc., member FINRA/SIPC. Advisory Services offered through the SEC registered investment advisers Sanctuary Advisors, LLC and tru Independence. Sanctuary Wealth consists of the wholly owned subsidiaries: Sanctuary Advisors LLC, Sanctuary Securities, Inc., and tru Independence, as well as Sanctuary Alternative Holdings, Sanctuary Asset Management, Sanctuary Insurance Solutions, Sanctuary Global, and Sanctuary Global Family Office.

U.S. Markets Navigate Mixed Signals In A Volatile Week

Last week, markets endured a mixed bag of softer inflation data, hawkish Federal Reserve (Fed) commentary, strong bank earnings, rising oil prices amid Iran tensions, and continued rotation out of Semiconductor chip stocks.

While we expect near-term choppiness to persist, we believe that patient investors will be supported by underlying earnings resilience and ongoing, long-term secular trends.

Softer Inflation Data

The June Consumer Price Index (CPI)—a key government measure of the average change over time in prices paid by urban consumers for a market basket of consumer goods and services—came in significantly weaker than expected by economists. This cooler reading helped push Treasury yields lower, lifting bond prices, which generally translates into reduced borrowing costs for mortgages, corporate loans, and other forms of debt. Lower yields can support stock valuations and interest rate-sensitive sectors in the near term.

The Producer Price Index (PPI)—which measures changes in the prices producers receive for their goods and services—also came in below expectations, reinforcing the disinflationary signal from the CPI. These data points should give the Fed more flexibility on policy timing—including potential rate cuts later this year. While Fed rhetoric remains cautious, the data gives policymakers greater flexibility and leaves the door open to a range of interest rate outcomes in the second half of the year.

Warsh Congressional Testimony: Hawkish Tone

New Fed Chair Kevin Warsh delivered a notably hawkish message in his congressional testimony, stressing that inflation has remained too high for too long and rejecting any idea that the softer CPI signaled “mission accomplished” on reducing it. Warsh’s tone matched his comments during his first Federal Open Market Committee (FOMC) meeting. So far, investors have been encouraged by Warsh’s firm stance on inflation.

Interest Rate Expectations

Markets began last week pricing in meaningful odds of a rate hike at the late-July FOMC meeting. After the softer inflation data was released, those expectations dropped sharply, with the probability of a near-term hike falling to roughly 10% by last Thursday’s close.

Strong Bank Earnings Underpin Financials

Last week, major U.S. banks kicked off the second-quarter earnings season with impressive results, as all eight large institutions in the S&P 500 index that reported beat Wall Street earnings expectations.

Firms such as Goldman Sachs (GS) posted record revenue from equity trading, investment banking, and initial public offerings (IPOs), while Bank of America (BAC) and others showed healthy gains in lending as well as investment banking activities. These beats reflect resilient consumer spending, steady loan demand in a higher-rate environment, and strong performance in capital markets businesses, including IPOs. (Remember, many of the banks recently raised their dividends.)

These strong bank earnings offer reassurance about the underlying strength of the economy and our bullish outlook for the Banks sector overall. While near-term volatility from interest-rate uncertainty and geopolitical risks remains, these results underscore the sector’s ability to generate solid returns.

Oil Rises On Iran Tensions But Hits Resistance

Oil prices posted solid weekly gains last week amid escalating tensions in the Persian Gulf, where U.S. strikes on Iran and disruptions to shipping through the critical Strait of Hormuz have once again raised supply concerns. West Texas Intermediate (WTI) crude oil—the primary U.S. oil benchmark—has climbed into the upper $70s to low $80s per barrel.

There is significant resistance in the $80–$85 per barrel range for WTI, and so far, the commodity has respected this level without breaking higher on a sustained basis. Higher oil prices support energy stocks, but they do feed into broader inflation worries. While geopolitical risks retain an upside potential in crude prices, the market’s adherence to technical resistance suggests that any further spikes may be capped for now. Investors should brace for continued volatility in energy prices. We continue to favor Energy companies, and 2Q earnings for the sector are expected to come in strong.

Major Oil Companies Benefit From Higher Prices And Strong Cash Flows

Integrated energy giants such as Exxon Mobil (XOM), Chevron (CVX), and Shell (SHEL) have been direct beneficiaries of the recent lift in crude oil prices, which boosts their upstream production revenues, while their refining and chemical businesses provide some natural hedge against volatility.

Oil refiners also remain attractive, as constrained refining capacity can support refining margins. Many of these companies are generating robust free cash flow—cash left over after capital spending and dividends—which they are using for shareholder returns through buybacks, dividends, and selective acquisitions.

Defense Stocks Gain Relevance Amid Geopolitical Tensions

Rising geopolitical risks from the Iran conflict have highlighted the strategic importance of U.S. defense capabilities and domestic supply chains. With weapon stockpiles drawn down by support for Ukraine and military operations in the Persian Gulf, companies in the Aerospace & Defense sector stand to benefit from increased spending and accelerated production needs.

JPMorgan Chase CEO Jamie Dimon has underscored this opportunity by directing the bank to invest its own capital and provide substantial financing for national security and related industries through its broader Security and Resiliency Initiative. The effort includes a $24 million investment in the Philadelphia Navy Yard. This environment underscores the long-term case for selective exposure to established defense names with strong backlogs and technological edges, even as near-term budget and procurement cycles can introduce volatility.

Technology Faces Rotation Amid AI Spending Concerns

The Technology sector, a clear leader in the ongoing secular bull market, experienced notable rotation and pressure last week, with chipmakers and the broader group pulling back amid concerns over elevated capital spending, stretched valuations in select companies, and high market leverage, particularly in Semiconductor stocks. Semiconductor stocks had surged sharply, creating overbought conditions that invited profit-taking.

Meanwhile, the Magnificent 7—Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Amazon (AMZN), Alphabet (GOOGL), Meta Platforms (META), and Tesla (TSLA)—had largely worked off their earlier outsized gains and, after becoming oversold, began to rally. Apple led the advance by reaching new record highs. This kind of volatility was expected.

Earnings momentum remains robust, with the sector delivering strong guidance and superior growth prospects driven by artificial intelligence (AI) infrastructure demand. Any near-term weakness should be viewed as a potential opportunity to reposition into the clearest long-term winners with durable moats, strong cash flows, and proven execution in the AI buildout.

AI Boosts Business Formation and Job Creation

Artificial intelligence (AI) is proving to be a powerful force for new business creation rather than simply displacing jobs, according to Torsten Slok, chief economist at Apollo Global Management. Large language models (LLMs) and related tools are dramatically lowering the cost and complexity of launching companies, fueling a surge in the formation of new U.S. businesses—particularly solo and small operations in high-productivity sectors.

This dynamic highlights AI’s broader economic lift: it not only drives infrastructure demand but also spurs entrepreneurship and future hiring. While short-term disruption in certain roles is real, the net effect supports long-term growth and reinforces the sector’s leadership in the secular bull market.

Moonshot Challenges U.S. Frontier Models

A frontier model is the most advanced large language model (LLM) available at a given time, pushing the boundaries of reasoning, coding, creativity, and complex problem-solving. Moonshot AI, a Chinese company, has attracted attention with its latest model, Kimi 3, which reportedly rivals leading U.S. models in context length and overall performance on certain benchmarks.

While Kimi 3 demonstrates China’s rapid progress in AI, the broader risks to U.S. frontier model firms remain significant: intense global competition, rapid capability diffusion, and concerns over intellectual property practices. One flashpoint is distillation—training a smaller model using the outputs of a larger one—which U.S. companies argue can cross into IP infringement when proprietary model behavior is copied without authorization. Moonshot’s Kimi has sparked controversy for responses that occasionally mimic the style of models like Claude (Kimi has reportedly said, “Hi, I’m Claude”), though no definitive proof of direct copying has been established.

Near-term, developments like this can pressure U.S. frontier companies through heightened competition and valuation scrutiny, much as the DeepSeek releases earlier in the year triggered sell-offs in AI-related stocks despite the long-term innovation tailwinds. These episodes highlight the fast-moving nature of the AI race and the importance of focusing on firms with durable competitive advantages, strong execution, and clear paths to monetization amid global rivalry.

Sector Readings

Energy Now In First Place, Information Technology Second, Industrials Third; Consumer Discretionary Still In Last Place, Followed By Utilities

Energy moved to the top spot last week, followed by Information Technology which moved down a notch, indicating it may be weakening. Consumer Discretionary is in last place, followed by Utilities: these two have been in the same order at the end of the sector rankings for 3 weeks.

Our sector model analyzes S&P 500 GICS sector classifications, using a weighted measure of price momentum across three time periods. We rank each sector from best to worst based upon the average of its 40-, 26-, and 13-week relative price performances. We rank each sector from 1 to 11, with 1 being the strongest and 11 the weakest.

What To Watch This Week: Welcome to Hyperscalers Week

This is a week where earnings announcements should rise above economic data and geopolitical news.

This will be a week heavy with earnings—a veritable “hyperscalers week,” with major technology leaders such as Alphabet (GOOGL) and Tesla (TSLA) reporting results alongside other important names including IBM (IBM), ServiceNow (NOW), Texas Instruments (TXN), defense contractors like Lockheed Martin (LMT) and RTX (RTX), and several industrial and consumer companies. These earnings will be closely watched for updates on AI spending, cloud growth, vehicle and robotics demand, margins, and overall business confidence.

Investors will also see lighter economic data such as weekly ADP employment figures, flash Purchasing Managers’ Index (PMI) readings for manufacturing and services, weekly jobless claims, and new home sales, which should provide additional context on the health of the consumer and business activity.

On the geopolitical front, developments around the Iran conflict remain a key risk factor. While Gulf States have redirected much of their oil exports away from the Strait of Hormuz via pipelines, any escalation of military action could still pressure energy prices and broader risk appetite.

We believe that a solid set of earnings reports could reinforce confidence in the earnings-driven bull market, while any notable misses or cautious guidance might add to near-term volatility. Overall, we expect continued volatility but maintain patient optimism that strong fundamentals in leading sectors will prevail for the balance of the year—Remain Fearless!

Disclosures & Disclaimer:

Sanctuary makes no representation as to the accuracy or completeness of information contained herein. Any forward-looking statements are based on assumptions, may not materialize, and are subject to change without notice. The information is based upon data available to the public and is not an offer to sell or solicitation of offers to buy any securities mentioned herein. Any investment discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Investments are subject to risk, including but not limited to market and interest rate fluctuations. Any performance data represents past performance which is no guarantee of future results. Prices/yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request.

Comments regarding cryptocurrencies or cryptocurrency-based securities are for informational purposes only and do not constitute investment advice or a solicitation to buy or sell any cryptocurrency-related product. These products involve significant risks, including high price volatility, evolving regulations, limited market liquidity, and vulnerability to fraud and cyberattacks.

Securities offered through Sanctuary Securities, Inc., member FINRA/SIPC. Advisory Services offered through the SEC registered investment advisers Sanctuary Advisors, LLC and tru Independence. Sanctuary Wealth consists of the wholly owned subsidiaries: Sanctuary Advisors LLC, Sanctuary Securities, Inc., and tru Independence, as well as Sanctuary Alternative Holdings, Sanctuary Asset Management, Sanctuary Insurance Solutions, Sanctuary Global, and Sanctuary Global Family Office.

Largest Foreign Listing Boosts Investor Confidence

Last week, markets posted modest gains over five full trading days that featured noticeable internal rotation beneath relatively calm index-level performance.

The S&P 500 rose about 0.4% to close near 7,575, while the tech-heavy Nasdaq Composite advanced roughly 0.3%. A standout moment came from SK Hynix, the South Korean memory-chip maker, which completed its U.S. listing on Nasdaq. The highly oversubscribed IPO raised $26.5 billion in a record-setting debut. The American Depositary Shares (ADS), each representing one-tenth of a South Korean ordinary share, were priced at $149 and rose more than 13% during their first full trading session. The strong debut helped lift sentiment across the semiconductor sector.

S&P 500 Poised For A Breakout Targeting 7,900-8,000 & Raising Year-End Target

The S&P 500 index has been trading in a tightening wedge pattern for several weeks, and a decisive move above the upper trendline would target the 7,900 to 8,000 area. This technical setup suggests the market could reach new highs on upcoming inflation data and bank earnings this week.

With S&P 500 earnings estimates continuing to move higher, the market trading at 22x this year’s earnings and 19x next year’s, and technical indicators suggesting the index is on the verge of a breakout, we are raising our year-end S&P 500 target to 8,225.

A breakout would reinforce the longer-term bullish trend, but any failure to clear that level would continue the consolidation pattern. Earnings growth for the first quarter came in higher than expected, up nearly 30% and second quarter growth is estimated at 23% with FactSet estimating 2Q earnings could actually come in above 29%. For calendar year 2026, consensus earnings estimates currently range from 23% to 24%.

Seasonality Bullish For Stocks In The Summer

Looking at the S&P 500’s historical seasonal performance, July has typically been one of the strongest months of the year, with an average gain of 3.6% over the past five years. Markets have then often peaked before experiencing a seasonal correction during September and October. Over the past five years, the average September pullback has been 2.7%, often creating an attractive buying opportunity ahead of a typical October rebound. October has averaged a 2.8% gain, while November has delivered the strongest average monthly return of the year, rallying nearly 4%.

Consumers Spending Is Strong

According to Bank of America card data, all groups of income categories (low, middle and higher) are increasing their spending and the gap between the higher and low end is narrowing. The K-Economy is evolving toward an “E-Economy” – as spending patterns become increasingly even across income groups. Overall spending was up 6%.

Market’s Fear Index Unusually Quiet

The Chicago Board Options Exchange Volatility Index (VIX), often called the market’s “fear gauge” because it measures expected swings in the S&P 500, closed the week at 15.03 – its lowest level since early January and down nearly 7% for the week. The subdued reading suggests investors are not rushing for the exits. Instead, it reinforces the view that there is bullish consolidation and a rotating among sectors and investment styles within equities. Small Cap stocks have been strong this year, providing confidence in the broadening breadth of the market.

Mag 7 Stocks Have Completed Their Correction

The Magnificent Seven (Mag 7) group of mega-cap tech stocks (Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Amazon (AMZN), Meta (META), Alphabet (GOOGL), and Tesla (TSLA)) shows early signs of stabilization on a technical basis. The Moving Average Convergence Divergence indicator, commonly known as MACD (a momentum indicator used to identify changes in trend strength, direction and momentum) has formed a bullish bottom for the group. This suggests the intense selling pressure on these names could be easing, potentially setting the stage for a recovery in the second half of the year.

Banks and Insurance Companies Benefit From Rising Yields

Banks and insurance companies continue to trade well. The interest rate environment has become more favorable now that rates are well above the zero bound, helping to improve net interest margins (the difference between what banks earn on loans and what they pay on deposits). Improving capital markets activity, including a pickup in initial public offerings (IPOs), is also benefiting the banks. Investors are also anticipating that the Federal Reserve (Fed) will eventually ease some banking regulations. This has led to a big base breakout in the banks of 26 years – leadership is emerging in the banks. Having banks break out is a bullish sign that the economy continues to grow.

Insurance companies have been able to raise premiums, while float income (the investment income earned on premiums before they are paid out as claims) continues to improve. Earnings season begins Tuesday with the major banks, including JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), Wells Fargo (WFC), and Goldman Sachs (GS). Analysts expect strong trading revenues, higher IPO underwriting fees, and healthy consumer lending trends.

Iran Keeps Oil Markets On Edge

The situation with Iran remains sticky and could linger well into the second half of the year. Ongoing tensions and threats around the Strait of Hormuz, the narrow waterway through which about one-fifth of the world’s oil passes, keep a risk premium in energy prices. In our view, crude oil faces near-term resistance in the $80 to $85 per barrel range. Even so, firmer oil prices should benefit Energy stocks. The Energy sector is expected to deliver the strongest second-quarter earnings growth of any sector. At the same time, Energy stocks have recently corrected to test their multi-year breakout levels and now appear extremely oversold on a technical basis. This remains a favored sector.

Sector Readings: Information Technology In First Place, Followed By Energy, Then Industrials; Consumer Discretionary Still In Last Place, Followed By Utilities

Information Technology was strongest last week, followed by Energy, then Industrials. Consumer Discretionary is in last place, followed by Utilities.

Our sector model analyzes S&P 500 GICS sector classifications, using a weighted measure of price momentum across three time periods. We rank each sector from best to worst based upon the average of its 40-, 26-, and 13-week relative price performances. We rank each sector from 1 to 11, with 1 being the strongest and 11 the weakest.

Sector Rankings By 40-, 26-, And 13-Week Average Relative Price Performance

Sector	Jul 10	Jul 3	Jun 26	Jun 19	Jun 12	Jun 5	May 29	May 22
Consumer Discretionary	11	11	11	8	10	9	6	5
Consumer Staples	8	7	8	7	7	8	8	8
Energy	2	5	3	5	2	2	2	1
Financials	9	8	9	9	11	11	11	10
Healthcare	4	3	5	10	8	7	9	11
Industrials	3	2	—	2	3	—	4	4
Information Technology	1	1	2	1	1	3	1	2
Materials	7	4	—	—	4	—	5	7
Communication Services	6	9	—	—	6	—	3	—
Utilities	10	10	—	11	9	—	—	—
Real Estate	5	6	—	—	—	—	—	—

Source: Bloomberg, Sanctuary Wealth, July 10, 2026

OBOS List: Information Technology Remains Overbought; Materials, Utilities, Consumer Staples, Energy, Consumer Discretionary, And Industrials Are Oversold; Real Estate And Communication Services Are Near Oversold.

Information Technology was still overbought last week. Utilities, Consumer Staples, Energy, Consumer Discretionary, and Industrials are all also oversold, though the most extreme oversold levels are ameliorated; Real Estate and Communication Services were near oversold. Unusual overbought/oversold conditions point to continued sector rotation and often lead to heightened volatility.

Our tactical sector rotation model uses the S&P 500 GICS sector classifications. We apply a 13-week rate of change methodology that normalizes the rankings from overbought (OB) to oversold (OS). An industry group is overbought when it has risen too far too fast, relative to the rest of the market, based upon its normal movement. Conversely, it’s oversold when it has lost too much too fast, relative to the rest of the market, based upon its normal movement. Over time, a sector tends to move back toward its normal rate of change, relative to the rest of the market. Overbought sectors tend to slow their pace of gains in relative price, while oversold sectors tend to improve in relative price until they reach their average performance again.

Here’s our methodology: the overbought-oversold table of sectors measures the 13-week rate of change in the relative price of each sector. We then average (i.e., smooth) this over 3 weeks and normalize the results. Normalized oscillator values over 1.0 are considered overbought, while those between 0.6 and 1.0 are considered near overbought. Normalized oscillator values below -1.0 are considered oversold, while those between -0.6 and -1.0 are considered near oversold.

Sector Overbought/Oversold List as of 10 July 2026

Rank	S&P Sector	Normalized Oscillator	Condition
1	Information Technology	1.4520	Overbought
2	Financials	-0.1761	Neutral
3	Healthcare	-0.3408	Neutral
4	Communication Services	-0.7519	Near Oversold
5	Real Estate	-0.8672	Near Oversold
6	Industrials	-1.1455	Oversold
7	Consumer Discretionary	-1.3291	Oversold
8	Energy	-1.4569	Oversold
9	Consumer Staples	-1.6535	Oversold
10	Utilities	-1.7025	Oversold
11	Materials	-1.9511	Oversold

Source: Bloomberg, Sanctuary Wealth, July 10, 2026

This week, we get the latest on inflation, Warsh goes before Congress, and earnings start to roll in.

Market Performance: Energy Was The Best Performing Asset Year-To-Date, Followed By Russell 2000 and Information Technology; Bitcoin Is Still Weakest, Followed Distantly By Silver

Investors face a busy calendar that could set the tone for the rest of July. On Tuesday, the Consumer Price Index (CPI) report for June is due — Wall Street expects headline inflation to ease to 3.8% year-over-year, with core CPI (which strips out food and energy) around 2.9%. Later that morning, Fed Chair Kevin Warsh testifies before the House Financial Services Committee, followed by testimony before the Senate on Wednesday. It will be his first appearance before Congress as Fed Chair, and he will have the fresh CPI data in hand. Earnings season also kicks off in earnest on Tuesday with the major banks. Investors will listen closely for commentary on trading revenues, IPO fees, consumer health, and the impact of higher oil prices.

Market Performance Statistics Table

Index / Asset	Last 7/10/2026	Month End 6/30/2026	Month to Date	Quarter End 6/30/2026	Quarter to Date	Year End 12/31/2025	Year to Date	Year Ago 7/10/2025	Year to Year
S&P 500	7,575.39	7,499.38	1.0%	7,499.38	1.0%	6,845.50	10.7%	6,280.40	20.6%
NASDAQ Composite	26,281.61	26,211.72	0.3%	26,211.72	0.3%	23,231.81	13.1%	20,625.32	27.4%
NASDAQ 100	725.51	736.25	-1.5%	736.25	-1.5%	614.39	18.1%	558.12	30.0%
Russell 2000	2,977.81	3,024.37	-1.5%	3,024.37	-1.5%	2,481.01	20.0%	2,263.22	31.6%
S&P Consumer Discretionary Sector	1,914.80	1,907.19	0.4%	1,907.19	0.4%	1,927.50	-0.7%	1,779.12	7.6%
S&P Consumer Staples Sector	930.18	923.00	0.8%	923.00	0.8%	865.31	7.5%	893.02	4.2%
S&P Energy Sector	839.58	811.20	3.5%	811.20	3.5%	687.33	22.1%	679.92	23.5%
S&P Financial Sector	926.80	893.22	3.8%	893.22	3.8%	911.13	1.7%	877.12	5.7%
S&P Healthcare Sector	1,876.76	1,852.18	1.3%	1,852.18	1.3%	1,806.83	3.9%	1,590.32	18.0%
S&P Industrials Sector	1,539.79	1,568.10	-1.8%	1,568.10	-1.8%	1,312.33	17.3%	1,275.90	20.7%
S&P Information Technology Sector	6,790.70	6,790.31	0.0%	6,790.31	0.0%	5,680.12	19.5%	5,055.20	34.3%
S&P Materials Sector	639.02	638.09	0.1%	638.09	0.1%	574.61	11.2%	579.11	10.3%
S&P Real Estate Sector	282.82	279.80	1.1%	279.80	1.1%	255.01	10.9%	261.13	8.3%
S&P Communications Sector	472.98	454.20	4.1%	454.20	4.1%	452.12	4.6%	372.31	27.0%
S&P Utilities Sector	461.13	460.68	0.1%	460.68	0.1%	433.82	6.3%	419.12	10.0%
S&P 500 Total Return	13,039.29	12,895.91	1.1%	12,895.91	1.1%	11,673.22	11.7%	10,650.31	22.4%
3 Month Treasury Bill Price	99.88	99.88	0.0%	99.88	0.0%	99.88	0.0%	99.88	0.0%
3 Month Treasury Bill Total Return	273.21	272.91	0.1%	272.91	0.1%	266.31	2.6%	258.11	5.8%
10 Year Treasury Bond Future	111.88	112.33	-0.4%	112.33	-0.4%	114.12	-2.0%	111.13	0.7%
10 Year Treasury Note Total Return	119.33	119.55	-0.2%	119.55	-0.2%	119.01	0.3%	117.22	1.8%
iShares 20+ Year Treasury Bond ETF	84.77	86.42	-1.9%	86.42	-1.9%	87.11	-2.7%	84.09	0.8%
S&P Municipal Bond Total Return	290.34	289.91	0.1%	289.91	0.1%	284.11	2.2%	279.13	4.0%
iShares S&P National Municipal Bond NAV	103.18	102.91	0.3%	102.91	0.3%	100.82	2.3%	99.11	4.1%
S&P 500 Investment Grade Corporate Bond Total Return	339.11	338.80	0.1%	338.80	0.1%	332.11	2.1%	321.12	5.6%
S&P Investment Grade Corporate Bond	168.01	168.10	-0.1%	168.10	-0.1%	168.01	0.0%	161.03	4.3%
S&P Investment Grade Corporate Bond Total Return	339.11	338.80	0.1%	338.80	0.1%	332.11	2.1%	321.12	5.6%
SPDR Bloomberg High Yield Bond ETF	91.88	91.88	0.0%	91.88	0.0%	88.31	4.0%	84.32	9.0%
iShares iBoxx High Yield Corporate Bond ETF	77.11	77.20	-0.1%	77.20	-0.1%	75.31	2.4%	72.11	6.9%
Gold	4,119.93	4,008.31	2.8%	4,008.31	2.8%	4,319.11	-4.6%	3,321.11	24.1%
Bitcoin	63,798.18	58,611.11	8.8%	58,611.11	8.8%	87,611.11	-27.2%	44,351.11	43.8%
Silver	59.87	58.60	2.2%	58.60	2.2%	71.71	-16.5%	37.01	61.8%

Disclosures & Disclaimer

Sanctuary makes no representation as to the accuracy or completeness of information contained herein. Any forward-looking statements are based on assumptions, may not materialize, and are subject to change without notice. The information is based upon data available to the public and is not an offer to sell or solicitation of offers to buy any securities mentioned herein. Any investment discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Investments are subject to risk, including but not limited to market and interest rate fluctuations. Any performance data represents past performance which is no guarantee of future results. Prices/yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request.

If someone had told you at the start of the year that global markets would be posting blockbuster returns in the middle of a military conflict with Iran, a shutdown of the critical Strait of Hormuz, and crude oil prices rocketing past $100 a barrel, you probably wouldn’t have believed them.

Yet, against all odds, here we are. The S&P 500 just wrapped up the second quarter of 2026 with an explosive 15% return. To put that into perspective, this isn’t just a good quarter—it is the single best second-quarter return in a midterm election year since 1936, and the 12th best overall quarter for the index since 1950! So, why is Wall Street shrugging off major geopolitical chaos? The answer boils down to corporate earnings and a massive structural shift. The aggressive capital spending on Artificial Intelligence is fueling a historic industrial build-out, essentially rewriting the economic playbook and powering the stock market higher.

Earnings Growth is Holding the Line

As we head deeper into the summer, corporate fundamentals are proving to be remarkably resilient. First-quarter year-over-year earnings growth for the S&P 500 clocked in at a staggering 28%, blowing past practically all analyst estimates.

Now, as we enter the second-quarter earnings season, corporate leadership remains uncharacteristically optimistic. Data from FactSet shows that estimated earnings for the S&P 500 are actually higher today than they were when the quarter began. For the second consecutive quarter, overall corporate earnings growth is expected to top 20%. We’ll get a taste of this corporate resilience later this week when consumer giant PepsiCo (PEP) and Delta Air Lines (DAL) report their numbers, right before the major banks officially kick off the floodgates on July 14.

The Job Market is Cooling (And What It Means for the Fed)

While the stock market looks red-hot, the underlying labor market tells a much quieter story. Recent government surveys reveal that the employment picture is softening faster than a lot of investors realize.

First, the Household Survey—which monitors civilian employment, including small businesses and the self-employed—has been steadily ticking downward all year, falling from 170.5 million workers in January down to 169.4 million in June. Second, the closely watched Nonfarm Payrolls report for June completely missed the mark, adding just 57,000 jobs. Leisure and hospitality took a notable hit, losing 61,000 positions due to weak seasonal hiring. While the formal unemployment rate fell slightly to 4.2%, it happened mostly because people are leaving the workforce altogether. The Silver Lining for Investors: This cooler employment backdrop takes a massive amount of pressure off Federal Reserve Chair Kevin Warsh and the FOMC. The consensus expectation was that the Fed would feel forced to keep raising interest rates, but this softer data completely challenges that view. Keep an eye out for the release of the June FOMC meeting minutes this Wednesday for more clues on where policy is headed.

Defense Stocks Are Rocketing Higher

Unfortunately, global friction is a secular reality, and it’s driving a multi-year investment opportunity in defense stocks. Allied and U.S. defense spending is surging past $1.0 trillion annually as nations rush to replenish munitions sent to Ukraine, respond to tensions with Iran, and prepare for potential disruptions around Taiwan.

The smart money is moving fast. Highlighting this trend, JPMorgan Chase recently made waves by launching an initiative to invest $10 billion of its own capital directly into national security and defense firms. There is also an innovation angle here: modern defense is moving toward cheaper, AI-enabled, autonomous systems (pioneered by private innovators like Anduril). This allows for rapid, scalable production that traditional, multi-billion-dollar military hardware platforms simply can’t compete with. While headline news will cause short-term volatility, defense remains a highly resilient, structural theme for diversified portfolios.

Energy Volatility and the International Breakout

On the commodity front, oil prices saw a sharp relief drop this past week as diplomatic de-escalation between the U.S. and Iran eased supply anxieties. Commercial shipping traffic has safely resumed through the critical Strait of Hormuz chokepoint, instantly lowering the geopolitical risk premium on crude oil.

Cheaper oil is an instant win for consumers at the pump, serves as an inflation cooler, and provides an immediate boost to transportation, airline, and shipping stocks. While the price drop temporarily dented Energy sector stock prices, the sector’s forward earnings forecasts are still incredibly strong, meaning we view this pullback as a textbook buying opportunity.

Meanwhile, the international story keeps getting better. The STOXX Europe 600 broke out to new all-time record highs last week, locking in an 8.0% gain for the first half of the year. This confirms our view that international markets entered a fresh secular bull market last year, and we continue to advise diversifying outside of purely U.S. equities.

Reading the Market’s Tactical Compass

If we look under the hood of the market using price momentum, Information Technology remains firmly in first place, followed closely by Industrials and Healthcare. On the flip side, Consumer Discretionary and Utilities are lagging at the bottom of the pile.

According to our tactical model, things are looking highly stretched. Technology is heavily overbought right now, which means its breakneck pace of gains will likely start to normalize. Conversely, sectors like Energy, Utilities, Consumer Staples, and Materials are deeply oversold.

Because this dramatic overbought/oversold imbalance is still working itself out, the stage is set for aggressive, volatile sector rotations. Don’t be surprised to see capital suddenly shift out of high-flying tech and rush into these battered, unloved sectors in the weeks ahead.

Disclosures & Disclaimer

Sanctuary makes no representation as to the accuracy or completeness of information contained herein. Any forward-looking statements are based on assumptions, may not materialize, and are subject to change without notice. The information is based upon data available to the public and is not an offer to sell or solicitation of offers to buy any securities mentioned herein. Any investment discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Investments are subject to risk, including but not limited to market and interest rate fluctuations. Any performance data represents past performance which is no guarantee of future results. Prices/yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request.

Happy 250th Birthday America: Let The Fireworks Begin

This is a holiday week with the markets closed on Friday in observance of the Fourth of July.

Equity markets are biased to rally into a long holiday weekend. As we enter July, the Dow Jones Industrial Average (DJIA) and the Russell 2000 small cap index both reached record highs last week. The S&P 500 and Nasdaq 100 have been consolidating and approaching oversold readings. Historically, the S&P 500 has tended to rally into July before entering a more volatile period. August is often choppy, while September and early October have historically been among the market’s weakest months. Those seasonal pullbacks have frequently created attractive buying opportunities ahead of a year-end rally.

The S&P 500 has struggled recently in the 7,500–7,600 range and is currently trading at 7,354. We believe the market will attempt to rally to test the recent highs. We have maintained our year-end target of 7,500 as we do believe we can have a deep correction into the fall months. We maintain our longer-term secular bull market target range for the S&P 500 of 10,000–13,000.

Warsh, Bessent, And The Bond Market’s Vote Of Confidence On Inflation

Federal Reserve (Fed) Chair Kevin Warsh and Treasury Secretary Scott Bessent delivered closely coordinated messages last week on the importance of stabilizing inflation. Bessent publicly expressed confidence that Warsh will “optimize the path for both inflation and economic growth,” while praising the Fed’s decision to reduce forward guidance. Professional investors noted this alignment between monetary and fiscal leadership as a positive development for market stability.

Five-year Treasury breakeven yields—a market-based measure of expected inflation over the next five years—have collapsed to 2.22%, signaling the market believes inflation should fall in the future toward 2%. This move indicates that bond investors are not overly concerned about inflation reaccelerating.

Secretary Bessent has previously highlighted Truflation, an alternative, real-time inflation gauge that draws on a broad range of consumer price data. The Truflation index currently sits at 1.9% year-over-year, reinforcing the market’s view that inflation pressures are easing. We also anticipate that Fed Chair Kevin Warsh may place greater emphasis on a broader range of inflation measures rather than relying primarily on the Core Personal Consumption Expenditures (PCE) Price Index.

The market is currently expecting the Fed to begin raising interest rates by the end of the year. We believe the surprise this year could be that sharply lower oil prices—combined with a shift in how inflation is measured—lead to the Fed cutting interest rates by year-end.

Market Breadth Reaches Record High, Confirming Bull Trend

Last week, despite the volatility, particularly in Technology, the Bloomberg cumulative advance-decline (A-D) line reached an all-time high. The S&P 500 A-D line also hit a record high. This confirms the equity market remains in a bull market with new highs achievable.

Small Caps Hit All-Time High

The Russell 2000 small cap index hit an all-time high and is outperforming the large cap stocks so far this year. The S&P 500 is up 7% with the Russell 2000 up 21%. The relative price has made an important bottom, in our view, similar to the low in 1999. We believe small caps are in the early phases of entering a secular trend of outperforming. We would continue to diversify portfolios toward smaller cap stocks.

The Dow Jones Industrial Average (DJIA) also hit an all-time high last week. Google parent company Alphabet (GOOGL) will be added to the DJIA, replacing Verizon (VZ). Alphabet will be the Dow’s fifth Magnificent 7 member.

Debasement Trade Not Here

Many investors have been calling for the demise of the U.S. dollar, but last week the U.S. dollar began a rally as the market is expecting the Fed to begin raising interest rates. Should the dollar index break above 102, investors should expect a stronger rally in the dollar, in our view.

Risk Of Higher Rates & Stronger Dollar Put Pressure On Precious Metals

Higher interest rates, growing expectations that the Fed could resume raising rates, and a stronger U.S. dollar have put pressure on precious metals. Gold has been correcting since a peak of $5,586. It is traditional for a strong rally to correct one-third to one-half of a move. Gold has support near the 50% retracement level at $3,945. Amid elevated uncertainty, we expect Gold to remain in a choppy trading range, with good support near $4,000. Should this level not hold, the risk is a 61.8% correction near $3,557. We maintain the long-term projection for Gold is $10,000.

Silver Testing Major Breakout Support Level

Silver broke out from a nearly 15-year base and we believe Silver is now testing that breakout near $50. We believe the long-term potential is for Silver to trade toward $200.

What Are The Risks?

Risk 1: Leverage Is High In Margin Debt & Leveraged ETFs

There are always risks in the market. Today, the greatest concern we see is the buildup of leverage and margin debt, particularly within the Technology sector. Leverage has risen sharply relative to total market capitalization, as measured by the Wilshire 5000 Index. If we do get a correction in the fall months, it may be a deeper correction of 10%–15% as investors would be forced to deleverage positions. We expect this to cause volatility but not end the bull market rally.

Risk 2: Semiconductors Rallying But Price Momentum is Weakening

The VanEck Semiconductor ETF (SMH) is exhibiting a negative divergence, with prices continuing to advance while momentum has begun to weaken. This could be signaling a potential correction coming in semis. Since there is leverage built into this sector, it could be a significant correction of 30%. We expect semis to maintain leadership. We do not believe this is a bubble that is popping.

Looking back to the 1990s, the semi stocks have had several bear market corrections (30%+) before peaking. With AI infrastructure and data center development still in the early stages, we do not believe the semiconductor cycle has yet reached its peak or the point at which semiconductor demand becomes commoditized.

Semi Fundamentals Remain Positive Longer-Term

Strong Cash Flows, Rising Orders, And Tight Supply

Semiconductor companies are generating record free cash flow while investing heavily for future growth. Industry-wide projections show chip makers on track to produce roughly $1.0 trillion in cumulative free cash flow by 2027. At the same time, the major hyperscalers (such as Microsoft, Amazon, Alphabet, and Meta, all building massive AI data centers) are expected to spend close to $1.0 trillion on capital expenditures in 2027.

The hyperscaler spending versus chip-maker free cash flow shows nearly mirror-image ramps, a powerful visual of how supply and demand are aligned for strong multi-year growth in the AI infrastructure buildout. Because current production capacity still cannot meet surging demand, unfilled orders continue to rise, pushing prices for key memory chips higher.

Shortage Of Memory For Chips Has Caused DRAM Prices To Surge

Memory chip makers such as Micron (MU) have seen their stock rise sharply on the shortage of enough memory to meet demand. This has resulted in DRAM (Dynamic Random-Access Memory) prices skyrocketing. This has also caused some technology companies such as Apple (AAPL) and Microsoft (MSFT) to raise prices on their products.

Sector Readings

Information Technology Remains In First Place, Followed By Industrials, Then Energy; Consumer Discretionary In Last Place, Followed By Communication Services

Information Technology is still strongest, followed by Industrials, then Energy. Consumer Discretionary is in last place, followed by Communication Services. Energy returned to the top three sectors, where except for last week, it has been for 30 weeks. The decline in Communication Services is dramatic.

Our sector model analyzes S&P 500 GICS sector classifications, using a weighted measure of price momentum across three time periods. We rank each sector from best to worst based upon the average of its 40-, 26-, and 13-week relative price performances. We rank each sector from 1 to 11, with 1 being the strongest and 11 the weakest.

Stars, Stripes, And Jobs

This week investors will look at jobs within our borders and geopolitics outside them.

As America prepares to celebrate its 250th birthday, investors will be closely watching this week’s labor market data, including JOLTS job openings, the ADP employment report, and Thursday’s June nonfarm payrolls report. The employment data will be scrutinized for signs of labor market strength, wage growth, and unemployment as investors assess whether Fed Chair Kevin Warsh is likely to maintain a higher-for-longer interest rate policy.

Markets will also monitor developments in the Strait of Hormuz to gauge whether the U.S.-Iran ceasefire can hold. Early in the week, attention will focus on housing data, including the S&P/Case-Shiller Home Price Index, along with Conference Board consumer confidence and manufacturing activity.

Trading hours will be shortened on Thursday, July 2 (equities close at 1:00 p.m. ET), with full market closure on Friday, July 3, for the Independence Day holiday. As a result, labor market conditions, consumer confidence, and geopolitical developments are likely to remain the dominant themes heading into the long holiday weekend.

Disclosures & Disclaimer

Sanctuary makes no representation as to the accuracy or completeness of information contained herein. Any forward-looking statements are based on assumptions, may not materialize, and are subject to change without notice. The information is based upon data available to the public and is not an offer to sell or solicitation of offers to buy any securities mentioned herein. Any investment discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Investments are subject to risk, including but not limited to market and interest rate fluctuations. Any performance data represents past performance which is no guarantee of future results. Prices/yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request.

Warsh Takes the Reins: A Sharper, More Focused Fed

Kevin Warsh officially stepped into his role as Federal Reserve Chair on May 22. Presiding over his very first FOMC meeting and subsequent press conference, Chair Warsh signaled an immediate structural shift from prior leadership, prioritizing operational adjustments over sudden interest-rate modifications.

A “Less is More” Communication Strategy:

• Drastic Statement Trim: The June FOMC statement contained just 147 words, down drastically from the five-year average of roughly 380 words under former Chair Jerome Powell.
• End of Forward Guidance: Open-ended projections and future policy hints have been effectively eliminated. Warsh firmly deflected forward-looking policy queries at his press conference, quoting the late former Treasury Secretary George Shultz: “Press conferences are useful, but be sure you have something to say.”
• Stepping Away from the “Dots”: While the 19-member Summary of Economic Projections (SEP) will continue, Chair Warsh announced he will personally no longer contribute to the individual “dot plot” forecasts.

Markets are expected to undergo an adjustment period as they adapt to trading purely on incoming macroeconomic data rather than Fed management, likely introducing fresh short-term volatility.

This Committee Will Deliver Price Stability

Striking a deeply hawkish and confident tone, Chair Warsh reassured the public that the central bank remains fiercely committed to its inflation mandate, declaring, “This Committee will deliver price stability.”

Key Economic Observations:

• Uneven System Liquidity: Banking system reserves remain ample but are flowing in an uneven fashion.
• Real Estate Hardship: High mortgage rates continue to act as a highly restrictive weight on housing market activity and affordability.
• Hardware Resilience: On a brighter note, corporate capital expenditure (capex) and macro productivity gains remain fundamentally solid.

Market Impact: Because several FOMC members penciled rate hikes into the updated dot plots, fixed income markets aggressively pulled forward expectations for the next rate hike from December to September. The 2-year Treasury yield surged sharply higher, while equity markets corrected downward on the news. Crucially, 5-year breakeven inflation yields collapsed, demonstrating that bond investors have deep confidence in Warsh’s hardline approach to cooling high prices.

Five Independent Task Forces Launched

In a bid to modernize central bank operations, Chair Warsh announced the formation of five independent task forces slated to begin delivering initial findings this autumn, targeting full completion by the end of 2026. The groups will thoroughly examine:

• Fed communications
• The Federal Reserve balance sheet
• Data source utilization and methodological enhancements
• Macro inflation frameworks
• Productivity and jobs, specifically analyzing the speed, economic reach, and institutional footprint of artificial intelligence

On the Shift to High-Frequency Data: Warsh strongly criticized the Fed’s traditional dependence on lagging, backward-looking metrics, stating a clear preference for timely, high-frequency data to guide modern policy.

Bumpy Road to Peace in the Middle East

Geopolitical developments remain highly volatile. The United States and Iran electronically executed a 14-point Memorandum of Understanding (MOU) to pause hostilities. Under the framework, U.S. Treasury Secretary Scott Bessent announced a temporary 60-day general license permitting Iranian oil sales alongside International Atomic Energy Agency (IAEA) inspections.

Supply Dynamics & Shipping Volatility:

• Strait of Hormuz Instability: While commercial transit briefly resumed as WTI crude plunged below $80 per barrel, Iran’s Revolutionary Guards rapidly declared the Strait closed again following a sharp rise in military conflict between Israel and Hezbollah in Lebanon.
• Gulf Re-openings: Despite localized escalations, global oil markets continue to signal long-term optimism that a final peace deal will materialize. Once finalized, Gulf producers are poised to flood the market: Saudi Arabia can achieve pre-war capacity in two weeks, Kuwait expects 80% restoration in one week, and the UAE is prepared to instantly utilize an operational bypass pipeline.
• Technical Targets: WTI Crude futures recently settled at $77.39. Technicians expect a further slide into the low $70s, with a potential test of the unfilled $67–$69 price gap. Meanwhile, the national retail gas average fell to $3.99, breaking below the $4.00 mark for the first time since March.

Valuations Improve Even With Higher Stock Prices

Despite major indices pushing to higher ground, equity valuations have actually grown much more reasonable. The S&P 500 forward price-to-earnings ($P/E$) ratio has eased to just under 22 times—marking a 3.3% decline relative to last year.

This healthy contraction is entirely driven by blockbuster corporate profitability; aggregate Wall Street earnings estimates for the next four quarters have surged an incredible 28% to 30% year-over-year.

This historic surge in corporate profitability highlights immense corporate pricing power, significant administrative efficiency upgrades, and robust macro productivity gains.

Sector Momentum and Technical Readings

According to our quantitative momentum models, Information Technology remains firmly entrenched in first place, followed by Industrials and Communication Services.

Extreme Technical Disconnections

Our short-term 13-week normalized oscillator features an extraordinarily rare layout:

• Extremely Overbought: Information Technology is sitting completely isolated at an extreme value of 2.0058.
• Deeply Oversold: Energy (-2.3782), Consumer Staples (-1.8978), Healthcare (-1.8546), and Utilities (-1.6946) have all entered deeply washed-out territory.
• Near Oversold: Every single remaining sector in the S&P 500 is currently categorized as near oversold.

This extreme imbalance leaves technology highly exposed to a sudden, painful correction, while setting the stage for a violent, massive summer sector rotation into long-ignored value spaces. Notably, Energy fell out of the top three spots for the first time in 28 weeks, while Financials vacated the bottom tier for the first time in 19 weeks, signaling a clear structural bottom.

Looking Ahead: Inflation Gauges and AI Hardware

The upcoming corporate and macroeconomic calendar contains pivotal triggers for the summer season:

• The Core PCE Showdown: On Thursday, the Bureau of Economic Analysis will release May Personal Consumption Expenditures (PCE) data. As the Fed’s absolute favorite inflation gauge, this print will test the validity of Chair Warsh’s hawkish stance.
• Micron Technology Earnings: Reporting fiscal Q3 financial results on Wednesday night, Micron (MU) will serve as a crucial macro health check for global data-center spending and High Bandwidth Memory (HBM) infrastructure demand.

Passing of an Icon: Alan Greenspan (1926–2026)

We conclude this week’s report by noting the passing of former Federal Reserve Chairman Alan Greenspan at the age of 100. Managing American monetary policy for an extraordinary 18-year tenure (1987–2006) across four presidential administrations, Greenspan guided the nation through a legendary era of historic stock market expansion and low structural unemployment. He will permanently occupy a place in history as one of the most influential central bankers the United States has ever known.

Sanctuary makes no representation as to the accuracy or completeness of information contained herein. Any forward-looking statements are based on assumptions, may not materialize, and are subject to change without notice. The information is based upon data available to the public and is not an offer to sell or solicitation of offers to buy any securities mentioned herein. Any investment discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Investments are subject to risk, including but not limited to market and interest rate fluctuations. Any performance data represents past performance which is no guarantee of future results. Prices/ yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request. Comments regarding cryptocurrencies or cryptocurrency-based securities are for informational purposes only and do not constitute investment advice or a solicitation to buy or sell any cryptocurrency-related product. These products involve significant risks, including high price volatility, evolving regulations, limited market liquidity, and vulnerability to fraud and cyberattacks. Securities offered through Sanctuary Securities, Inc., member FINRA/SIPC. Advisory Services offered through the SEC registered investment advisers Sanctuary Advisors, LLC and tru Independence. Sanctuary Wealth consists of the wholly owned subsidiaries: Sanctuary Advisors LLC, Sanctuary Securities, Inc., and tru Independence, as well as Sanctuary Alternative Holdings, Sanctuary Asset Management, Sanctuary Insurance Solutions, Sanctuary Global, and Sanctuary Global Family Office.