In Your Money This Week…
The Fed met and left interest rates unchanged. Markets had priced in only about a 30% chance of a rate hike, even though inflation remains above the Fed’s 2% target, the war continues to pressure oil prices, and tariffs are being reintroduced on almost all American imports. Three of the 12 voters favored a hike, which John Authers noted is rare: “only the sixth time in the last 30 years that as many as three FOMC members dissented.”
Markets are still expecting a rate hike later this year and another in early 2027. Those expectations have been wrong before, and conditions can change quickly, but to make the case for rate cuts right now, you have to look past an economy in good shape, a labor market that is holding up, attribute the continued elevated inflation mostly to the war, and ignore that tariffs might increase prices.
Investing is rarely clear-cut because markets reflect complex systems operating in a complex world. The 10-year Treasury yield hitting a recent high of 4.7% could be a reaction to higher oil prices and the conflict, or it could reflect deeper bond-market concerns about inflation and the potential need for the Fed to hike again.
The U.S. economy grew at a 1.5% annualized rate in the second quarter, below economists’ expectations of 1.8%. Consumer spending and business investment were particularly strong.
The Equal Weight S&P 500 hit another all-time high earlier this week and is outperforming the S&P 500 YTD. Andrew and I have discussed this on my YouTube channel. The Equal Weight S&P 500 gives every company the same weight, unlike the traditional S&P 500, where the largest companies dominate the index. Today, the top ten holdings make up roughly 36% of the S&P 500 and are heavily concentrated in technology-related names.
We have focused, rightly in my view, on the pig in the python that is AI in today’s stock market and economy. That focus should continue, and I share two Bloomberg pieces below on the circular financing behind the AI boom and how Wall Street is beginning to separate AI winners from losers. But this week also showed that the market may be moving beyond AI dominance, at least for now. While some tech giants are struggling, the average stock is doing well. As a stock-picking friend at another firm put it, the things that were ignored for so long are finally doing better.
I get into this and more in this week’s Your Money This Week video.
Weekly Reads
CDS Market Surges as Wall Street Picks AI’s Winners and Losers by Bloomberg
Credit markets are increasingly distinguishing between AI companies based on their ability to finance massive capital spending. Firms with heavy borrowing needs and negative free cash flow, such as CoreWeave and Oracle, have seen the cost of insuring their debt climb sharply, while financially stronger companies like Microsoft have experienced a much smaller increase. For investors, the message is that success in the AI race will depend not only on technological leadership but also on balance-sheet strength, cash generation, and the ability to earn attractive returns on unprecedented levels of capital investment.
See also: A Guide to the Circular Deals Underpinning the AI Boom by Bloomberg which analyzes how “A web of interlinked investments raises the risk of cascading losses if AI falls short of its potential.”
4 Ways Portfolio Diversification Has Paid Off in 2026 by Morningstar
Diversification has been rewarded over the past 19 months, with bonds reducing portfolio volatility during equity selloffs while international stocks and U.S. small caps have outperformed the broader U.S. market. The recent gains highlight that leadership rotates over time, correlations between asset classes change, and portfolios concentrated in large U.S. technology stocks can miss meaningful opportunities elsewhere.
The Everyday Guide to Supersizing Your Retirement Account by The Wall Street Journal
Building substantial retirement wealth is less about finding extraordinary investments than consistently maximizing the tax advantages available through retirement accounts. Investors can significantly increase after-tax wealth by taking full advantage of annual 401(k) and IRA contributions, backdoor and mega-backdoor Roth conversions when eligible, and, for business owners, cash balance pension plans that allow much higher contribution limits.
How asset location can boost after-tax returns by Vanguard
Asset location—deciding which investments belong in taxable, tax-deferred, and Roth accounts—can modestly improve after-tax returns without changing a portfolio’s overall asset allocation. The greatest benefit comes from holding tax-inefficient assets, such as taxable bonds, in tax-advantaged accounts while reserving taxable accounts for more tax-efficient investments like equities. Although the annual improvement may be relatively small, the tax savings can compound over decades, particularly for investors with balanced portfolios spread across multiple account types.
How to Protect Generational Wealth After Selling Your Business by Savant Wealth
Preserving wealth after selling a business requires more than minimizing taxes at closing. Families that sustain wealth across generations typically pair sound tax and estate planning with intentional family communication, disciplined post-sale decision-making, and a clear governance structure that prepares heirs for the responsibilities of managing inherited assets. Treating the sale as the beginning of a long-term family capital strategy, rather than the end of a business journey, can have a greater impact on multi-generational success than the transaction itself.
Book Recommendations
A new subscriber asked for some book recommendations, so here’s three in different categories that are a combination of favorite reads and timely ones.
The Feast of the Goat by Mario Vargas Llosa – one of my favorite novels. In The Feast of the Goat, this ‘masterpiece of Latin American and world literature, and one of the finest political novels ever written’ (Bookforum), Mario Vargas Llosa recounts the end of a regime and the birth of a terrible democracy, giving voice to the historical Trujillo and the victims, both innocent and complicit, drawn into his deadly orbit.
Under the Banner of Heaven: A Story of Violent Faith by Jon Krakauer – excellent non-fiction. From the author of Into the Wild and Into Thin Air, this extraordinary work of investigative journalism takes readers inside America’s isolated Mormon Fundamentalist communities
Nothing Like It In the World: The Men Who Built the Transcontinental Railroad 1863-1869 by Stephen Ambrose – I’ve been intrigued by the idea that the AI buildout has railroad industry parallels, and this book is an excellent place to start. In this New York Times bestseller, Stephen Ambrose brings to life the story of the building of the transcontinental railroad, from the men who financed it to the engineers and surveyors who risked their lives to the workers who signed on for the dangerous job.
