In Your Money This Week…
Stocks had a strong week, with gains across U.S. large caps, small caps, developed international stocks, and emerging markets, while the 10-year Treasury yield moved slightly lower. Beneath those market moves, however, the economic data told a more complicated story.
The ISM Manufacturing Index rose to 55.6 in July, comfortably above the 50 level that signals expansion. Factory output increased, manufacturing employment turned positive for the first time in 33 months, and commentary from businesses suggested strength extending beyond the most obvious beneficiary of today’s investment boom: AI infrastructure.
That’s an important distinction. The extraordinary amount of money flowing into data centers, semiconductors, and related infrastructure is unquestionably helping the economy. But the manufacturing data suggests the strength is broader than AI alone.
That doesn’t eliminate a longer-term question we’ve been discussing: What happens if all this AI infrastructure spending doesn’t eventually generate the returns companies and investors expect? Previous technological revolutions created enormous economic benefits while still producing periods of overinvestment and painful losses along the way. AI can transform the economy and still leave some companies—and their investors—worse off. This is something we should all be watching and we will.
The July jobs report offered a less encouraging economic signal. The economy lost 23,000 jobs according to the initial estimate, while May and June were revised downward by a combined 103,000 jobs. The frequent and sometimes substantial revisions to employment data make it difficult to put too much weight on any single report, but markets nevertheless reacted by reducing expectations for additional Fed rate hikes.
Corporate earnings are very strong and continue to answer the FAQ about why this market is doing so well. With roughly 62% of S&P 500 companies having reported, aggregate earnings per share were running approximately 47% above a year earlier. Amazon and Alphabet made unusually large contributions to that growth, but even excluding them, earnings growth was still tracking near 29%. In other words, strong corporate performance is not simply an AI story.
We also look at two individual companies that tell interesting stories about different parts of the economy. CVS is seeing measurable financial benefits associated with the growing use of GLP-1 drugs, illustrating how a major healthcare innovation can affect businesses beyond the companies manufacturing the drugs themselves. United Wholesale Mortgage presents a much different picture: the country’s largest mortgage lender has seen its stock fall dramatically, suspended its dividend, and required a major capital infusion. That doesn’t mean another 2008-style housing crisis is coming, but it does illustrate the pressure created by an extremely difficult residential real estate and mortgage environment.
Finally, we discuss what I consider one of the most useful investor behavior studies published each year: Morningstar’s Mind the Gap. Its latest results show investors earned an annualized 8.7% over the past decade from funds that returned 9.9%—a 1.2 percentage-point annual shortfall.
The lesson isn’t that investors are choosing bad investments. It’s that even after choosing good ones, their decisions about when to buy, sell, chase performance, or abandon an underperforming strategy can significantly reduce the returns they actually receive. The gap was even larger in more volatile strategies, and crypto investors experienced an extraordinary 14% gap.
Picking good investments matters. Sticking with them matters just as much.
Andrew and I get into this and more in this week’s Your Money This Week video.
Weekly Reads
2026 private equity midyear update: Private longer, public later by Vanguard
Companies are staying private much longer and reaching larger valuations before going public, meaning public-market investors may miss more of their early growth. This shift may also be weakening the public small-cap opportunity set, with roughly 40% of Russell 2000 companies now unprofitable versus 18% in 1995, while private equity provides access to small and midsize companies that remain private. Current private-market opportunities include buying quality assets at discounts through secondaries, benefiting from a potential reopening of the IPO market, and selectively investing in software companies whose valuations have fallen amid AI disruption. Vanguard expects global buyout private equity to return a median 8.5% annually over the next decade versus 5.3% for global public equities, although capturing that premium depends on diversification, disciplined commitments, and access to skilled managers.
You May Not Get to Choose When You Retire. Here’s How to Prepare by Morningstar
People approaching retirement should plan for the possibility that health problems, job loss, caregiving responsibilities, or other circumstances could force them to stop working earlier than expected. That means building enough savings and flexibility to withstand an earlier retirement date rather than relying on several additional years of earnings, retirement contributions, and delayed withdrawals to make the plan work. Preparing for multiple retirement dates—and understanding how an earlier exit would affect spending, healthcare, Social Security, and portfolio withdrawals—can make an unexpected retirement financially manageable rather than forcing major last-minute changes.
The No. 1 reason why I look forward to earnings season 🏆 by TKer
Quarterly earnings give investors a chance to stop speculating about how all the scary headlines are affecting businesses and see what’s actually happening. So far, the answer is surprisingly positive: sales are growing, profit margins are expanding across most industries, 87% of S&P 500 companies have beaten Q2 earnings expectations, and earnings are on pace to grow 27% from a year ago even excluding unusual investment gains. Earnings estimates for 2026 and 2027 are also being revised higher, helping explain why stocks have continued to rise despite persistent concerns about inflation, interest rates, tariffs, geopolitical turmoil, and layoffs.
The Winning Formula for Fund Investors, and Why Others Left Money on the Table by Morningstar
Here’s the article summarizing the study Andrew and I discuss in this week’s video highlighting how investors underperform their own investments and how to close the gap.
Thinking About Selling Your Home? Read This First by Savant Wealth
Selling a home involves more than choosing a price and finding a buyer—tax consequences, transaction costs, timing, and how the proceeds fit into your broader financial plan can materially affect what you ultimately keep. Planning before listing can help you evaluate potential capital gains taxes, prepare for the costs of the sale, and decide how the proceeds should support your next home purchase or other financial goals.
Book Recommendation
American Patriarch: The Life of George Washington by H.W. Brands
The most recent George Washington biography by historian and Pulitzer Prize finalist H.W. Brands is a good one for those of you who wince at having to pick up a Ron Chernow book.
