Market Insights Recap — Week of August 3, 2026

Hello, I’m Steve Orr, Chief Investment Officer for Texas Capital’s Private Bank.

Let’s review economy, rates and stocks now that July is in the books.

First off with the economy, last week we got a report for the second quarter’s gross domestic product, and it was this measly 1.5% — that doesn’t really fit with what’s going on at all. Well, when you look into the numbers, imports and inventories take away from GDP. And when we look at what actually happened just in the U.S. — called final sales to domestic purchasers — 2.6% growth in the second quarter, and that’s right on track with the last six quarters. So, an economy that’s rolling along very solid in second gear: don’t need to make any portfolio changes on the economy’s front.

Last week, we also had Warsh’s second meeting as Chair of the Federal Open Market Committee. So, the Federal Reserve voted to keep rates on hold, Warsh says he’s committed to delivering on price stability, but he’s also close to midterm elections and he probably doesn’t quite have the votes yet to hike or lower rates. We think the next move is a hike. When it does come, we think the Fed’s on hold the rest of this year. One of the things he’s got to contend with is we have 39 trillion in federal debt, and 25% of it comes due within the next 12 months; so, you should expect more Treasury bills to be issued, getting away from those high interest rates out there on the long end in Treasury bond land.

Now, stocks earnings season well over halfway done, year-over-year growth for the second quarter: 31% growth in earnings per share — a knockout number. But, take away two big adjustments at Amazon and Google, earnings are still up a very healthy 9.2%. Those adjustments at those two companies, Amazon and Alphabet, are them marking up their investments in Open AI and Anthropic — fine. Does that mean that the peak in AI earnings is over? Well, if not the second quarter, likely this year. That does not mean that earnings growth is turning lower — not by any means. In fact, hyperscalers that have reported so far are starting to show a return on investment for their CapEx for the first time — good news.

The other peak in AI last week was the blow up of a hedge fund called Situational Awareness. High flying and later crashing software and semi stocks combined with four-times leverage was sure to cause a problem, and it did. So, you saw this big drop Tuesday-Wednesday, cleared all that out, markets cleaned up at the end of the week for the end of the month. Overall, S&P 500: flat for July, despite all that AI volatility.

Looking around the world: geopolitical dysfunction, a dysfunctional Congress and on-again, off-again tariffs from the administration — they’re going to keep markets guessing. In August/September, it’s a mixed bag in terms of midterm years. So, this is a good time to take a step back, look at your gains and start planning again for next year. Stay invested; ‘til next time.