Market Insights Recap — Week of July 6, 2026

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

Okay, let’s run through a mid-year checkup on the economy, rates, policy and stocks. And we’re going to do it less than four minutes — promise. First up, the economy: it’s in good shape, despite input inflation crimping margins. June’s jobs numbers were below expectations, but the average job growth in the first half:  92,000 a month versus only 10,000 a month in the first half of last year — good shape.  

There’s no recession when you have unemployment at 4.2% and double-digit earnings growth. Lower tariffs, lower regulatory burden, tax breaks earlier this year, they can all propel GDP above 3% in the second half of the year. What about interest rates — the price of money? Now, inflation: it erodes the value of money, it makes the price or rate go up to compensate investors for the loss of value. Inflation will hover around the high 3% range and maybe hit 4% over the next few months —not because of gas prices but because of raw materials and making up shortages from the Iran war. 

Now, can government policies help inflation? Yes, but not this year. Congress already gave us tax breaks and capex expensing in the One Big Beautiful Bill. But the data center backlash: that’s real. Even on the cover of Barron’s this week, Texas Governor Abbott wants a moratorium on rural data centers. And data centers and AI hype drove the stock market over the last year. 

This year, it’s all about rotating away from the Magnificent Seven and AI and into chips, industrials, materials — the stuff needed to make data centers. The stunning rebounds after the Iran war, though, were very impressive for the S&P 500; it was up 15% in the second quarter — that’s the best second quarter in… I really don't know. Small caps also came crawling out of the cellar, up 21%. And for the last six decades — or your lifetime — small caps have beat inflation every decade. S&P 500 earnings are growing more than 24% in the second quarter, and for the full year. The dollar and rates: they’re kind of less volatile right now. And oil is falling. All those three things equal: game on for stocks — the primary trend is higher. 

So, there you have it: 3% growth in the second half, a little bit higher interest rates, 3% and up to 4% for inflation and the primary trend for stocks is up. We’re staying fully invested; ‘til next time.