● United States of Oligarchy: How America’s Wealthiest Ally with Dictators, Weaken the U.S., and Destroy Democracy
Casey Michel
Summary via publisher (Macmillan)
For years, a small group of billionaires has amassed increasing power, steering American politics for their own benefit. Many of these figures are familiar. There’s Elon Musk, who has used his wealth to help place Donald Trump back in the White House. There’s Mark Zuckerberg, who has used his resources to transform America into his own digital playground. There’s Jared Kushner, who has used family connections to gain more political power than he ever dreamed of. There is only one word to describe such extreme levels of wealth, avarice, and political control: Oligarchy.

● Reining in the Bulls: How to Stop Corporate Abuse in an Age of Unbridled Greed
Michael Marx
Summary via publisher (Island Press)
Major corporations exercise enormous control over our lives. They influence how we think, what we buy, who we vote for, and how our society evolves. They are key drivers of the wealth that fuels our economic system, and their power insulates them from strict government regulations and accountability. In this setting, corporate abuses—pollution, toxic and inhumane work environments, defective products—go unchecked. When the government refuses to corral industry’s misdeeds, advocacy groups turn to corporate campaigns to expose and change harmful behavior.

● Untamed Unicorns: Why Startup Finance Is Broken and How to Fix It
Renée M. Jones
Review via Boston College Law School Magazine
Much of what is happening with startup companies, from governance to financing to culture, has Professor Renée Jones concerned. The nationally renowned expert in securities law, who served as director of the Securities and Exchange Commission’s Division of Corporation Finance from 2021 to 2023, is calling out the danger being posed by rapid deregulation of securities markets.
The term “unicorns” was originally coined to convey just how rare and extraordinary these businesses were, but the startup ecosystem has since changed dramatically. Whereas there were just an estimated 40 such companies in 2013, that number has ballooned to an estimated 1,500 today, a number that also includes so-called “decacorns,” valued at over $10 billion, and even “centicorns,” valued at over $100 billion.

Please note that the links to books above are affiliate links with Amazon.com and James Picerno (a.k.a. The Capital Spectator) earns money if you buy one of the titles listed. Also note that you will not pay extra for a book even though it generates revenue for The Capital Spectator. By purchasing books through this site, you provide support for The Capital Spectator’s free content. Thank you!

Initial estimates for third-quarter GDP point to a rebound in growth following the softer-than-expected gain in Q2, based on the median of nowcasts compiled by The Capital Spectator.

The current estimate points to a real annualized 2.7% increase in output, according to the median nowcast. If confirmed when the official numbers are published, the gain would mark a solid improvement over Q2’s modest 1.5% rise.

To state the obvious, the nowcast should be viewed cautiously this early in the quarter. The Bureau of Economic Analysis is scheduled to publish its preliminary Q3 GDP report on Oct. 29 and, to cite the standard caveat, a lot can happen between now and then. All the more so given the unsettled conflict in the Middle East and the resumption of US tariffs. Estimating how these risk factors could influence economic activity is precarious at best. Add in uncertainty about inflation’s path and it’s clear that confidence surrounding economic analysis remains a day-to-day affair.

The early numbers for Q3, however, look encouraging. Indeed, all of the nowcasts in the chart above are printing above the 1.5% advance in Q2. For the moment, at least, there’s a reasonable case for expecting that growth will pick up in the current quarter.

One source of optimism is stronger business activity in July, based on PMI survey data published by S&P Global Market Intelligence. Polling indicates “an encouraging acceleration in economic growth at the start of the third quarter,” notes Chris Williamson, chief business economist at the consultancy.

Lower oil prices helped, thanks to reduced hostilities in the Middle East. The renewed fighting in recent weeks suggests the relative calm is precarious, but the relative calm appears to be holding.

But as Williamson points out, some of the PMI-based rebound in July is linked to a one-time pop from the World Cup soccer games. He says “that the biggest improvement in demand in July was reported among consumer-facing service providers, spending on which surged at a rate not seen for over four years

linked to the FIFA World Cup and US Independence Day events.” The weeks ahead will stress-test the durability of the initial Q3 numbers, but for the moment the early estimates suggest that softer growth in the previous quarter is picking up.

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When you need financial flexibility, a home equity line of credit (HELOC) gives you access to potential funding for renovations, debt consolidation, or major expenses. If that’s the right solution for you, applying can be easier than you think. Here’s how to find a lender that makes borrowing simple and stress-free. What Is a HELOC […]

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The Federal Reserve is steering through a thicket of macro crosscurrents, and the challenge is sharpening amid a new report that President Trump has been calling Chair Kevin Warsh since he took the helm at the central bank in May.

The Wall Street Journal reports that President Trump has “repeatedly” called Fed Chair Kevin Warsh—discussing AI and Iran, but avoiding interest rates. That backdrop may sharpen the bond market’s sensitivity to any hint of political pressure on the central bank, especially given Trump’s history of urging Warsh’s predecessor to cut rates.

According to the Journal, “The president calls Warsh in bursts… according to people familiar with the matter.” The sources said Trump called “several times in a stretch of days, then quiet for longer periods. Trump has sought Warsh’s counsel on a range of matters, including how the war in Iran and the rapid rise of artificial intelligence are affecting the economy, some of the people said.”

How or if the bond market reacts to this reporting, and whether it’s a sign that Warsh will face rate-cutting pressure, will hinge on traders’ read of the political backdrop. The Journal’s article will surely increase scrutiny of Warsh at his next press conference during the upcoming policy meeting in September, which will include new Fed economic projections.

Fed Chair Kevin Warsh’s debut press conference last month drew a skeptical, cautious reaction from Wall Street, headlined by a rise in long-term Treasury yields as the bond market demanded what some call a “credibility premium.” Analysts criticized the disconnect between Warsh’s hawkish rhetoric on price stability and the Fed’s decision to hold rates steady despite three internal dissents, while his deliberate move to end detailed forward guidance left investors unsettled by the lack of clarity on future rate paths.

Next week’s July report on consumer inflation will provide a key update for deciding if the rise in pricing pressure due to the Iran war is temporary. Reports this week that a new deal is being negotiated to reopen the critical Strait of Hormuz waterway, and thereby facilitate more energy exports, could help keep Treasury yields stable/lower while easing pressure on headline inflation in the months ahead. In that case, the Fed’s patience on rates may look prescient in hindsight.

Optimists point to the pullback in the 30-year Treasury yield this week. After rising to a 19-year high on Friday, the most inflation-sensitive maturity has fallen in each of the three trading sessions through Wednesday.

The policy-sensitive 2-year has also fallen in recent days, although it remains well above the effective Fed funds rate – a sign that the market is still pricing in a rate hike.

It’s unclear if Treasury yields have peaked or will continue to rise further and raise the pressure on the Fed to hike. Fed funds futures are again pricing the odds of a rate hike next month as basically a coin flip. Yet the fact remains that multiple risk factors are spinning in a grey zone of ambiguity – Iran, inflation, economic activity – and so the Fed still faces an unusually difficult period for managing policy decisions.

A complicating factor is the view by some analysts that the Fed is in danger of losing credibility after Warsh last month offered a vague response regarding whether inflation warranted further tightening. The conclusion on this debate has yet to be determined, and there’s pusback from some economists and market analysts, but the fact that it’s become a talking point on Wall Street isn’t helpful.

Add in new questions about how much influence Trump has over Warsh and the stage is set for ongoing volatility and uncertainty in the bond market.

This much is obvious: If key Treasury yields mount a new run higher, that will be a clear sign that the bond market is losing faith in the Fed.

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Energy stocks are still the year’s top-performing sector, but yesterday’s tech-led surge in equities — and energy’s stumble — suggest another leadership change may be brewing.

The S&P 500 Index soared on Tuesday (Aug. 4) to a record high, exceeding the previous peak (set in early June) by a wide margin. One day’s trading should be viewed cautiously, but it’s also tempting to view yesterday’s blowout rally as the release of pent-up bullish energy that’s been contained over the past month by renewed geopolitical risk linked to the Middle East — risk that may be, possibly, set to ease in the weeks and months ahead. If so, the main catalyst that’s supported energy shares this year may have crested.

Viewed from a year-to-date perspective, energy is still holding the top spot, based on a set of ETFs through Tuesday’s close (Aug. 4). The SPDR Energy ETF (XLE) is posting a 32.7% gain in 2026, slightly ahead of tech’s 30.1% rise, based on the SPDR Technology ETF (XLK). Both performances are far ahead of the market benchmark’s 13.7% increase.

But yesterday’s market action for energy and tech stocks highlights a divergence. While tech (XLK) soared 5.0% on Tuesday, energy (XLE) dipped 0.5%. Set against the backdrop of reports that yet another U.S.–Iran peace deal may emerge this week, the crisis premium that’s lifted energy stocks may fade.

“We are in talks with the Iranians,” Treasury Secretary Bessent told CNBC on Tuesday. “There is a chance we may have a deal today or tomorrow to open the Strait and move towards a more normalized position in this conflict.”

President Trump confirmed the possibility, telling reporters on Tuesday that a deal could come as early as today. “It could happen. Tomorrow or the next day,” he said, speaking on Tuesday. “A lot of progress has been made.”

Skepticism is still recommended when it comes to the prospects for peace in the Middle East. One risk is that Iran isn’t the only factor affecting energy prices. Yemen’s Iran-backed Houthis reportedly struck a Saudi Arabian tanker in the Red Sea today, a reminder that this remains a multi-front conflict.

It’s reasonable to assume that Iran risk will remain a shape-shifting cloud that hangs over energy markets well into the future. A formal end to the fighting and full resumption of energy exports may not be forthcoming. But the political incentive for the White House to downsize the war and its macro effects ahead of the mid-term elections is strong, and growing by the day. That implies that gray-zone clashes that straddle the line between war and peace are the more likely path, moving these events off the front pages and helping Wall Street refocus elsewhere.

Yesterday’s market action offered a test of this theory as the AI-driven earnings narrative returned to the fore. Although there’s growing anxiety about AI’s costs and the extent of business opportunities with the technology, earnings data at the moment are strong enough to reanimate the tech bulls. FactSet estimates that 86% of S&P 500 companies have reported actual earnings per share results in Q2 that beat analysts’ estimates.

A related benefit for market sentiment that flows from a less-acute Middle East crisis: softer inflation risk. Although it will take several months at a minimum to determine if pricing pressure will stabilize, ease or accelerate, some form of relative peace that facilitates higher energy exports through the Strait of Hormuz will favors forecasts of cooler inflation, which will give the Federal Reserve more space to delay rate hikes.

This relatively rosy scenario is precarious and could quickly fall apart since it rests on a shaky assumption: the worst of the Iran crisis has passed, which provides a backdrop for market sentiment to refocus on AI-related growth opportunities, real or imagined.

How long the sentiment shift lasts is unclear, but yesterday’s market surge suggests the crowd is again motivated to give optimism the benefit of the doubt.

The expected total return for the Global Market Index (GMI) continued to edge higher in July, extending the recent run of upward revisions. Even so, the long‑term outlook remains well below its trailing 10‑year performance, though the gap has narrowed.

GMI represents a market‑value‑weighted blend of the major asset classes (excluding cash) using ETF proxies, and today’s update reflects the average of three underlying models, which are defined below.

The latest forecast—an annualized 8.0%—is modestly above last month’s estimate but still far short of the benchmark’s decade‑long trailing return, although the gap has been narrowing lately.

Consistent with recent trends, several of GMI’s underlying components continue to show expected returns that fall short of their results over the past ten years, highlighted by the red boxes in the far‑right column in the table below. The widest divergence remains in U.S. equities, where the models anticipate a meaningfully softer, though still solid, performance relative to history. Overall, GMI’s projected return remains below its trailing 10‑year pace through July: 8.0% versus 9.6%.

GMI represents a theoretical benchmark for the “optimal” portfolio that’s suited for the average investor with an infinite time horizon. Given those practical limitiations, GMI is useful as a starting point for customizing asset allocation and portfolio design to match a particular investor’s expectations, objectives, risk tolerance, etc. GMI’s history suggests that this passive benchmark’s performance will be competitive with most active asset-allocation strategies, especially after adjusting for risk, trading costs and taxes.

It’s likely that some, most or possibly all of the forecasts above will be wide of the mark in some degree. GMI’s projections, however, are expected to be somewhat more reliable vs. the estimates for its  components. Predictions for the specific markets (US stocks, commodities, etc.) are subject to greater variability compared with aggregating the forecasts into the GMI estimate, a process that may reduce some of the errors through time.

Another way to view the projections above is to use the estimates as a baseline for refining expectations. For instance, the point forecasts above can be adjusted with additional modeling that accounts for other factors and assumptions not used here. Customizing portfolios for a specfic investor, to reflect risk tolerance, time horizon, and so on, is also recommended.

For perspective on how GMI’s realized total return has evolved through time, consider the benchmark’s track record on a rolling 10-year annualized basis. The chart below compares GMI’s performance vs. ETFs tracking US stocks and US bonds through last month. GMI’s current return for the past ten years is a robust annualized 9.6%, a modest decline from June’s performance.

Here’s a brief summary of how the forecasts are generated and definitions of the other metrics in the table above:

BB: The Building Block model uses historical returns as a proxy for estimating the future. The sample period used starts in January 1998 (the earliest available date for all the asset classes listed above). The procedure is to calculate the risk premium for each asset class, compute the annualized return and then add an expected risk-free rate to generate a total return forecast. For the expected risk-free rate, we’re using the latest yield on the 10-year Treasury Inflation Protected Security (TIPS). This yield is considered a market estimate of a risk-free, real (inflation-adjusted) return for a “safe” asset — this “risk-free” rate is also used for all the models outlined below. Note that the BB model used here is (loosely) based on a methodology originally outlined by Ibbotson Associates (a division of Morningstar).

EQ: The Equilibrium model reverse engineers expected return by way of risk. Rather than trying to predict return directly, this model relies on the somewhat more reliable framework of using risk metrics to estimate future performance. The process is relatively robust in the sense that forecasting risk is slightly easier than projecting return. The three inputs:

* An estimate of the overall portfolio’s expected market price of risk, defined as the Sharpe ratio, which is the ratio of risk premia to volatility (standard deviation). Note: the “portfolio” here and throughout is defined as GMI

* The expected volatility (standard deviation) of each asset (GMI’s market components)

* The expected correlation for each asset relative to the portfolio (GMI)

This model for estimating equilibrium returns was initially outlined in a 1974 paper by Professor Bill Sharpe. For a summary, see Gary Brinson’s explanation in Chapter 3 of The Portable MBA in Investment. I also review the model in my book Dynamic Asset Allocation. Note that this methodology initially estimates a risk premium and then adds an expected risk-free rate to arrive at total return forecasts. The expected risk-free rate is outlined in BB above.

ADJ: This methodology is identical to the Equilibrium model (EQ) outlined above with one exception: the forecasts are adjusted based on short-term momentum and longer-term mean reversion factors. Momentum is defined as the current price relative to the trailing 12-month moving average. The mean reversion factor is estimated as the current price relative to the trailing 60-month (5-year) moving average. The equilibrium forecasts are adjusted based on current prices relative to the 12-month and 60-month moving averages. If current prices are above (below) the moving averages, the unadjusted risk premia estimates are decreased (increased). The formula for adjustment is simply taking the inverse of the average of the current price to the two moving averages. For example: if an asset class’s current price is 10% above its 12-month moving average and 20% over its 60-month moving average, the unadjusted forecast is reduced by 15% (the average of 10% and 20%). The logic here is that when prices are relatively high vs. recent history, the equilibrium forecasts are reduced. On the flip side, when prices are relatively low vs. recent history, the equilibrium forecasts are increased.

Avg: This column is a simple average of the three forecasts for each row (asset class)

10yr Ret: For perspective on actual returns, this column shows the trailing 10-year annualized total return for the asset classes through the current target month.

Spread: Average-model forecast less trailing 10-year return.

Markets remained mixed for a second month in July, based on a set of ETFs tracking the major asset classes. The main event in last month’s performance review: commodities rebounded after a sharp selloff in June, outperforming the other asset classes by a wide margin. Another notable development in July: the recent rally in real estate continued and widened into foreign shares.

A broad measure of commodities (GSG) was the big winner last month, soaring 12.0% as the resumption of hostilities in the Middle East lifted energy prices. Year to date, commodities (GSG) retain a strong edge over the rest of the major asset classes, posting a near‑39% advance.

US stocks (VTI) fell for a second straight month in July, although the loss was a mild -0.5%, in line with the previous month’s decline. Year to date, VTI is up a solid 10.5%—a respectable gain in the context of the long‑run record, although by recent standards it’s below average.

US bonds (BND), by contrast, were among the weakest performers last month, shedding 1.3% in July. For the year so far, BND slipped into the red, dipping 0.5%.

US real estate shares (VNQ) extended their recent strength, rallying 2.6% last month and posting a 14.0% year‑to‑date gain—second only to commodities (GSG) in the current 2026 ledger. Foreign property shares (VNQI) joined the party, matching VNQ’s advance in July.

The Global Market Index (GMI) fell for a second straight month, easing 0.6%. GMI is an unmanaged benchmark (maintained by The Capital Spectator) that holds all the major asset classes (except cash) in market‑value weights via ETFs and serves as a competitive benchmark for globally diversified, multi‑asset‑class portfolio strategies. For the year so far, GMI is ahead 9.3%, outperforming most of its components in 2026.

● Positive Sum: How Zero-sum Thinking Broke Capitalism – and How We Can Fix It
Roy Swan
Summary via publisher (Wiley)
Zero-sum thinking has cost the American economy an estimated $50 trillion over the last 30 years. Roy Swan, reveals why this primitive instinct continues to cost businesses $600 billion annually, and offers a practical roadmap for recognizing the economic power of fairness to create broadly shared prosperity. Through Positive Sum Swan questions the outdated economic theory that for someone to win, someone else must lose.

● Data Empire: The Power of Information to Organize, Control, and Dominate
Roopika Risam
Essay by via Next Big Idea Club
Most people think data began with computers. In reality, data is one of humanity’s oldest technologies. Nearly five thousand years ago, someone named Kushim carefully recorded deliveries of barley on a clay tablet in ancient Mesopotamia. Kushim wasn’t a king or a priest. He was an accountant—and he is the first person with a name in recorded history.
Usually, we imagine history beginning with rulers, battles, or monuments. Instead, the first named person is someone doing paperwork. Kushim was tracking grain because survival in the ancient world depended on it. Cities needed to know who had contributed food, how much was stored, and how it would be redistributed. Without records like these, large settlements simply couldn’t function.

● Fintech Capital: The Digital Transformation of Everyday Money and Finance
Paul Langley and Andrew Leyshon
Summary via publisher (Princeton U. Press)
How people pay, make savings and investments, buy insurance, and take on debt is undergoing digital transformation across the globe. This book argues that FinTech is a distinct form of intermediary and rentier capital that is radically reorganizing the routine social relations of money and finance. People are being configured by FinTech capital as users and data rather than as consumers, a phenomenon we increasingly take for granted in our everyday lives. Langley and Leyshon analyze the rise of FinTech capital through the intersecting processes of digital and financial capitalism that underpin it: platformization, datafication, monopolization, colonization, and capitalization.

● Investing in America: Expanding Access to Finance to Solve Our Shared Challenges
Antony Bugg-Levine
Review via Antidote to Autocracy
In Investing in America, Antony Bugg-Levine, with whom I co-authored perhaps the first book on impact investing, makes a simple argument: the promise of America depends on capital. Not capital in the billionaire sense of concentrated wealth, but capital as a democratized tool—available to workers buying their companies, to first-time homebuyers with limited down payment savings, to entrepreneurs building companies that improve job quality, to communities preserving their land.
Our friend and colleague traces this insight back to Benjamin Franklin, who established revolving loan funds in the 18th century to help young workers become business owners. By 1990, those funds had made thousands of workers into owners and channeled millions of dollars toward positive public impacts of various types. What could be a more appropriate tribute to the 250th celebration of our nation’s declaration of independence?

Please note that the links to books above are affiliate links with Amazon.com and James Picerno (a.k.a. The Capital Spectator) earns money if you buy one of the titles listed. Also note that you will not pay extra for a book even though it generates revenue for The Capital Spectator. By purchasing books through this site, you provide support for The Capital Spectator’s free content. Thank you!

If you want to have financial discipline you'll want to set some goals and then create and follow a plan to meet those goals.

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The Federal Reserve may be downplaying inflation risk, but financial markets are less confident. The central bank left interest rates unchanged on Wednesday, implying that it could remain patient in deciding whether there’s a threat to price stability — a commitment Chair Kevin Warsh has vowed to deliver multiple times since taking the helm in May. Market sentiment, by contrast, is somewhat less convinced that monetary policy is fine as is.

The ongoing Middle East conflict isn’t helping. As the war drags on, it remains a threat by lifting inflation and slowing growth. Flat‑out risk‑off signals, however, have yet to arrive, based on a review of several indicators using comparisons of ETFs.

We may be at an inflection point for the risk appetite, but the jury is still out, according to a big‑picture profile of global asset allocation strategies based on the ratio of two ETF proxies: an aggressive strategy (AOA) versus its conservative counterpart (AOK). Despite all the macro turmoil in recent months, this ratio is churning in a range, holding on to the rebound from the sell‑off in the early days of the Iran war. The implication: investors are still processing the risk outlook.

Within some asset classes, by contrast, changes in sentiment are starker. Notably, investors have sharply dialed down the collective risk appetite, as shown by the steep decline in the ratio of the U.S. stock market (SPY) vs. a low‑volatility counterpart (USMV), a proxy for a relatively conservative equities strategy. Although a clear risk‑off signal has yet to emerge on this front, the stock market’s tolerance for shock and awe has been severely depleted, and a tipping point may be near if additional negative surprises arise.

A more sensitive proxy for equity‑market risk tolerance reveals a greater degree of weakness, which could be an early warning sign and deserves close attention in the weeks ahead, based on the ratio of U.S. cyclical stocks (XLY) to defensive shares (XLP).

By contrast, the recent recovery in relative strength for small‑cap stocks (IJR) vs. large caps (SPY) remains resilient.

Similarly, the rebound in value stocks (IWD) over growth (IWF) still looks robust.

The bond market, by contrast, is is leaning into a risk‑off signal, based on the ratio of medium‑term Treasuries (IEF) vs. their short‑term counterparts (SHY).

If the IEF–SHY ratio sinks further and triggers a clear risk‑off signal, the shift could spill over into the stock market and spark a new leg down for equities.

Across asset classes, investors are increasingly uneasy even as the Federal Reserve maintains a patient stance on inflation risk. Taken together, the indicators suggest that markets may be approaching a critical juncture.

Learn To Use R For Portfolio Analysis
Quantitative Investment Portfolio Analytics In R:
An Introduction To R For Modeling Portfolio Risk and Return
By James Picerno

Federal Reserve Chairman Kevin Warsh is playing a dangerous game. Explaining the central bank’s decision to leave its target interest rate unchanged yesterday amid mounting inflation concerns, he tried to walk a fine line, saying that price stability remained the goal. But the bond market is skeptical and Treasury yields rose yesterday.

Incoming inflation data could yet validate the Fed’s cautious approach to rate hikes. But there’s also the crucial aspect of credibility, which was dented, if only slightly, by Warsh’s comments in yesterday’s press conference.

“We will deliver the 2% inflation target,” he said. “That is the definition of price stability.” That was an unfortunate formulation with inflation still running well above that mark. His lack of clarity on explaining and framing the gap suggests his communciation strategy needs revising.

Today’s June update on personal consumption expenditure prices (PCE inflation) is expected to cool, provide a bit of respite on the data front, but the expected report will still leave a yawning gap between the Fed’s target and the actual year-over-year trend, as the previously published numbers for consumer prices in June imply.

When asked why the Fed was waiting to raise rates, he was evasive and failed to persuasively outline the rationale. The bond market wasn’t impressed. Treasury yields rose, including the 30-year yield, the most inflation-sensitive maturity, which spiked to 5.20% — the highest close since 2007.

The Fed chairman asked for patience in judging the central bank’s record on managing inflation, reasoning that his short tenure since taking the helm in May is too soon to judge. Fair point, but the bond market won’t distinguish inflation risk between his predecessor’s challenge and current conditions. It’s all one continuous stream, a non-trivial point with inflation running meaningfully above the 2% target for more than a year, accelerating in recent months.

The current moment is especially fraught as a new escalation in the Iran war unfolds, which threatens to keep energy prices elevated. It’s understood that the Fed focuses on core inflation indicators, which strip out food and energy, which provides a cleaner, more reliable measure of the trend. But core inflation has been rising too.

The softer data in June via the Consumer Price Index (CPI), which will presumably be confirmed in today’s PCE price report, is encouraging. Per his previous comments, Warsh may also be relying on alternative inflation indicators to support a wait‑and‑see approach to a policy pivot. The Dallas Fed’s Trimmed Mean PCE inflation rate, for example, is running in the low‑2% range through May.

Yet the resumption of hostilities in the Middle East, and the ongoing near‑complete blockage of exports through the Strait of Hormuz, suggests that inflationary pressure will remain a threat for the foreseeable future. Pointing to alternative inflation metrics to argue that the Fed’s job is more or less complete won’t fly with the bond market.

The key risk is that headline inflation starts spilling over into mainstream core measures. There are hints that this transmission is developing. Even if the Fed’s decision to stand pat is justified — a reasonable view, according to some economists — Warsh’s suggestion that the bond market would do the Fed’s job for now in reacting to inflation pressures is not a good look for a central bank trying to establish its monetary bona fides this early in his tenure.

He insisted that “this Fed will not waver” in its obligation to lower inflation to the target. “Our credibility rests on performing our duties and delivering on our responsibilities.”

Those words will ring hollow if the Fed doesn’t persuade the bond market. The central bank lost some of its influence capital yesterday. Softer‑than‑expected inflation reports could come to the rescue, of course. But the opposite scenario is plausible too.

Make no mistake: the bond market is testing the Fed chairman. The good news is that he still has time to make a course correction. But if yesterday’s discussion is a guide for his guidance strategy, the months ahead could be a rocky road for the Fed’s influence and the bond market.

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The rout in semiconductor stocks is rattling nerves on Wall Street, but it’s premature to label this as something more than a correction after a white-hot rally that arguably lifted chip stocks too high too fast.

The decline in semis is taking a toll on tech sentiment generally, but there are some notable pockets of strength, including the recent rally in formerly battered software shares. Reviewing the tech sector’s performance since the start of the Iran war, however, suggests that the still-hefty performance gap favoring these stocks leaves them vulnerable to a bit of mean reversion until risk sentiment stabilizes.

For some perspective, here’s how sector results compare since the bombs started dropping on Iran on Feb. 28, which one might argue marks the beginning of a new era of geopolitical and macro risks. Using a set of ETFs through yesterday’s close (July 28) shows that for all of the recent woes hanging over tech, the sector’s still posting a wide return premium over the rest of the field and the stock market overall.

The SPDR Tech Sector ETF (XLK), despite its recent slide, is still up nearly 24% since Feb. 28. The next-best sector performer: financials (XLF), which is ahead by a distant 13.0%. The broad market’s gain is even softer at 8.6%, based on the SPDR S&P 500 ETF (SPY).

Note, too, that five sectors are underwater in the period profiled in the chart above. The biggest setback is a 6.6% loss for communication services (XLC).

The source of the angst in tech at the moment is linked to a number of concerns that have animated sentiment lately. A key issue is rising doubts over Big Tech’s AI spending and free cash flow. Recent second-quarter earnings reports, such as Alphabet’s, highlighted significant cash consumption directed toward AI infrastructure and data center buildouts, for example.

Concerns have also mounted over the financial structure of the broader AI ecosystem, specifically instances where hardware suppliers, cloud providers, and startups fund one another’s compute purchases. An additional worry that’s received attention lately: aggressive multi-billion-dollar manufacturing expansion plans announced by major memory and chip manufacturers (such as Samsung and SK Hynix), which have sparked fears of potential future supply gluts.

Lofty valuations for several high flyers in the tech space haven’t helped. Semiconductor and AI-linked stocks experienced strong gains in the first half of the year. With valuations stretched to near-perfect execution expectations, even modest shifts in sentiment or guidance have triggered profit-taking and leverage unwinding.

Investor anxiety has also been heightened by news of advances in China’s domestic technology supply chain. Reports of Chinese progress in domestic chip-making equipment, alongside competitive, lower-cost large language models from Chinese AI startups, have raised questions about Silicon Valley’s long-term dominance and pricing power. [added comma after “equipment” for proper clause separation]

And then there’s the macro backdrop: Rising Treasury yields, paired with ongoing inflation concerns fueled by energy price volatility, have raised expectations that central banks may maintain higher interest rates for longer, increasing borrowing costs and reducing the relative appeal of equities.

For all the anxiety about tech, it’s important to note that the sector is quite varied, as the chart below reminds. As semi stocks have cratered lately, other industries in the tech space have rallied in recent days.

Tech writ large may be wobbling, but a closer look at the underlying industries suggests that a rotation within the sector — and across sectors — is taking shape. The market, in short, is doing its job and resetting expectations for industries that recently succumbed to a bout of irrational exuberance.

Changing banks sounds simple until you actually try it. You open the new account in ten minutes, and then you realize your entire financial life is quietly wired into the old one. Paychecks land there. Subscriptions pull from there. A dozen small transactions run on autopilot every month, and most of them you have not […]

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A car costs way more than just the price you pay to drive it off the lot. Here are the seven true costs of owning a car and how to save on car ownership.

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The Iran conflict continues to unsettle the outlook for the US economy, but the effects of the Middle East crisis may be hard to spot in this week’s second‑quarter GDP report. The government’s initial estimate is expected to roughly match Q1’s moderate 2.1% real annualized gain, based on the median of nowcasts compiled by The Capital Spectator, with the Bureau of Economic Analysis set to publish the official data on July 30.

Today’s median estimate has ticked up to 2.1% from 1.8% on July 18, while the Econoday consensus is slightly higher at 2.3%. Overall, Q2 is poised to reaffirm the economy’s resilience despite a series of macro shocks. The Iran conflict remains a key risk by keeping energy prices elevated, which ripples through supply chains, raises costs, and adds pressure on the Federal Reserve to tighten policy. The threat of further escalation continues to hang over markets, sustaining geopolitical uncertainty that acts as a tax on growth by lifting energy costs, complicating trade flows, and keeping inflation risks skewed to the upside.

Even so, consumer spending has held up, supported by income growth and a labor market that continues to add jobs at a modest pace. Layoffs remain low, and new filings for unemployment benefits fell to 187,000 last week—the lowest since 1969. Jobless claims at a half‑century low alongside $100 oil suggest a labor market with virtually no slack, a combination that could become problematic if the conflict persists. A brief lull in hostilities this morning hints at improvement, but after five months of stop‑and‑start warfare, visibility remains poor.

As a result, the Federal Reserve will find it increasingly difficult to ignore elevated inflation signals. And with so much riding on the path of energy prices, geopolitical stability, and labor‑market tightness, the first half of the year may prove a poor guide to what the second half ultimately delivers.

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What is a good credit score? The answer is tricky, but this guide tells you everything you need to know to qualify for loans, credit cards, and more.

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The CAPE that Cried Wolf
Dino Palazzo (Board of Governors of the Federal Reserve System)
May 2026

The Capital Spectator’s Takeaway
The paper reports that traditional CAPE ratio’s false warnings of market overvaluation since the 1990s are an accounting illusion caused by mandatory R&D expensing and volatile special-item write-downs. By stripping out these regulatory distortions, CAPE-H eliminates the apparent structural break and restores CAPE’s ability to accurately predict long-term price appreciation and excess stock market returns.

Abstract
The “dog that did not bark”-the absence of dividend-growth predictability (Cochrane, 2008)-implies time-varying expected returns, yet the cyclically adjusted price-earnings (CAPE) ratio has “cried wolf” in the post-Global Financial Crisis period, persistently signaling mean reversion that failed to materialize. Since the early 1990s, CAPE has exhibited a persistent structural break and weak out-of-sample performance (Goyal and Welch, 2008; Lettau and Van Nieuwerburgh, 2008). This apparent breakdown can be largely attributed to systematic earnings distortions arising from accounting changes interacting with intangible capital growth. Mandatory R&D expensing increasingly understates reported earnings, while expanded special items recognition introduces transitory volatility that contaminates long-horizon averages. We construct CAPE-H (Historically-comparable CAPE), restoring intertemporal comparability by correcting both distortions. Decomposing returns, we show that the failure of traditional CAPE arises from a breakdown in predicting price appreciation, while dividend growth remains essentially unpredictable under both measures. CAPE-H reestablishes predictability in excess returns, consistent with valuation-based mean reversion, by restoring the link between valuations and subsequent price appreciation.

Persistence and innovation in the momentum signal
Doojin Ryu (Sungkyunkwan University)
May 2026

The Capital Spectator’s Takeaway
The momentum premium is primarily driven by predictable stock risk rather than temporary mispricing, though unexpected price shocks offer distinct high-alpha opportunities in smaller stocks. By decomposing past stock returns into a predictable trend and a forecast-error “innovation,” the research reveals that predictable persistence accounts for most momentum profits but is largely absorbed by standard risk factors. In contrast, unexpected innovations generate true risk-adjusted alpha—particularly among smaller and mid-tier momentum stocks—while extreme winner and loser stocks eventually see these unexpected price shocks reverse.

Abstract
By separating the momentum indicator into a predictable persistent component and a forecast-error innovation, we examine how each component contributes to the momentum premium. The persistent component absorbs most of the momentum profit, challenging a pure transitory-mispricing interpretation of momentum. The innovation component earns a smaller positive premium, concentrated among non-extreme momentum stocks but reversed at the extremes.​

Crowded Anomalies over the Business Cycle
Dennis Jung (Technical University of Darmstadt)
May 2026

The Capital Spectator’s Takeaway
The research advises that different stock market strategies carry different levels of economy-driven risk, allowing you to time your investments based on the business cycle. Instead of generating higher profits all the time, strategies tied closely to the broader economy behave like a coiled spring: they bear brunt during market recessions, but deliver strong, outsized returns during economic recoveries and expansions. By identifying which strategies align best with economic momentum, investors can rotate into the right assets at the right point in the cycle.

Abstract
Anomaly returns vary systematically over the business cycle, yet the literature on factor timing has studied this variation in the time series and remains silent on its cross-sectional allocation. We propose excess centrality, a measure constructed from the difference between an anomaly’s centrality in a macro-targeted principal-component decomposition and its centrality in standard PCA. The measure isolates the component of systematic exposure that loads on macroeconomic fundamentals and assigns it at the level of individual anomalies. A longonly portfolio formed on the signal matches the equal-weighted benchmark unconditionally but earns its premium cyclically: realised in recovery, contributed in expansion, and absent in recession where the priced risk is borne. The unconditional flatness is the arithmetic signature of a state-dependent premium paid through the cycle rather than the absence of a signal. The findings identify a priced macroeconomic risk premium that conventional factor models do not capture, locate it in identifiable corners of the anomaly cross-section, and extend factor timing from the question of when to scale a given factor to the cross-sectional question of which strategies carry the macroeconomic risk.

Pricing the Federal Reserve’s Inflation Response in Treasury Markets
Keiichi Morimoto (Meiji University)
June 2026

The Capital Spectator’s Takeaway
The post-pandemic market repricing of Federal Reserve rate hikes occurred in two distinct phases: in 2022, markets priced in higher future real interest rates alongside rising inflation expectations, but in 2023, the market underwent a fundamental shift toward higher real rates paired with falling inflation compensation. This structural transition made 2023 the strongest year on record for perceived Fed policy responsiveness, demonstrating to investors that nominal yield spikes alone do not reflect monetary tightening unless real rate hikes successfully bring down long-term market inflation expectations.

Abstract
Using public nominal Treasury and Treasury Inflation-Protected Securities curves, I decompose post-pandemic Treasury repricing into real-rate and inflation-compensation projections measured along the same six-maturity direction. The distinction changes the reading of the tightening cycle. In 2022, real-rate pricing strengthened, but inflation compensation rose even more, leaving the combined response-pricing index weak. In 2023, firmer real-rate pricing was accompanied by lower inflation compensation; that annual configuration ranks above every other analysis year for every positive weighting. Existing research documents a broad post-liftoff increase in perceived Federal Reserve responsiveness. I show that the Treasury repricing behind that shift changed composition between 2022 and 2023. Household three-year inflation expectations and disagreement move inversely with the index, while Federal Open Market Committee path surprises move it upward. The chronology survives presample statistical and term-structure alternatives. Treasury prices determine finite-grid projection coordinates conditional on the representation, not a daily Taylor-rule coefficient separately from other macroeconomic forces, so the measure is a price contrast rather than a structural policy estimate.

Learn To Use R For Portfolio Analysis
Quantitative Investment Portfolio Analytics In R:
An Introduction To R For Modeling Portfolio Risk and Return
By James Picerno

Managing contracts at enterprise scale creates operational blind spots that can cost organizations millions annually. When teams can’t access critical terms, manual workflows bottleneck approvals and delay revenue. Compliance risks hide in untracked obligations, while missed renewals negotiate value. What makes a great Contract Lifecycle Management (CLM) platform is its ability to eliminate these inefficiencies […]

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“I made a lot more money this year than last year. Am I about to owe the IRS a huge bill?” If that’s the question you typed into a search bar at 11 p.m., the honest answer is: probably yes, and probably more than you think. A raise. A bonus. Some 1099 income on the […]

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The war with Iran is bad news for the global economy, but it’s lifting the fortunes of most energy stocks, led by oil refiners, according to a set of ETFs. The world has had a painful reminder that fossil fuels from the Middle East can’t be ignored. At the same time, some corners of energy have taken a hit — the nuclear power industry is the major downside outlier since the conflict began on Feb. 28.

The benchmark for energy stocks is the Big Oil sector, proxied by the State Street Energy Select Sector SPDR ETF (XLE), dominated by ExxonMobil, Chevron, and ConocoPhillips, which together make up more than 40% of the portfolio. Since the conflict began, XLE is up more than 7% through Wednesday’s close. It’s a solid gain, though it trails the broader stock market: the SPDR S&P 500 ETF (SPY) has risen about 9.5% over the same period. Competing with AI and tech — SPY’s largest weights — is difficult these days, even with a Middle East war providing a tailwind for energy.

Looking beyond Big Oil reveals an even wider spread of outcomes. Oil refiners have dramatically outperformed XLE. The VanEck Oil Refiners ETF (CRAK) has surged nearly 24% during the war, marking the strongest rally in the group. The Iran conflict has created a perfect storm for refiners: years of lagging refinery-capacity growth, geopolitical disruption, and strong consumer and industrial fuel demand have combined to boost profitability.

The big energy loser during the war has been uranium and nuclear stocks. The VanEck Uranium and Nuclear ETF (NLR) has fallen nearly 25% since Feb. 28. Some of this weakness reflects the unwinding of a large 2024–2025 rally. Recent news — including the Trump administration’s approval of a U.S.–Saudi civilian nuclear pact and a White House-backed AI-driven nuclear acceleration initiative — has helped revive sentiment this week. There are early signs that fortunes in the industry may be stabilizing.

In the near term, however, if the Iran conflict continues to simmer, traditional oil and gas stocks are likely to remain the primary beneficiaries. Geopolitical risk tends to support crude prices, bolster refining margins, and strengthen cash flows for fossil‑fuel producers — giving them a clearer upside path than more volatile, sentiment‑driven segments like nuclear.

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