U.S. GDP grew at an annualized rate of 1.5% in the second quarter of 2026, below consensus expectations. The result is explained primarily by a decline in net exports, a line item that tends to be volatile from quarter to quarter, which overshadowed solid domestic demand. Consumer spending, which accounts for roughly two-thirds of economic activity, advanced 3.2%, while business investment continued to expand vigorously, driven by artificial intelligence spending.

Our Take

The composition of the report reveals an economy with considerably solid domestic demand. The rebound in consumption and the persistence of the AI-driven investment cycle are the most relevant signals for the growth trajectory going forward, while the volatility of the external component distorts the quarter's headline reading.

The Federal Reserve kept the federal funds rate unchanged in the range of 3.50% to 3.75%, marking the fifth consecutive pause. The vote was 9 to 3, with three regional presidents dissenting in favor of a 25-basis-point hike, the first unified three-member hawkish dissent since 2016. The statement described economic activity as solid despite geopolitical uncertainty stemming from the Middle East conflict.

Our Take

The division within the Committee, with three dissenting votes in favor of a hike, suggests the Fed faces growing internal pressure to act against persistently above-target inflation. Despite this, the market quickly recalibrated its expectations toward a lower probability of a cut in September, with long-term yields rising following the press conference.

The market is beginning to question the Federal Reserve's ability to bring inflation back under control and is once again penalizing public debt. Despite Kevin Warsh's firm tone, the decision to hold rates unchanged and the absence of signals about next steps have reinforced investor skepticism. As a result, the 30-year U.S. Treasury yield has climbed to 5.23%, its highest level since 2007.

Our Take

In a environment marked by rising oil prices and persistent inflationary pressures, a growing number of traders doubt that price stability can be restored without additional monetary policy tightening.

The June 2026 PCE price index fell 0.1% from the prior month, while the core index, which excludes food and energy, rose 0.1% on a monthly basis. On an annual basis, headline PCE inflation stood at 3.7%, and core PCE at 3.3%. Disposable personal income grew 0.2% and personal spending rose 0.3%, driven more by services expenditure than goods.

Our Take

The fact that the personal consumption expenditures price index, the Fed's preferred inflation measure, came in line with expectations offers a signal of stability rather than relief. The reading confirms the absence of an additional inflationary shock, without being benign enough to rule out tightening at upcoming meetings.

The Bank of England held its benchmark rate at 3.75% for the fifth time this year, with a divided vote of 6 to 3, in which dissenters favored a hike to 4%. The decision comes in a context of inflation that the central bank itself projects will peak at 3.2% toward the fourth quarter of 2026, pressured by the Middle East conflict and the increase in the energy price cap in the United Kingdom.

Our Take

The Bank of England's pause adds to an increasingly widespread pattern among developed-economy central banks, prioritizing caution over stimulus. This synchrony reflects a phase of global monetary policy that is more restrictive for longer than anticipated at the start of the year, with central banks preferring to wait for concrete evidence on the persistence of the price shock before committing to a path of cuts.

The U.S. launched a new wave of strikes against dozens of military targets in Iran, in response to a surprise attack by Tehran on a U.S. base in Jordan. Iran, in turn, struck a building in northern Kuwait, and Jordan intercepted five Iranian missiles, while two liquefied natural gas vessels at an Egyptian Mediterranean port were hit by drones, the first such attack in Egyptian waters since the conflict began just over five months ago.

Our Take

Egypt's entry onto the risk map, via the Mediterranean and, potentially, the Suez Canal, adds a third global maritime artery to the already compromised Strait of Hormuz and Bab el-Mandeb, broadening the conflict's impact radius beyond oil to global maritime trade at large.

Corporate News

Microsoft reported revenues of $90 billion, an increase of 18% year-over-year, surpassing market consensus. Earnings per share came in at $4.81, a 32% increase from the prior year. Azure was the primary growth engine and for the first time exceeded $100 billion in annual revenues, with 41% expansion in the fiscal year. Capital expenditure for 2027 is projected at between $255 billion and $260 billion, well above the $190 billion committed in 2026, reflecting the scale of investment in AI infrastructure.

Meta reported revenues of $60.8 billion, a 28% annual increase, in line with market expectations. However, earnings per share came in at $6.18, well below the consensus of $7.17, which triggered a decline of close to 10% in the stock price following the report. Capital expenditure surged to $31.1 billion in the quarter, more than double a year earlier, compressing the operating margin to 31% from 43% in the same period of 2025.

Samsung reported record consolidated revenues of 171.5 trillion won (approximately $118.7 billion), up 28% quarter-over-quarter. Operating profit also hit an all-time high of 89.5 trillion won, a 56% increase from the first quarter. The result was driven almost entirely by the semiconductor division. In contrast, the mobile devices division posted the company's first-ever operating loss in its history, at 0.7 trillion won, due to component cost pressures.

The To-Do List

  • Monitor oil and the Middle East conflict: the conflict extends to Egypt with attacks on two LNG vessels in the Mediterranean.

  • Keep an eye on the 30-year Treasury: it will continue to be the market's thermometer for inflation expectations.

  • Tonight, make some picadillo tacos with potatoes and carrots, comforting, affordable, and among the best for a Thursday night when the week is already weighing on you.

  • Dedicate 30 minutes to a jump rope or jogging session at home, the best cardio when time is short and energy is low.

Today's quote…

"Believe you can and you're halfway there."

— Theodore Roosevelt