At PalomarWealth,it is important to us that you are well informed aboutwhat’shappening in the markets. Here are a few of the key topics of conversation that we feel deserve the most attention this month. If you have any questions or would like to continue the conversation, let us know, and we appreciate the opportunity.
The second half of 2026 opened with markets balancing three competing forces: renewed U.S.-Iran hostilities, the first meaningful inflation relief in months, and the start of second-quarter earnings season. Stocks entered July with considerable momentum after the S&P500and Nasdaq Composite posted their strongest quarters since 2020, and the Dow Jones Industrial Average notched back-to-back record closes in the opening days of the month. That optimism was quickly tested when the June ceasefire between the U.S. and Iran unraveled, reviving the energy shock that had pushed inflation higher through the spring. By mid-July, however, cooler inflation data and strong early earnings results had helped move the major indexes back to withinroughly 0.5%of their records.
The renewed hostilities rippled first through energy markets. Brent crude oil, which had retreated sharply toward pre-war levels after the June ceasefire, initially climbed above $76 a barrel following fresh strikes and later approached $85 as the conflict intensified. The Strait of Hormuzremainsa critical risk because it handles oil flows equivalent toroughly 20%of the world’s oil supply. Sector leadership also shifted with the headlines. Semiconductor shares remained volatile as investors weighed profit-taking against still-robust demand tied to artificial intelligence, while energy and financial shares found support. Financial sharesbenefitedfrom strong bank earnings, fueled by record trading and investment-banking revenue. FactSet estimates that S&P 500 earnings will growroughly 23%from a year earlier in the second quarter, a pace that would provide important support for elevated stock valuations1.
The economic calendar reinforced the shifting narrative. The June jobs report showed employers adding just 57,000 jobs, well below the 115,000consensus, while revisions removed 74,000 jobs from April and May2. The unemployment rate edged down to 4.2% from 4.3% in May, partly because labor force participation fell to 61.5%,itslowest since March 20212. Inflation brought more encouraging news. The Consumer Price Index (CPI) fell 0.4% in June, its largest monthly decline since April 2020, as energy prices dropped 5.7%3. Annual inflation slowed to 3.5% from 4.2% in May, below the 3.8% consensus forecast3. Core CPI, which excludes food and energy, was unchanged for the month and eased to 2.6% from a year earlier3. The Producer Price Index (PPI) declined 0.3% in June, trimming the odds that the Federal Reserve will need to raise interest rates at its July 28-29 meeting4.
The bottom line:The coming weeks will test whether that relief holds. Earnings season will broaden beyond the banks, the Fed will meet at month-end, and the path of the Iran conflict will helpdeterminewhether June’s energy-driven disinflation extends into the summer or proves to be a one-month reprieve. For now, resilient corporate earnings are giving investors some reason to look throughthe geopoliticaluncertainty, but the renewed rise in oil prices means inflation risks have not fully faded.
Sources:
FactSet,https://insight.factset.com/sp-500-likely-to-report-earnings-growth-above-29-for-q2
Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.nr0.htm
Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
Bureau of Labor Statistics, https://www.bls.gov/news.release/ppi.nr0.htm
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Definitions:
The S&P 500® Index, or the Standard & Poor's 500® Index, is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies.
The Nasdaq-100 is a stock market index made up of equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange. It is a modified capitalization-weighted index.
The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States.
Nonfarm payrolls measure the total number of paid workers in the U.S., excluding farm employees, government employees, private household workers, and employees of nonprofit organizations.
The unemployment rate represents the number of unemployed people as a percentage of the labor force (the labor force is the sum of the employed and unemployed).
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
The Producer Price Index (PPI) is a measure of the average change in selling prices received by domestic producers for their goods and services over time. Published monthly by the Bureau of Labor Statistics (BLS), PPI tracks inflation at the wholesale level before it reaches consumers.
The Bureau of Labor Statistics (BLS) is an agency of the United States Department of Labor. It is the principal fact-finding agency in the broad field of labor economics and statistics and serves as part of the U.S. Federal Statistical System. BLS collects, calculates, analyzes, and publishes data essential to the public, employers, researchers, and government organizations.
Brent is the leading global price benchmark for Atlantic basin crude oils. It is used to set the price of two-thirds of the world's internationally traded crude oil supplies. It is one of the two main benchmark prices for purchases of oil worldwide, the other being West Texas Intermediate (WTI).
WTI crude oil, or West Texas Intermediate, is a specific grade of crude oil and a major benchmark for oil pricing, particularly in the North American market.
The labor force participation rate measures the percentage of the working-age population that is either employed or actively seeking work. It acts as a key economic indicator, tracking the proportion of individuals who are economically active within a country.
Earnings per share (EPS) is a financial metric indicating a company's profitability on a per-share basis, calculated by dividing net income (minus preferred dividends) by outstanding common shares. A higher EPS signifies greater value and profitability, serving as a key indicator for investors to evaluate company performance.