Escalation of hostilities in the Middle East has increased uncertainty in the markets this month as stock prices are jerked higher and lower due to daily shifts in investor sentiment. One day, markets are ruled by optimism in corporate earnings and AI; then the next day, pessimism from rising global energy prices and fear of inflation reigns.
This uncertainty has kept the Fed on the sidelines, neither raising or lowering interest rates, but that may be about to change. Oil has quickly risen from $70 per barrel to $90 as confidence in a near-term solution has faded. Even though the inflation rate fell from 4.2% to 3.5% last month, the Fed must now consider the possibility of higher energy prices reversing the course of inflation. Markets now believe there is a 35.8% chance that the Fed will raise interest rates 0.25% in next week’s meeting to get ahead of potential inflation.
The market is now pricing in a 0% chance of an interest rate cut this year.
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
Corporate earnings remain very strong, and the labor market isn’t showing any real signs of stress. The unemployment rate was 4.2% in June, and the previously mentioned uncertainty has caused a “low-hire, low-fire” job market. Jobs are more secure for those who are working, but it’s difficult for the unemployed to find work. Nonetheless, unemployment claims have been declining recently and last week hit their lowest level since 1969.
https://www.cnn.com/2026/07/23/economy/us-initial-jobless-claims-1969
Have a great weekend.
Jack C. Harmon II, CFP®, CIMA
Principal, Harmon Financial Advisors
Registered Principal, Raymond James Financial Services
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