The July Employment report missed expectations badly, but Wall Street did not seem too disappointed. Instead, weaker hiring reduced the perceived likelihood of a Federal Reserve rate increase, helping the stock market to its strongest week since April.
Stock Market Rebound
The stock market continues to rebound. The S&P 500 rose 3.59% for the week to close at 7,757.64, reaching its new historical high. Nasdaq gained 5.19% to finish at 26,690.62, close to its June peak at 27093.90. The Dow Jones Industrial Average advanced 2.96% to 54,036.93.
Technology was the clear leader. S&P 500 Information Technology Sector gained 7.22%, achieving its strongest weekly performance since April. Semiconductors did even better, with the Philadelphia Semiconductor Index rising over 9%, fully recovering from the previous market cool-down. Besides the rising performance of Technology, most sectors gained this week, contributing to the overall market rebound, except for the Energy sector, which declined approximately 0.5% in response to falling crude oil prices.
Treasury Yield Curve Shifted Lower
The Treasury yield curve shifted lower during the week after the weak July employment report reduced expectations for another near-term Fed rate increase. Yields from 2y to 30y shifted down by 8-10 bps, while other short-term yields remained approximately unchanged.
A Miss That Markets Liked
U.S. nonfarm payrolls declined by 23,000 in July, well below economists’ expectation for a gain of approximately 80,000. Substantial revisions compounded the weakness: May’s payroll growth was reduced from 129,000 to 63,000, while June was revised from 57,000 to 20,000. Together, the two months lost 103,000 previously reported jobs.
Combined with the previously reported unemployment rate, which edged down from 4.2% to 4.1%, labor markets tend to convey the signal of “low employment, low lay-off”. Market expectations of the employment environment weaken, reducing the anticipated probability of the Fed raising interest rates. This partially contributes to the rise of the stock market this week.
The Treasury Moves the Pressure Up Front
The Treasury raised its third-quarter net marketable borrowing estimate to $739 billion, $68 billion above its May projection. Despite the increase, it kept nominal coupon and floating rate note auction sizes unchanged. The August refunding package remained at $125 billion, including $58 billion in three-year notes, $42 billion in 10-year notes, and $25 billion in 30-year bonds.
The Treasury will continue using short-term bills to meet changing funding needs. This approach may limit immediate supply pressure on longer-term bonds. However, it also shifts more borrowing toward securities that mature quickly and require frequent refinancing.
Hormuz Is Still a Work in Progress
Crude oil prices fell sharply during the week after Iran and Oman reported progress toward establishing a temporary shipping route through the Strait of Hormuz. The news reduced concerns that the waterway would remain largely closed for an extended period.
Important disagreements remain. Plans under discussion could give Iran greater oversight of vessels entering the Persian Gulf and allow it to charge transit fees. Oman supports a regional management system funded by voluntary contributions for navigation, environmental protection, and other services. The United States opposes mandatory fees and continues to call for free commercial passage through the international waterway.
Lower oil prices may provide near-term relief for headline inflation. However, the negotiations remain unfinished. Oil prices could rise again if the talks fail or shipping risks return.
Fed Independence Back in Focus
The White House renewed its effort to remove Federal Reserve Governor Lisa Cook. Cook has until August 26 to respond to allegations about mortgage applications she completed before joining the Fed. She denies wrongdoing and has not been criminally charged.
The Supreme Court previously blocked the first removal attempt because Cook had not received enough opportunity to respond. The Court did not decide whether the allegations were true or whether they provided sufficient legal grounds for removal. Cook therefore remains in office while the dispute continues.
The case could affect the Fed’s independence. Governors serve long terms and may be removed only “for cause.” This protection prevents dismissal based solely on policy disagreements. If the government gains more power to remove Fed officials, investors may become more concerned about political influence over monetary policy and future interest-rate decisions.
Week Ahead
The week's central event is Wednesday's July CPI report. June's print showed inflation cooling faster than expected, with core CPI falling to 2.6% year-over-year, and consensus now looks for a further step down to 3.4% headline and 2.5% core. A reading in line with that would reinforce the case for the Fed to hold steady into its September meeting; a hotter print would quickly revive rate-hike chatter and pressure both equities and Treasuries. PPI and jobless claims follow Thursday, rounding out the inflation picture, while Friday's retail sales data will offer a read on whether consumer spending is holding up under the current rate environment. Earnings season is winding down, with Super Micro Computer, CoreWeave, and JD.com among the notable reports left, keeping AI infrastructure spending in focus. With volatility subdued and sentiment constructive, Wednesday's CPI release is the print most likely to set the tone for the remainder of the week.
[View of the future in 10 years]
"The most likely outcome is the age of amazing abundance where anyone can have anything they can think of. This may sound preposterous, but well, here we are in 2026. Let's see where we stand in 2036.”
—Tesla and SpaceX CEO Elon Musk, The Economist, July 29, 2026
Perspectives by Jason Hsu, PhD
Why This Bubble Is Different (And Why It Could Get Bigger)
When I sat down at the beginning of July to write about what’s been happening with tech stocks in 2026, I simply wanted to talk readers through the elephant in the room: Are we in an AI hardware bubble and what can investors do about it?
I don’t have a crystal ball, but I do have a Bloomberg terminal, and AI hardware stocks were flashing enough green that I felt I had to write something. Take, for example, the Goldman Sachs US AI Semiconductor Index, tracking companies selling chips that power the AI revolution: In the first six months of 2026, it had literally doubled in value. Add in 2025’s gain, and the index had tripled its value in just a year and a half.
As an investor, you see something like this, and you have two thoughts: First, “Can gains like that really sustain?”—and second, “What if I sit it out and I miss the next 100% rise?”
That late-June mark turned out to be high-water, and the market made my comments look pretty timely: AI investors started getting jitters about hardware makers’ growth and a potential slowdown in datacenter capex, and some of the air came out of the AI hardware trade. From the end of June to July 29, 2026, that Goldman AI Semis Index crashed down 27%.
Now, entering August, AI stocks are bouncing back, the S&P 500 Index is again flirting with record highs, and investors are asking the same question they were at the end of June—maybe now with just a little more anxiety than before: “Is this 1999 all over again?”
So, in case you missed my thoughts on that question, I’d like to share them one more time… Are we re-living the 1999 boom and bust?
As your honest, but characteristically equivocal economist, my answer is “Yes, this is a FOMO bubble,” BUT ON THE OTHER HAND “AI will change life and business even more profoundly than the internet,” and, finally—the part that matters most to investors—“This bubble might run for another 18 months and bring all rational investors to their knees… or burst next quarter.”
To be sure, this current raging bull market has all the hallmarks of the Dot-Com era: 1) a genuinely transformative technology that we can only begin to imagine its full impact on productivity and future product innovation, 2) a valuation frenzy that feels disconnected from any rational or even irrational growth projection, and 3) babbling tech bros who celebrate self-anointed prophets like Messiahs.
But there is one critical difference between 1999 and today—a difference that suggests this bubble could get much bigger and last much longer than we think.
The “Infinite Cash” Problem
The internet bubble of the late 90s was fueled by venture capital. It depended on external money to finance the dreams of Yahoo, Webvan.com, and Pets.com. When the VC well ran dry, the party ended abruptly. The underlying companies were burning cash with no end in sight. There just wasn’t enough willing capital to throw itself after bad money.
Today is different. The AI revolution isn’t being funded by VCs hoping for an exit; it is being funded by the “Magnificent Seven”—the richest, most cash-flow-positive companies in the history of capitalism. They are the eternal spring of growth capital!
Microsoft, Apple, Google, Meta, Nvidia, Amazon, Tesla —these companies are minting money faster than the government can print it. They don’t need external funding to keep the AI party going. They can afford to be incredibly patient. They can easily shrug off bad IRR, which would otherwise doom a VC fund, in the name of strategic investment; regardless, given their current size and profitability, poor ROI on incremental CAPEX is entirely negligible. They can throw tens of billions of dollars at infrastructure and R&D year after year without blinking.
This combination of “patient growth capital” and “extremely deep pocket with low shareholder governance” results in a CAPEX spending spree that is not dissimilar to the US government’s unchecked spending financed by a printing press. As a result, the bubble has a much stronger structural support system than it did in 1999. It means the runway is longer. We might be in the 5th inning, not the 9th.
The Conversation You Must Have Today
So, how do you talk to a client who sees this run-up and wants to chase it? Or conversely, a client who is terrified it will all collapse tomorrow?
The advisor’s job isn’t to predict the top. Even the best investors in the world can’t do that. Your job is to frame the trade-off.
Sit down with your client and say this:
“Look at your portfolio. Because you own the S&P 500, you have already participated in this spectacular run. You own NVDA. You own META, TSLA, and MSFT. You have won.”
“We might be in the middle of a 9-inning baseball game. It could go up another 50% or even 100%. But we also know how this story ends. When the internet bubble burst, the NASDAQ dropped nearly 80% and spent the next 15 years in recovery.”
“So here is the choice: What is more important to your retirement right now? Is it the excitement of riding this wave to the absolute bitter end? Or is it the predictability of knowing your retirement plan is secure—and even accelerated because you were lucky enough to have participated in a raging bull market and wise enough to have taken profit.”
Trading FOMO for Certainty
This isn’t about being a bear. It is about defining “enough.”
If a client chooses to de-risk, they aren’t “missing out.” They are exchanging potential upside for guaranteed peace of mind. They are cashing out their winning lottery ticket instead of rolling it back in hoping for more big wins.
By making this an explicit decision—by saying, “We acknowledge we might leave money on the table, and we are okay with that because we prefer certainty”—you inoculate the relationship against regret. You take yourself out of the impossible game of market timing and put yourself back in the role of the fiduciary.
In my view, the AI bubble is real. It is powerful. It is backed by nearly limitless capital. It could run for years. But you don’t need to bet the farm on it to have a successful retirement. You just need to decide when you’ve won—and you have already won.
The views expressed in this article are those of Jason Hsu and are provided for informational and educational purposes only. They do not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security. References to specific securities are for illustrative purposes only and do not constitute a recommendation to purchase, hold, or sell those securities. Past market events and performance are not indicative of future results. Investing involves risk, including the possible loss of principal. This material is intended for independent financial advisors and registered investment advisers (RIAs) and is not intended for distribution to retail investors. Sowell Management is a registered investment adviser. Registration does not imply a certain level of skill or training.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.
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WEEK AHEAD
August 10-14, 2026
Weekly Market Commentary:
Weak Jobs, Good Week
Stock Market Rebound
Treasury Yield Curve Shifted Lower
A Miss That Markets Liked
The Treasury Moves the Pressure Up Front
Hormuz Is Still a Work in Progress
Crude oil prices fell sharply during the week after Iran and Oman reported progress toward establishing a temporary shipping route through the Strait of Hormuz. The news reduced concerns that the waterway would remain largely closed for an extended period.
Week Ahead
Perspectives by Jason Hsu, PhD
Why This Bubble Is Different (And Why It Could Get Bigger)
The “Infinite Cash” Problem
The Conversation You Must Have Today
Trading FOMO for Certainty
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.