July 2026 | Strength Behind The Headlines
The 2026 World Cup has offered a timely reminder that headlines rarely tell the whole story. At a time when much of the world seems consumed by geopolitical conflict and division, millions of people have gathered to celebrate sport, community, and shared experiences. Images from the tournament have shown strangers becoming friends, cultures coming together, and common ground emerging where many expected only differences. Although the United States exited the tournament earlier than we may have hoped, the event itself has been a celebration of connection that has defied expectations.
We see a similar disconnect between today’s economy and much of the financial discourse. Artificial intelligence continues to dominate the headlines, with many predicting widespread job displacement and economic disruption. Yet the data paints a more nuanced picture. In our view employment remains healthy, and demand for workers with AI-related skills continues to grow across industries. The accompanying charts highlight both the stability of the labor market and the rapid increase in job postings seeking AI proficiency.(1,2)
It is still too early to know how much AI will ultimately improve productivity, but several developments are encouraging. Corporate profit margins have continued to expand, and earnings growth has accelerated across large-, mid-, and small-cap companies. These developments suggest businesses are adapting effectively and beginning to realize some of the benefits of technological innovation.
That broader improvement is encouraging because healthy earnings growth ultimately benefits employees and investors alike. At the same time, we believe it is important to remain disciplined. Markets are forward-looking, and today's stock prices already reflect considerable optimism about future earnings.(3,4)
As our final chart shows, valuations remain above long-term averages across several measures.(5) That doesn't necessarily mean markets are due for a correction, but it does suggest that much of the recent good news may be reflected in current prices, and future returns are likely to depend more on continued earnings growth than on investors’ willingness to pay even higher prices for those earnings.
One of Wall Street's oldest axioms is that markets often 'climb a wall of worry', meaning that periods of persistent uncertainty often create the conditions for durable market advances when reality turns out to be less dire than predicted.
Before the World Cup began, many wondered whether global tensions would diminish attendance and enthusiasm. Instead, stadiums have been full, visitors have been enthusiastic, and the tournament has brought people together in ways few anticipated. Likewise, despite ongoing concerns surrounding artificial intelligence, the underlying fundamentals of the economy – including employment, corporate profitability, and earnings – remain stronger than many headlines would suggest.
Markets have spent the past two years wrestling with inflation, interest rates, tariffs, geopolitical conflict, and now artificial intelligence. Yet despite this shifting focus, the underlying economy has remained remarkably resilient. Headlines capture our attention, but fundamentals determine long-term outcomes. Today, we believe the strength behind the headlines tells the more important story.
— Brad Dinsmore
1. CHART SOURCE: Ned Davis Research, July 13, 2026
2. CHART SOURCE: Yardeni Research, June 30, 2026
3. CHART SOURCE: Yardeni Research, July 13, 2026
4. CHART SOURCE: Yardeni Research, July 13, 2026
5. CHART SOURCE: J.P.Morgan Asset Management, July 13, 2026
NOTE: The S&P 500 Index is a market-capitalization weighted index that includes the 500 most widely held companies chosen with respect to market size, liquidity, and industry. Investors cannot invest directly in an index.