This Week in Review | Fed Meeting, US GDP, Eurozone GDP (July 31, 2026)

The episode reviews three significant economic announcements from the week of July 31, 2026. First, the Federal Open Market Committee voted to hold interest rates steady at 3.5-3.75% for the fifth consecutive meeting, though three members dissented and voted for a 25 basis point hike. The speakers caution against reading too much into the divided vote, noting that dissenting opinions don't indicate future rate changes, and that Chairman Warsh's move away from forward guidance should not concern investors—central banks routinely change course based on new data. Even if rate hikes occur, they argue the market has already successfully navigated similar policy rate ranges. Second, US GDP came in at 1.5% annualized growth for Q2, down from 2.1% in Q1, driven primarily by resilient consumer spending. The speakers make a key distinction: stocks are forward-looking while GDP is backward-looking, meaning stocks don't wait for economic data but instead preprice known information. They argue that slower GDP growth need not concern equity investors, as history shows stocks deliver positive returns even during modest growth periods, and economic slowdown fears can paradoxically help stocks by lowering expectations for upside surprises. Third, eurozone GDP expanded at 1.8% annualized in Q2, significantly exceeding expectations and rising from flat Q1 growth. Growth was driven by strong AI investment and recovering industrial output, with Spain leading at 2.7% annual growth. Despite recent ECB rate hikes, the speakers highlight that the eurozone yield curve remains positive, supporting healthy loan growth. They conclude that while the eurozone faces challenges from the Iran war and tariffs, the region is positioned to outperform expectations and continue supporting the global bull market.