This Week in Review | US Inflation, Midterm Primaries, Q2 Earnings (Aug. 14, 2026)

The episode opens with July Consumer Price Index data released by the Bureau of Labor Statistics, showing headline CPI at 3.4% year-over-year, marking the second consecutive month of cooling after peaking at 4.2% in May. Core CPI slowed to 2.5%. The segment attributes this largely to energy market dynamics tied to the ongoing Middle East conflict. Gasoline prices rose 24.6% year-over-year but were down from the prior month. The hosts note that while 3.4% is above pre-conflict levels of 2.4%, it falls short of feared massive spikes. They frame inflation as fundamentally a monetary phenomenon, with moderate global money supply growth suggesting energy pressures should fade over time. For investors, what matters is how reality compares to expectations—current elevated consumer inflation expectations combined with cooler-than-feared reality could boost investor sentiment.

The second segment addresses US primary elections and midterm political uncertainty. The hosts introduce the concept of the "Midterm Miracle," citing research showing that midterm years' fourth quarter combined with the following first and second quarters has delivered positive returns 92% of the time, averaging 19.8% cumulative return. They explain this pattern stems from gridlock: midterms typically weaken the sitting president's party, with the president's party losing House seats 89.7% of the time and Senate seats 72.4% of the time historically. Gridlock lowers legislative risk and surprises, rewarding predictability. The hosts caution against letting political views or primary results drive portfolio decisions, emphasizing that markets care about policies affecting businesses, not personalities or party lines. History shows that staying invested through election cycles rather than timing them has rewarded investors.

The final segment analyzes Q2 earnings results. While AI infrastructure investments and hyperscaler spending have genuinely helped drive earnings, the hosts argue this narrative misses the broader story. As of the reporting date, 88% of S&P 500 companies had reported Q2 earnings with 86% beating per-share estimates. Blended earnings growth across all sectors reached over 50% year-over-year, exceeding the 23.1% analysts expected at the end of June and marking the highest growth rate since Q2 2021. Even excluding Amazon and Alphabet, Q2 earnings growth exceeds 20% year-over-year—the second consecutive quarter above this threshold and the seventh consecutive quarter of double-digit growth. Eight sectors reported double-digit earnings growth, and the strength extends globally, with Japanese companies showing over 35% earnings growth year-over-year in Q1. The hosts conclude the picture shows broad market profitability rather than a fragile rally dependent on mega-cap names.