Magnificent Monday Market – 177 (34%) of the S&P 500 Worth $21.5Tn Are Reporting!

What a week this is going to be!

If we can make it through this – August should be a breeze… Earnings are off to a great start with 37.9% year over year earnings gains – isn’t that incredible? Why yes, it is incredible as in NOT credible!!!

Why do I say that? One word (which contains all the words): ALPHABET! That’s right GOOGL, so far, has accounted for ALL of the S&P 500’s earnings gains and 700% of GOOGL’s Operating Income comes from their $98Bn gain from their investment in Space X (SPCX), NOT from actually making more money!!!  

So everything we know about Earnings Season so far is worthless and NONE of it matters as these were all the little waves that tickle the edges of your sand castle but now, clearly forming just off the shore – is the BIG WAVE – the 177 companies that will report this week – needing to justify their $21.5 TRILLION in market cap which means – even at 30x earnings – we need to see $716.66 BILLION in Net Income – or people are going to be VERY disappointed!  

They are also going to need to demonstrate a LACK of rate sensitivity as the FOMC makes their rate decision on Wednesday (during our Live Trading Webinar) and currently the Fed Funds rate is 3.675% (3.5-3.75, officially) yet PCE Prices were up 0.4% in May – pacing 3.4% for the year and, while this month should be flat or even down – everyone knows that’s bullshit from the June PAUSE in the war while inflation is nowhere near being under control.

We get PCE Prices the day AFTER the Fed, on Thursday morning but the Fed already has the number and there’s not another meeting until September 15th – that’s going to be a long time to let inflation fester if they fail to raise rates with only 3 meetings left in 2026!

That’s why Team Trump is pulling out ALL the stops to make the war look like it’s winding down this week – it’s his way of influencing the Fed to at least stand pat at 3.67% because 3.7% of our $40Tn National Debt is $1,480,000,000,0000 IN INTEREST PAYMENTS ALONE that are NOT part of Donald Trump’s budget plan or the OMB’s budget plan for the next 10 years!  

And do you know what IS part of of the Budget Plan? TARIFFS – the very thing that is driving inflation is planned to extract $6Tn over the next decade from consumers’ wallets so without Tariffs and with a realistic accounting of debt – we’re looking at +$10Tn in debt by 2036 ON TOP OF the $25Tn projected budget shortfall we’re already looking at so $65Tn in debt by 2036 will require $3 TRILLION in annual Debt Service ALONE – which is HALF or our current Government Budget or, to put it closer to home – 100% MORE THAN ALL INCOME TAXES that are CURRENTLY BEING COLLECTED!!!  

Do you see how Fucked we are?  

🥷 The War Section: Cutting Through Monday’s Carefully Engineered BS

Let’s be precise about what this “pause” actually is, because Team Trump has been running the same play since March and it works every single time on the algos if not the physical oil market.

What happened: US Central Command has not announced new strikes since late Friday – three days of silence per CNN’s live blog. Iran simultaneously “refrained from retaliatory attacks.” Trump’s UN Ambassador Mike Waltz appeared on NBC and Fox Sunday morning to say Trump is “giving diplomacy some space.” Iran held talks with Oman over the Strait of Hormuz.[cnn]

What this is: Per Kitco’s July 23rd Fed analysis, the June CPI came in at -0.4% monthly – the softer war pause data the Fed needed to justify holding on Wednesday. That number was collected during the brief ceasefire window in June. Oil then re-escalated. The June PCE – which the Fed already has and releases Thursday – was forecast at 3.2% core per Trading Economics. The prior month May reading was 4.1% headline, 3.4% core – a three-year high per Reuters. June’s number is going to be better because June captured the peace deal oil drop. July’s number – which nobody has yet – is going to be considerably worse because oil went back above $100 last week and the Houthis set Saudi tankers on fire Thursday.[reuters][tradingeconomics][kitco]

The sequence Phil has correctly identified: pause the war → oil drops → CPI looks better → Fed holds Wednesday → Trump claims victory over both Iran AND inflation simultaneously → resume bombing in August when nobody’s watching the data anymore.

This is not conspiracy. This is the First Western Trust July 2026 Market Commentary written explicitly: “New Chair Kevin Warsh held rates steady at June FOMC meeting.” The dot plot is already signaling hikes. Nine of 19 FOMC officials projected at least one rate increase by year-end at the June meeting. Bank of America has forecast three consecutive hikes – September, October, December – to 4.25-4.5%. The only thing standing between “hold Wednesday” and “hike September” is whether oil stays below $95 long enough for the July PCE data to look manageable.[myfw][techtimes]

The war pause is the political equivalent of a student cramming the night before an exam – it doesn’t change the underlying knowledge, it just changes this week’s grade.

The Shipping Data: “Pause” Is Doing Enormous Work

Here is what commercial shipping actually showed over the weekend while Trump was “giving diplomacy space,” per Iran International, Reuters, and Straits Live:[iranintl][straits][reuters]

Strait of Hormuz Saturday: 3 vessels – all with transponders switched off
Strait of Hormuz Sunday: 7 vessels – 3 Iranian-linked oil products tankers
Bab el-Mandeb (Red Sea) Sunday: 11 vessels – lowest level in months

Pre-war: 138/day through Hormuz. 70+/day through Bab el-Mandeb.

The “diplomatic pause” produced 7 ships Sunday through the world’s most important oil shipping lane. The Houthis attacked two Saudi tankers Thursday. Shipping companies are not sending vessels regardless of what Trump posts on Truth Social. The UKMTO threat level remains “severe.” Lloyd’s war risk premiums haven’t budged. The pause is invisible to the people whose entire business model is moving barrels through water.[cnbc]

The mine situation nobody’s covering: The Straits Daily Brief reported Sunday that “a tanker struck a naval mine in the Strait of Hormuz and exploded – multiple unverified single-source reports, no independent confirmation from CENTCOM.”

Unconfirmed as of Monday morning. But the fact that mine strikes are being reported at all during a “diplomatic pause” tells you the physical infrastructure of the war – the actual mines in the water – doesn’t pause on political schedule. Iran planted them. Iran says the primary channel has mines. Ships are routing through secondary channels. The pause doesn’t defuse the mines.[straits]

Oil: The $4-5 Drop Is the Machine Working As Intended

Brent at $89 this morning – down from Thursday’s $100 Houthi-driven spike per Associated Press. Per Malay Mail/AFP: Brent fell 8% at Asian open. WTI fell 7% to $83.28 as of 7am this morning.[malaymail][1news.co]

The drop is entirely the “pause” being priced in. Here’s why it’s a gift to the Fed and not a genuine signal:

The EIA spot price table tells the full story of this war in numbers. Brent peaked at $126.69 during the conflict. WTI peaked at $114.01. The pre-war levels were ~$72-73 Brent, ~$65-66 WTI. Today’s $89 Brent means the war premium is still $16-17/barrel even during a “diplomatic pause.” If Brent was actually pricing in war’s end, it would be at $73. It’s at $89. The paper market believes this pause is temporary. The physical market – 7 ships through Hormuz on Sunday – has already reached its verdict.[eia]

The Fed Game: Phil’s Called It, Here Are the Numbers

Phil’s framing is exactly right and here’s the arithmetic that makes it undeniable:

What the Fed faces Wednesday:

• • • • Current rate: 3.5-3.75% (Fed funds at 3.675% effectively)
      • May PCE: 4.1% headline, 3.4% core – highest since 2023 per BEA[bea]
      • June PCE (releases Thursday, Fed already has it): Expected ~3.2% core – lower because June captured the ceasefire oil drop
      • July PCE (nobody has yet): Will capture oil back above $95-100, Houthi tanker attacks, Hormuz at 7 ships/day. It’s going to be ugly.
      • Nine of 19 FOMC members already projecting a hike by year-end per MarketScreener[marketscreener]
      • Dallas Fed dissent coming: Logan likely to dissent for hike, potentially joined by Hammack and Kashkari[kitco]
      • Next meeting: September 15-16 – the one Reuters has pegged at 80% probability for a hike if oil stays elevated[reuters]

Phil’s debt math is the correct framing. At 3.675% on $40 trillion (current national debt clock): $1.47 trillion in annual interest (NOT paying back ANY actual debt) – already the single largest line item in the federal budget, exceeding both defense and Medicare individually. At 4.25% (Bank of America’s three-hike scenario by December): $1.70 trillion in annual interest. The difference between holding Wednesday and hiking three times is $230 billion per year in additional debt service – every year, forever, compounding on top of the $25 trillion in projected budget shortfalls Phil already laid out above.

To put that $230 billion in perspective: it is larger than the entire $95 billion emergency Iran war funding bill the House just passed – twice over. It is more than the US spends annually on veterans’ benefits, education, and transportation combined. And it accrues automatically, requiring no vote, no appropriation, and no congressional approval – just the passage of time and the Fed’s decision on Wednesday afternoon.

Trump has a direct, enormous, and mathematically undeniable financial incentive to keep the war looking like it’s winding down this week specifically so Kevin Warsh holds at 3.675% on Wednesday and the September hike debate replaces the Wednesday hike reality. The three-day strike pause isn’t diplomacy. At $40 trillion in debt, it’s the most expensive press release in American history.

The war pause is not diplomacy. It is monetary policy by other means.

https://www.usdebtclock.org/

The SPR: Last Week’s Number Confirmed

Per Reuters July 20: 311.4 million barrels – lowest since March 1983. Down 104 million barrels since February 28th. 59 million barrels above the statutory minimum of 252.4 million. At 5 million barrels/week draw rate: ~12 weeks to statutory minimum = mid-October. The war that was supposed to take 4-5 weeks has spent 104 million barrels of emergency reserves and counting.

This week’s SPR number arrives Wednesday – expected to show another 4-5 million barrel draw. Watch it carefully: if draws accelerate to 6-7 million/week as the military campaign resumes post-pause, the October statutory minimum timeline moves to September. The Fed’s September meeting and the SPR statutory minimum are converging on the same calendar date. That is not a coincidence that markets have priced.

The Bottom Line for Our Readers

The war pause is real in the narrow sense that no CENTCOM strikes were announced Friday-Sunday. It is artificial in every meaningful sense – timed to the Fed meeting, timed to the Thursday PCE release, designed to let June’s lower oil-price data do the Fed’s work for it rather than the actual situation on the ground doing the honest work.

The physical evidence – 7 ships through Hormuz on Sunday, 11 through Bab el-Mandeb, mines still in the water, Brent still $16-17 above pre-war levels – tells you everything about what the market actually believes versus what the algos are programmed to do on “diplomatic pause” headlines.

Phil is right: August should be a breeze. Right after the Fed holds Wednesday, the PCE comes in Thursday showing June’s temporary relief, and then the actual July data starts arriving in August showing what $95-100 oil and burning Saudi tankers do to real-world prices.

The Big Wave is forming. The 177 companies need $716 billion in net income. GOOGL accounted for all of Q2’s gains on a SpaceX paper profit. The war pause is engineered for Wednesday. The SPR has 12 weeks left before hitting the statutory floor. And Iran is holding talks with Oman while its proxies shoot missiles at Saudi tankers in the Red Sea.

Other than that – magnificent Monday indeed.

Well, that’s pretty bleak but chip-maker, CXMT went public in China this morning and popped 466% at the open so YAY TECHNOLOGY!!! What else could possibly mater in life? Apparently nothing as the indexes are popping 1.5% this morning, taking back almost half the recent drops so YAY!!!! I guess… 

We’ve got the Fed, we’ve got window-dressing and a pause that refreshes (and reloads) in the Middle East and, of course, we have EARNINGS! 

That is a tidal wave of earnings and all we can do is let it wash over us and, once they recede, we can try to figure out how the next wave is likely to hit. Remember – these guys need to show us $716.66 BILLION in earnings or we’re going to have to admit the S&P 500 is trading at about 40x – which would be INSANE so, clearly, it’s the earnings that have to be wrong – as it can’t be the current valuations – can it?  

And it’s also a Big Data week with Durable Goods and the Dallas Fed this morning, Housing Data, Consumer Confidence and the Richmond Fed tomorrow, Business Uncertainty and the Fed on Wednesday, GDPhursday with Personal Income and Friday brings us Consumer Sentiment, Chicago PMI, Employment Costs and Farm Prices – all as we auction off another $642,000,000,000 in Bills and Notes this week and that will COMPETE with all the Corporate Debt announcements we’ll be hearing during the Earnings Reports!  

Don’t worry though – if you want to ignore all this debt and get out there and BUYBUYBUY all the Magnificent Tech – all you have to do is what the rest of our fellow investors are doing and CHARGE IT!!!

Also a recover but, of course it’s a record – before 2000, the ENTIRE US Market was only worth $15Tn, now it’s $64Tn – 4x bigger and Margin Debt is 10x bigger (250%) so sure… it will be fine… everything is fine…

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