Fidelis Capital LLC
07/17/2026 | Press release | Archived content
Investment Insights: Week Ending July 17
Originally published in "Investment Insights: Week Ending July 17"
By: Aaron Wall, CFA
Partner, Portfolio Manager
Markets have been relatively flat this week while digesting escalation in the Iran war, congressional testimony from Fed Chair Kevin Warsh, surprisingly weak inflation reports, and a strong start to second-quarter earnings season. Of those themes, we're taking a deeper dive into what is happening at the Fed and the weaker inflation data, which may not indicate that we are in the clear just yet.
The original "Memorandum of Understanding" (MOU), which now seems to be nullified, led to a steep decline in oil prices when it held throughout June.
At the start of the month, oil prices were around $100 a barrel, but by the end, prices fell to nearly $70 a barrel. This price plunge led to a downside surprise in June inflation. CPI fell 0.4% for the month against expectations for a 0.1% decline, while year-over-year CPI came in at 3.5%, down from 4.2% in May.
While still well above the Fed's stated 2% target, this is the first decline in the annual inflation rate since January and the largest monthly decline since April of 2020, making it a welcome surprise.
The Producer Price Index also had good results this week. PPI measures costs from the producer's perspective and is usually viewed as a leading indicator to CPI. PPI was expected to stay flat in June, but it fell by 0.3%.
While it is great to see these indicators of inflation weaken in June, it's important to remember that volatility in energy prices will likely hang around until the war ends. It would be unwise to see these numbers as a real turning point for inflation, though we will be monitoring whether a trend lower can start to form as we move into the back half of the summer.
During this session, he was grilled extensively on some of the new ideas he is seeking to bring to the institution. Below are key quotes from his testimony.
On the recent positive inflation data: "There might be some who look at this morning's data and say, 'Oh, mission accomplished, everything is swell.' That is not my view."
It's clear that Warsh is inclined to be patient. He continues to reference the Fed's job in managing inflation and how its ultimate priority is stable prices, something that the Fed has been unable to deliver for the last few years. As we would expect, he is looking for a trend to establish instead of reacting to one positive reading.
On his reformist agenda: "I've given the five task forces a tall task to go back to first principles, see what we're doing, see what can be improved upon. If they were starting with a blank sheet of paper and you had a highly credible central bank running the most important monetary policy in the world, what would we do?"
Warsh has created five task forces:
1. Communications - Reviewing how the Fed communicates its debates and decisions to the public.
2. Balance Sheet Policy - Examining how the Fed currently manages its asset holdings.
3. Data - Examining what data the Fed collects and how that data is used to inform policy decisions.
4. Productivity and Jobs - Reviewing how the Fed can increase its adoption of new technologies like AI to improve internal procedures, as well as assessing their potential impact on the productivity of the economy at large.
5. Inflation Frameworks - Re-examining how the Fed assesses inflation with a focus on how it may need to update policy.
He explained in his testimony that these task forces will create comprehensive reports that will be shared with the public.
On communication: "We're human and if we were to give you my projection today about what we'll do when we meet in two weeks ... then we would find ourselves taking information that's consistent with our priors and rejecting information that's inconsistent. It's not the way we want to do things… We want to get policy right, and I think being somewhat more circumspect in our communications, at least for me, is a better way of calling balls and strikes."
Here, Warsh is laying out his argument for the Fed to be more careful about how it communicates to the market. His concern is that when the Fed is openly forecasting its future path of interest rates, it could have negative consequences if data changes render the initial forecast irrelevant.
He wants the Fed communication to be less committal to avoid backing itself into a corner by signaling an expected action. It can be argued that this is what occurred when the Fed communicated inflation was initially transitory, leading to a delayed policy response, even as data began to signal that inflation was becoming stickier.
The Fed meets next in two weeks, and the odds-on favorite across the market is that interest rates will remain unchanged again. We are still in the early innings of Warsh's tenure, so we will continue to analyze and share thoughts on his public commentary.
Investment Committee members will recap the first half of the year, discuss the changing of the guard at the Fed, dissect potential equity headwinds and tailwinds in the second half of 2026, and review how we are positioning portfolios in the current environment.
If you receive our firm newsletters, you will get the webinar link directly to your inbox at 4:30pm ET-stay tuned.
By: Aaron Wall, CFA
Partner, Portfolio Manager
Markets have been relatively flat this week while digesting escalation in the Iran war, congressional testimony from Fed Chair Kevin Warsh, surprisingly weak inflation reports, and a strong start to second-quarter earnings season. Of those themes, we're taking a deeper dive into what is happening at the Fed and the weaker inflation data, which may not indicate that we are in the clear just yet.
June CPI and PPI: Lower Than Expected
Inflation data will continue to be messy for the foreseeable future as oil prices remain tightly correlated to the ongoing war in Iran.The original "Memorandum of Understanding" (MOU), which now seems to be nullified, led to a steep decline in oil prices when it held throughout June.
At the start of the month, oil prices were around $100 a barrel, but by the end, prices fell to nearly $70 a barrel. This price plunge led to a downside surprise in June inflation. CPI fell 0.4% for the month against expectations for a 0.1% decline, while year-over-year CPI came in at 3.5%, down from 4.2% in May.
While still well above the Fed's stated 2% target, this is the first decline in the annual inflation rate since January and the largest monthly decline since April of 2020, making it a welcome surprise.
The Producer Price Index also had good results this week. PPI measures costs from the producer's perspective and is usually viewed as a leading indicator to CPI. PPI was expected to stay flat in June, but it fell by 0.3%.
While it is great to see these indicators of inflation weaken in June, it's important to remember that volatility in energy prices will likely hang around until the war ends. It would be unwise to see these numbers as a real turning point for inflation, though we will be monitoring whether a trend lower can start to form as we move into the back half of the summer.
Warsh Testifies in Congress
On Tuesday, Kevin Warsh testified in front of lawmakers for roughly three hours, his first appearance before the House Financial Services Committee as Federal Reserve Chairman.During this session, he was grilled extensively on some of the new ideas he is seeking to bring to the institution. Below are key quotes from his testimony.
On the recent positive inflation data: "There might be some who look at this morning's data and say, 'Oh, mission accomplished, everything is swell.' That is not my view."
It's clear that Warsh is inclined to be patient. He continues to reference the Fed's job in managing inflation and how its ultimate priority is stable prices, something that the Fed has been unable to deliver for the last few years. As we would expect, he is looking for a trend to establish instead of reacting to one positive reading.
On his reformist agenda: "I've given the five task forces a tall task to go back to first principles, see what we're doing, see what can be improved upon. If they were starting with a blank sheet of paper and you had a highly credible central bank running the most important monetary policy in the world, what would we do?"
Warsh has created five task forces:
1. Communications - Reviewing how the Fed communicates its debates and decisions to the public.
2. Balance Sheet Policy - Examining how the Fed currently manages its asset holdings.
3. Data - Examining what data the Fed collects and how that data is used to inform policy decisions.
4. Productivity and Jobs - Reviewing how the Fed can increase its adoption of new technologies like AI to improve internal procedures, as well as assessing their potential impact on the productivity of the economy at large.
5. Inflation Frameworks - Re-examining how the Fed assesses inflation with a focus on how it may need to update policy.
He explained in his testimony that these task forces will create comprehensive reports that will be shared with the public.
On communication: "We're human and if we were to give you my projection today about what we'll do when we meet in two weeks ... then we would find ourselves taking information that's consistent with our priors and rejecting information that's inconsistent. It's not the way we want to do things… We want to get policy right, and I think being somewhat more circumspect in our communications, at least for me, is a better way of calling balls and strikes."
Here, Warsh is laying out his argument for the Fed to be more careful about how it communicates to the market. His concern is that when the Fed is openly forecasting its future path of interest rates, it could have negative consequences if data changes render the initial forecast irrelevant.
He wants the Fed communication to be less committal to avoid backing itself into a corner by signaling an expected action. It can be argued that this is what occurred when the Fed communicated inflation was initially transitory, leading to a delayed policy response, even as data began to signal that inflation was becoming stickier.
The Fed meets next in two weeks, and the odds-on favorite across the market is that interest rates will remain unchanged again. We are still in the early innings of Warsh's tenure, so we will continue to analyze and share thoughts on his public commentary.
Bonus: Surprise Guest At Upcoming Webinar
We are excited for you all to meet and hear from a surprise guest during our Q3 Market Outlook Webinar on Wednesday, July 22.Investment Committee members will recap the first half of the year, discuss the changing of the guard at the Fed, dissect potential equity headwinds and tailwinds in the second half of 2026, and review how we are positioning portfolios in the current environment.
If you receive our firm newsletters, you will get the webinar link directly to your inbox at 4:30pm ET-stay tuned.
Closing Time
As always, we are here for you. If you have any questions or concerns, please reach out to a member of your Fidelis Capital team.
Fidelis Capital LLC published this content on July 17, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on July 19, 2026 at 18:38 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]