July 2026 KWP Newsletter

Mid-Year Focus

Summer may be in full swing, but the markets haven't slowed down. Investors have navigated a steady flow of inflation data, evolving central bank expectations, geopolitical developments, and the start of earnings season. While headlines continue to shift, the underlying economy has remained remarkably resilient, with businesses and consumers adapting to a changing environment. It's a reminder that successful long-term investing isn't about reacting to every headline but staying focused on the bigger picture and the enduring strength of the economy.

June also brought encouraging news on the inflation front. The Consumer Price Index (CPI) showed prices fell 0.4% from May—the largest monthly decline since April 2020—while annual inflation eased to 3.5%, its lowest level since March. Both figures came in better than economists had expected, reflecting a meaningful cooling in price pressures. Much of the improvement was driven by lower energy costs, with gasoline prices falling by nearly 10% during the month. Food prices, however, continued to edge higher, led by increases in items such as produce and seafood. In addition, consumer spending has generally held up well, the labor market has remained relatively healthy, and corporate earnings expectations have stayed constructive. Minutes from the Federal Reserve's June meeting reinforced that officials remain committed to returning inflation to target (2%) while acknowledging that upside risks to prices remain.

^{https://www.federalreserve.gov/economy-at-a-glance-inflation-pce.htm}

^{https://finance.yahoo.com/economy/article/inflation-cooled-off-in-june-as-energy-prices-slid-180813780.html} 

Value vs. Growth

Earnings growth expectations remain positive across most sectors, although the pace of growth is uneven. Energy and Technology continue to lead the market, reflecting strong demand, improving profitability, and favorable year-over-year comparisons. Materials are also expected to deliver above-average earnings growth, while economically sensitive sectors such as Industrials and Financials are projected to post more moderate gains. Defensive sectors, including Utilities, Consumer Staples, and Real Estate, are expected to see steady but slower earnings growth, while Health Care is the only sector currently projected to experience a year-over-year decline. Overall, earnings growth remains broad-based, supporting the view that corporate America continues to demonstrate resilience despite a dynamic economic and market environment. The chart below resembles the potential shift in sector strength over the coming 12 months (based on Q2 2026 results).

^{https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/ (slide12)}

Recent Developments

While Congress took a break for the Independence Day holiday, activity in Washington didn't come to a complete stop. One of the more notable developments was the official launch of Trump Accounts, a new savings program for children created under last year's One Big Beautiful Bill Act.

Beginning July 4, 2026 parents became eligible to open accounts, and the federal government's initial $1,000 contribution also began being deposited for eligible children born on or after January 1, 2025. $5,000 annually can be added to each Trump Account (shared limit). For example: If parents and grandparents each want to contribute, no more than $5,000 total can be added each year. 

Interest in the program has been strong. According to the U.S. Treasury Department, more than 6 million accounts have already been opened, with approximately 1.4 million children currently eligible to receive the government's $1,000 contribution. New accounts are automatically invested in the State Street SPDR Portfolio S&P 500 ETF (SPYM).

The program is also expected to become more flexible over time. Treasury officials have indicated that families will eventually be able to transfer their accounts to other brokerage firms. Guidance on how those rollovers will work is expected later this summer.

Opening a Trump Account can be initiated at https://www.irs.gov/trumpaccounts. Feel free to reach out to Kotys Wealth Professionals with any specific questions. 

^{https://www.schwabassetmanagement.com/story/washington-what-to-watch-now}