July 2026 Market and Economic Update: Mixed Signals and Elevated Valuations

What happened in the stock market and economy during July 2026?

In this month’s Market and Economic Update, Kaydan Wealth Management Founder, Jim Kruzan, CFP®, CRPC® reviews the latest economic indicators, stock market valuations, employment data, inflation, and investment returns. Although some areas showed modest improvement during July, other data continues to support a cautious outlook.

WATCH THE JULY MARKET AND ECONOMIC UPDATE

LEI Continues to Decline

The Conference Board Leading Economic Index (LEI), continued its downward trend. This indicator is designed to provide insight into the future direction of the U.S. economy and has historically weakened ahead of recessionary periods.

A declining LEI does not tell us exactly when an economic slowdown or market selloff may occur. However, when combined with historically elevated stock market valuations, it is one of several reasons we continue to approach the current environment cautiously.

Consumer Credit and Commercial Mortgage Concerns

Consumers account for a significant portion of U.S. economic activity, making household financial health an important part of the broader economic outlook.

Credit card delinquency rates have continued to rise, while commercial mortgages also remain under pressure. Delinquency rates associated with commercial real estate loans—particularly those tied to office buildings and held by local or regional banks—remain near historically high levels.

These trends do not necessarily indicate an immediate recession, but they may provide insight into financial strain affecting consumers, businesses and lenders.

Manufacturing Shows Some Improvement

Manufacturing provided one of the more encouraging signals in July. Several Federal Reserve regions reported modest improvement, while Purchasing Managers’ Index figures and new-order data also moved slightly higher.

Manufacturing numbers can fluctuate considerably from month to month, so it remains to be seen whether this improvement will continue. For now, it represents one of the more positive pieces of July’s economic data.

Inflation Remains Elevated

Inflation continues to complicate the Federal Reserve’s interest-rate decisions.

Producer Price Index data, which measures changes in the prices businesses pay for goods and services, remained elevated on a year-over-year basis. Because higher producer costs can eventually affect consumer prices, this may make it more difficult for the Federal Reserve to lower interest rates.

At the same time, emerging weakness in the labor market may make raising rates less appealing. The Federal Reserve is therefore balancing persistent inflation against signs of slower economic growth and employment.

Employment Data Shows Signs of Weakness

Several employment indicators came in below expectations.

The ADP employment report showed fewer new jobs than economists had forecast. The broader U.S. employment report also fell short of projections.

Although the unemployment rate declined from 4.2% to 4.1%, Jim explains that the decrease was influenced by fewer people actively seeking employment. A lower unemployment rate is not always an indication of a strengthening labor market when the labor-force participation behind it is also changing.

Together, these reports suggest that employment conditions may be gradually weakening.

Stock Market Valuations Remain Historically High

Jim also reviews two widely followed stock market valuation measures: the Buffett Indicator and the Shiller price-to-earnings ratio.

The Buffett Indicator compares the total value of the U.S. stock market with the country’s gross domestic product. The Shiller P/E ratio compares stock prices with inflation-adjusted corporate earnings averaged over a 10-year period.

Both measures indicate that U.S. stock market valuations remain historically elevated. Valuations alone cannot predict when the market will decline, and expensive markets can remain expensive for extended periods. However, higher valuations may leave investors more vulnerable if economic conditions or corporate earnings weaken.

July Stock and Bond Market Performance

Market performance varied during July.

The S&P 500 was relatively flat, while value stocks gained approximately 1%. The Nasdaq Composite and Nasdaq-100 declined during the month as some of the largest technology and artificial intelligence-related companies encountered headwinds.

The U.S. stock market also remains highly concentrated. The Magnificent Seven companies represent roughly one-third of the S&P 500, while the 10 largest companies account for nearly 40% of the index. This means the performance of a relatively small number of companies can have an outsized influence on the broader market.

Bonds also continued to face pressure. Several major bond categories remained negative for the year, including broad-market bonds and Treasury securities across different maturities. Jim explains how this interest-rate environment has influenced our use of money market holdings in certain IRA accounts.

Watch the July Market and Economic Update

July’s data presented a mixed picture. Manufacturing improved modestly, but weakness in the Leading Economic Index, consumer credit, commercial mortgages and employment remains concerning. Inflation and historically elevated stock market valuations add further uncertainty.

Watch Jim’s complete July 2026 Market and Economic Update for additional context on these trends and the investment decisions they may influence.

If you have questions or would like to discuss how current market and economic conditions may affect your investments or financial plan, please contact your Kaydan Wealth financial advisor.

We’ll return next month with an update on August.