Nom de Plume

July changed the tape.

The Iran war reignited the inflation trade. Oil surged. Energy stocks took leadership. Financials broke out. Meanwhile, the market’s favorite trade finally cracked.

Semiconductors suffered their worst month in more than a year. AI lost momentum. SpaceX continued unraveling after its euphoric debut.

The market is sending a different message.

Stop guessing what the Fed might do.

Start watching inflation. Because that’s exactly what Warsh is watching.

• Leadership Changed: Energy, natural resources, financials, and broker-dealers finished the month as the clear leaders while technology stumbled.

• The Semi Rally: SMH posted its first meaningful technical breakdown after twelve positive months out of the last fourteen, changing one of the market’s strongest trends.

• AI Lost Momentum: Momentum and AI stocks suffered double-digit declines as investors began making room for a new market environment.

• Energy: WTI rallied 20% during July, as higher fuel prices reignited the inflation trade.

• Financials: Financials continue strengthening as markets adapt to Warsh’s approach to monetary policy.

• Changed the Conversation: The Fed is telling investors to watch inflation not policymakers. If inflation stays contained, rates can stay put.

• Dollar: A weaker dollar gave another month of quiet, value-preserving performance despite continued market volatility.

• Precious Metals: With U.S. debt rapidly approaching $40 trillion, the long-term case for owning metals remains firmly intact.

• SpaceX Mania: Shares fell sharply again in July as speculative excess continued unwinding following the IPO.

• The Rotation Is Real: July ended with a decisive shift away from momentum and toward inflation beneficiaries, creating a very different market than the one investors entered just a month ago.

July finished with the View Matrix back in positive territory, driven by gains and the successful short.
One message continues to stand out: - Play the ball, not the referee.
The market will tell you when inflation is returning. If inflation stays quiet, the Fed can stay patient. If inflation heats up again, expect policy to respond.
For now, we’re sticking with the groups that proved themselves in July.