Daily Commentary
Commentary prepared by Alloya Investment Services, a division of the wholly owned CUSO of Alloya Corporate Federal Credit Union. Alloya Investment Services is a leading broker/dealer consultant to credit unions.
Monday, July 20, 2026 at 8:00 am CT
Commentary prepared by Tom Slefinger, Market Strategist
Market Indications
Other Market Indicators
| Market Indicators | ||
|---|---|---|
| 2s/5s Tsy Spread | 0.12 | 0.00 |
| 2s/10s Tsy Spread | 0.41 | 0.00 |
| 2s/30s Tsy Spread | 0.93 | 0.00 |
| DJIA-30 | 52,146.42 | -0.77% |
| S&P-500 | 7,457.69 | -1.01% |
| NASDAQ | 25,520.24 | -1.40% |
| Dollar Idx | 100.74 | -0.03% |
| WTI | 82.49 | +4.5% |
| Gold | 4,018.20 | +0.65% |
Daily Commentary
Recap — The U.S. is bombing Iran for a ninth straight day (as the number of American casualties reaches 17), and yet olive branches are being sent out once again as the regime claims that “the diplomatic apparatus has been active in recent days” — a statement that has investors hopeful that negotiations will resume yet again — in a classic sign of Einstein’s definition of insanity.
On the stock market front, U.S. futures are modestly in the green (and gaining some momentum). That said, the SOX index is now in bear market terrain, down exactly 20% in less than a month. The Mag Seven, which had led the market by a wide margin for four years, has now lagged far behind so far in 2026.
On Treasury yields, I find it striking that after multiple supply shocks, six years of extraordinary fiscal stimulus, an AI boom and record-high equities, the 10-year note can still barely reach 4.5%. That’s it? Without the recurring shocks since 2020, core inflation would likely be at 2% already. Ex-shelter core Consumer Price Index (CPI) is already running at 2.1%, a fact too few people seem to appreciate. There are pockets of inflation, but the broader story still looks overhyped.
Remember, the 10-year Treasury yield was below 4.0% before the war. Since then, oil prices have jumped, Fed expectations have reset, and AI-related debt issuance has lifted real rates. I do not think any of that is permanent, and I am not interested in overcomplicating it. Meanwhile, only 2% of portfolio managers expect a recession over the next year. With that kind of pro-cyclical consensus, the 10-year should arguably be closer to 6.0%. The fact that it is not may be the real story.
Given that extreme consensus, I am impressed that Treasury yields are still 50 basis points below the cycle peak. After the November midterms, political gridlock and fiscal drag should pressure GDP forecasts lower and will likely keep the Fed barking but not biting.
For a more in-depth analysis of the economy and markets, please be sure to read this week’s edition of the Weekly Relative Value — All About Inflation — Until It Isn’t — to be released later this morning.
The Week Ahead
There are no Fed speakers before the July 29 Federal Open Market Committee meeting, and the U.S. data calendar is light. Key releases include June New Home Sales on Friday, the Kansas City Fed Manufacturing Index on Thursday and July Services Indexes from the Philadelphia Fed on Tuesday and Kansas City Fed on Friday. New home sales are expected to rise to 600,000 annualized units, but the key point remains that bloated inventories near 17-year highs at 10.3 months’ supply will likely require lower prices to clear.
The Kansas City Fed Manufacturing Index may not draw much attention, but another strong print after solid New York and Philadelphia Fed reports would point to a broader factory sector pickup to start Q3. June’s Leading Economic Indicator and Chicago Fed National Activity Index are also due, though both are stale and unlikely to move markets.
Geopolitics remains the bigger risk, with renewed U.S.-Iran hostilities putting the Strait of Hormuz back in focus. The key tail risk is Iran warning that its Houthi allies could expand shipping disruptions to the Red Sea — likely a deterrent against U.S. strikes on Iranian power infrastructure but still a live threat. Another oil shock is the main risk to the global disinflation trend.
Finally, on Friday, July 24, many Section 301 investigations should conclude, leaving a more durable tariff regime in place by week’s end.
Stay tuned and have a great day!
Economic Calendar
July 20 - 24, 2026
Future Fed Expectations
Source: Bloomberg
| Select Probabilities based on the Futures | |
|---|---|
| Probability of Fed Funds rate HIKE on July 29, 2026 | 35% |
| Probability of Fed Funds rate HIKE on September 16, 2026 | 55% |
**All quoted rates are indications and are subject to change without notice.
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