This month’s Schwab Market Insights includes a new portfolio strategy report, bringing our current views together into one place.
The economy continues to expand, supported by business investment, a stable labor market, and strong corporate profits. This dynamic is helping support broad equities even as investors adjust positioning under the surface. We see better opportunities in high-quality bonds if yields are elevated. At the same time, consumer budgets remain under pressure. Inflation trends have been repeatedly disrupted, and equity valuations leave less room for disappointment.
We remain neutral on equities and cash, more favorable on commodities, and selective within fixed income. Risks are elevated but a severe downturn is not our base case.
Three charts help frame that view.
I'm Kasey McCurdy, Chief Portfolio Strategist for Schwab Wealth Advisory, and this is your Two Minutes on the Market with our Schwab Market Insights.
[Line chart showing U.S. effective tariff rate and national average gas price from January 2024 to July 2026]
First, inflation has faced back-to-back supply shocks. Tariffs raised pressure on goods prices, and before that could fully work through, disruption in the Strait of Hormuz pushed oil prices sharply higher. Growth has held up, but the path back toward the Fed's inflation target has become less predictable.
[Line chart showing the percent return of the Russell 2000, S&P 500 and Magnificent 7 from January 2026 to July 2026]
Second, equity leadership has broadened since spring. The Russell 2000 has outpaced both the S&P 500 and the Magnificent 7 this year. That’s encouraging after several years of narrow market leadership. We still want to see broader earnings growth and some relief in financing conditions before assuming the small-cap run will continue at the same pace.
[Line chart showing expected earnings growth for MSCI Emerging Markets, MSCI USA, MSCI Japan, and MSCI Europe ex. UK from 2016 to 2026]
Finally, earnings expectations have accelerated outside the United States, led by the emerging markets. Much of that growth is tied to technology and the global AI investment cycle. The opportunity has expanded geographically, though several markets have also become more dependent on continued technology spending.
Our view remains fairly straightforward: maintain broad diversification and be thoughtful when adding risk.
That's your Two Minutes on the Market. With the new portfolio strategy report the Schwab Market Insights brings our current positioning, supporting data, and market outlook together in one place to help you focus on the bigger picture, not just the latest headline.
