August 7, 2026

In the Loop – August 7, 2026

“In The Loop” is designed to give you a short update reflecting major developments, earnings, and investment trends across some core Equity Income and Growth holdings. All clients should be aware that individual buy/sell recommendations will be conveyed directly to you on an individual basis. Have a great weekend.

Jobs Friday: Weak Hiring Shifts the Fed Debate

Today’s employment report delivered a meaningful downside surprise, with the U.S. economy losing 23,000 jobs in July versus expectations for a gain of roughly 80,000. May and June payrolls were also revised lower by a combined 103,000, confirming that hiring has slowed more sharply than previously reported. The unemployment rate edged down to 4.1%, but largely because the labor-force participation rate fell to 61.4%, while annual wage growth cooled to 3.2%.

Markets initially welcomed the report because weaker employment and wage growth reduced the likelihood of another Federal Reserve rate hike, sending Treasury yields and the dollar lower.

However, as morning trading progressed, clear winners and losers began to emerge. Winners were found in what we call Speed 1 Economy companies and losers accumulated within the Speed 2 sectors. This reaction is reinforcing the market’s two-speed structure. Speed 1 includes the investment-led economy: AI infrastructure, power generation, the electric grid, defense, reshoring and industrial construction—where spending is supported by long-term strategic commitments and large backlogs. Speed 2 represents the consumer- and employment-sensitive economy; it is lagging because slower hiring raises concerns about household spending, while Speed 1 remains supported by the durable capital-investment cycle central to our U.S. Resiliency strategy.

Who else was committed to the US Resiliency Theme?

Alexander Hamilton! In his 1791 Report on Manufactures, Hamilton argued that America’s independence and security required the domestic capacity to produce its own military equipment and other essential goods rather than relying on foreign powers. More than two centuries later, Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer have revived that principle, applying it to semiconductors, artificial intelligence, quantum computing, shipbuilding, critical minerals, pharmaceuticals and advanced manufacturing—the same strategic foundation underlying our U.S. Resiliency investment framework.

Best Guess on Short-term Market Expectations

Clients should expect a more volatile, two-sided S&P 500 in the short term rather than a smooth advance. The index is near record highs, but weakening employment, elevated valuations, uncertainty over Federal Reserve policy, and upcoming inflation and retail-sales reports create greater sensitivity to every data release. Strong corporate earnings and continued Speed 1 investment should support the market, but pullbacks and sharp sector rotations are likely along the way.

Have a Great Weekend!

Individual Company Updates

Palantir (PLTR)

Palantir delivered an exceptional second quarter that reaffirmed its position as a leading software beneficiary of the AI cycle. Revenue increased 93% year over year to $1.94 billion, while adjusted EPS of $0.41 exceeded expectations. U.S. commercial revenue surged 149% and government revenue climbed 90%, demonstrating that customers are moving Palantir’s AIP platform beyond trial programs and into large-scale deployment. Strong operating leverage produced a 62% adjusted operating margin and $1.22 billion in free cash flow, prompting management to raise full-year revenue guidance by approximately $500 million. The nearly 30% stock rally restored market confidence, although Palantir’s elevated valuation and slower international growth remain important risks.

Eli Lilly (LLY)

Eli Lilly reported another outstanding quarter as demand for its diabetes and obesity therapies continued to exceed expectations. Revenue advanced 48% to nearly $23 billion, led by Mounjaro sales of $9.94 billion and Zepbound sales of $4.93 billion, while adjusted EPS reached $8.38. Lilly raised its 2026 revenue forecast to $85–$87 billion and continues to widen its competitive lead through expanding insurance access, additional manufacturing capacity and a deep pipeline that includes oral and next-generation obesity treatments. GLP-1 concentration and pricing pressure require monitoring, but the company’s volume growth and pipeline reinforce the long-term thesis.

Arista Networks (ANET)

Arista Networks reported record results as demand for high-speed AI networking exceeded already elevated expectations. Revenue increased nearly 38% to $3.04 billion, adjusted EPS rose 40% to $1.02 and operating margin approached 50%. Management raised full-year revenue guidance to approximately $12.6 billion and expects continued strength across AI fabrics, traditional data centers, enterprise networking and campus infrastructure. Component availability remains the principal risk, but Arista’s secured supply, substantial cash position and expanding customer base reinforce its position at the center of the AI networking buildout

JPMorgan (JPM)

JP Morgan produced another strong quarter, supported by higher trading activity, investment-banking fees, asset-management revenue and continued growth in deposits and loans. Excluding gains related to Visa shares and other investments, the bank generated net income of $16.9 billion, EPS of $6.14 and a 23% return on tangible common equity, while underlying revenue increased 15%. Expenses are rising as JPMorgan invests in technology, employees and business expansion, but its scale, diversified revenue base and strong balance sheet continue to distinguish it as the highest-quality large U.S. bank and a potential beneficiary of a more favorable capital-markets and regulatory environment.

Eaton (ETN)

Eaton delivered record second-quarter results as demand for electrical equipment remained strong across data centers, utilities, industrial facilities and aerospace. Sales rose 21%, organic growth reached 14% and adjusted EPS of $3.15 exceeded expectations, leading management to raise full-year adjusted EPS guidance to $13.40–$13.60. Electrical-sector data-center orders increased approximately 85%, revenue grew roughly 65% and total electrical backlog expanded 43%, providing excellent forward visibility. Eaton remains one of the clearest Speed 1 beneficiaries of the need to expand power generation, distribution and data-center infrastructure.

Baker Hughes (BKR)

Baker Hughes reported a strong quarter despite softer overall revenue, demonstrating the value of its transformation from a traditional oilfield-services company into a broader energy-technology provider. Adjusted EPS of $0.64 exceeded expectations, orders jumped 49% to a record $10.5 billion and backlog reached $40.1 billion, driven by LNG equipment, gas infrastructure and power-generation demand. Free cash flow rose to $1.11 billion, while the Industrial & Energy Technology division secured a record $7.1 billion of orders. Near-term Middle East disruptions and cautious third-quarter guidance may create volatility, but Baker Hughes is increasingly positioned to benefit from growing global demand for natural gas, LNG and reliable power for data centers.

Amphenol (APH)

Amphenol reported record quarterly results as demand for AI connectivity, power and fiber solutions continued to accelerate. Revenue increased 55% to $8.8 billion, adjusted EPS advanced 67% to $1.35 and orders reached a record $10.7 billion. IT datacom sales grew 89% and now represent 43% of company revenue, while expanding margins and strong cash flow demonstrated excellent operating leverage. Management issued robust third-quarter guidance and increased its expected contribution from the CommScope acquisition, reinforcing Amphenol’s position as a diversified supplier to AI, defense, aerospace and industrial markets.

Vertiv (VRT)
Vertiv produced strong earnings and margins, although revenue timing related to complex, multiphase AI projects created a modest sales shortfall. Revenue rose 24% to $3.27 billion, adjusted EPS increased 60% to $1.52 and operating margin expanded to 22.6%. Most importantly, backlog exceeded $15 billion—more than 76% above last year—indicating that delayed revenue reflects execution timing rather than weaker demand. Management raised its full-year outlook and expects manufacturing expansion and strong second-half activity to help convert this backlog into sales.
nVent Electric (NVT)

nVent Electric delivered an exceptional quarter as data-center demand accelerated across liquid cooling, cable management, electrical connections and engineered enclosures. Revenue increased 53% to $1.47 billion, organic growth reached 47% and adjusted EPS advanced 69% to $1.45. Free cash flow more than doubled, while management raised full-year organic-growth guidance to 32%–34% and adjusted EPS guidance to $5.00–$5.10. Additional manufacturing capacity planned in Minnesota should support continued expansion as annual data-center revenue moves above $2 billion.

Microsoft (MSFT)

Microsoft provided compelling evidence that its unprecedented AI investment is translating into revenue, backlog and earnings growth. Revenue increased 18% to $90 billion, while Azure grew 43% and Microsoft’s commercial backlog surged 84% to $678 billion. Adoption is broadening through Microsoft 365 Copilot, GitHub Copilot and Foundry, and management expects Azure growth to accelerate again next quarter. Capital spending remains enormous and is pressuring free cash flow and cloud margins, but demand continues to exceed capacity, suggesting that Microsoft’s infrastructure expansion is being supported by real customer commitments.

Amazon (AMZN)

Amazon reported accelerating revenue and profitability, led by the strongest AWS growth in several years. Companywide revenue rose 20% to $200.6 billion, operating income increased 43% and AWS sales climbed nearly 37% to $42.2 billion, with margins approaching 40%. AWS backlog reached $496 billion as customers reserved substantial capacity extending into 2028. Amazon raised expected 2026 capital spending to approximately $220 billion, creating free-cash-flow pressure and customer-concentration risk, but the combination of faster cloud growth, high margins and long-term reservations indicates that its AI investments are already generating meaningful returns.

We remain focused on navigating market trends and positioning portfolios for long-term growth and resilience.
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