July 31, 2026

In the Loop – July 31, 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.

The current bull market continues to follow a constructive historical pattern, as markets that reach their fourth year have often extended into a fifth. With recession risk still contained and another aggressive Federal Reserve tightening cycle appearing unlikely, the conditions that typically bring bull markets to an end are not yet in place. Corporate earnings remain the primary support for equities, helped by broad-based profit growth and continued investment in artificial intelligence. Valuations are more mixed: they remain defensible relative to earnings growth, although heavy hyperscaler spending has reduced free cash flow and made parts of the market look more expensive on that basis.

Federal Reserve and Interest Rates

The Federal Reserve held interest rates unchanged at 3.50%–3.75% following this week’s FOMC meeting, but the 9–3 vote delivered a more hawkish message than the unchanged rate suggests. Three members favored a quarter-point increase as inflation remains above the Fed’s 2% objective, partly reflecting higher energy prices and other supply pressures. With economic growth, capital investment, productivity, and employment remaining solid, the outcome indicates that the Fed is in no hurry to cut rates and could consider tightening further if inflation fails to improve.

Individual Company Updates

Alphabet (GOOGL)
Alphabet delivered a strong quarter, with revenue rising 24% and operating income increasing 30%. Google Cloud was the standout, with revenue up 82%, operating income more than tripling, and backlog reaching approximately $514 billion. The stock initially weakened because of negative quarterly free cash flow and higher capital-spending guidance, but the operating results indicate that Alphabet’s AI investments are beginning to generate meaningful returns.
Broadcom (AVGO)
Alphabet’s decision to accelerate AI infrastructure spending should directly benefit Broadcom, its primary partner for custom TPU silicon and advanced networking chips. Google’s first external TPU revenue also creates a potential new growth channel as third-party adoption begins to expand. Broadcom’s deeper partnership with Samsung should further strengthen its access to advanced manufacturing capacity and high-bandwidth memory.
NVIDIA (NVDA)
NVIDIA continues to expand from a chip supplier into a complete AI-infrastructure partner. Its initiatives with SK Group involve AI factories, Vera Rubin systems, and next-generation HBM memory, while potential financing arrangements with OpenAI could support one of the world’s largest proposed data-center developments. NVIDIA is also extending its ecosystem into cybersecurity through the Open Secure AI Alliance.
Microsoft (MSFT)
Microsoft closed fiscal 2026 with revenue up 18% to $90 billion and Azure growth accelerating to 43%. Microsoft Cloud revenue increased 27%, commercial backlog rose 84% to $678 billion, and Microsoft 365 Copilot surpassed 30 million paid seats. The results demonstrate that the company’s substantial AI infrastructure spending is translating into accelerating cloud demand, expanding commitments, and stronger earnings.
Baker Hughes (BKR)
Baker Hughes reported strong orders of $10.5 billion and free cash flow of $1.1 billion, with Industrial & Energy Technology orders more than doubling from the prior year. Remaining performance obligations reached $40.1 billion, including a record $37.1 billion in IET. The company is increasingly benefiting from natural-gas infrastructure, LNG, data-center power demand, and recurring aftermarket services rather than relying solely on traditional oilfield activity.
Eaton (ETN)
Eaton exceeded second-quarter expectations, reporting adjusted earnings of $3.15 per share on approximately $8.5 billion of sales. Management raised its full-year adjusted earnings outlook to $13.40–$13.60 per share. Continued strength in data-center electrical equipment, grid modernization, aerospace, and thermal management reinforces Eaton’s position as a primary beneficiary of rising power demand and AI infrastructure construction.
Teledyne Technologies (TDY)
Teledyne reported record sales and orders, with revenue increasing 9.8% and adjusted earnings rising 20.8%. Funded backlog reached approximately $5 billion, supported by demand for infrared imaging, space systems, maritime technology, and counter-drone applications. The company raised its 2026 outlook, providing additional confidence in continued earnings and cash-flow growth.
RTX Corporation (RTX)
RTX delivered a strong beat-and-raise quarter, with adjusted revenue increasing 14% and earnings advancing 21%. Backlog reached a record $289 billion as demand remained elevated for Patriot systems, missiles, radars, and commercial aerospace services. Improving engine-maintenance output at Pratt & Whitney, combined with higher guidance and stronger free cash flow, supports continued earnings momentum.
Amgen (AMGN)
Amgen’s latest available results showed revenue increasing 6% to $8.6 billion, supported by 9% product-volume growth and double-digit growth from 16 brands. Free cash flow rose to $1.5 billion, and management maintained full-year revenue guidance of $37.1–$38.5 billion. The investment case remains centered on a diversified drug portfolio, growing cardiovascular and rare-disease franchises, and a developing late-stage pipeline that could offset future patent expirations.
We remain focused on navigating market trends and positioning portfolios for long-term growth and resilience.
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