GDP, Bonds Not Doing Well, China's Oil Horde, and Watching the Wee Ones

August 2, 2026

THE U.S. ECONOMY: As measured by gross domestic product (GDP), the U.S. economy grew at an annualized rate of 1.5% in the second quarter. The consensus expectation on Wall Street was 2.0%, so this was a disappointment. U.S. GDP grew at an annualized rate of 2.1% in the first quarter. The key driver for growth was personal consumption which grew at a 3.2% annualized rate. Data center construction grew at a 15.2% rate. Business investment in information processing equipment grew at an 8.3% rate. So called "Core Real GDP", which includes consumer spending, business fixed purchases, and home building, and excludes more volatile areas such as government purchases, inventories, and international trade, grew at a 3.9% rate, the fastest pace in over three years. There was enough in this GDP report to support both the bulls and the bears, and so the market did not move much when the report was released.

THE FED: The Fed held its second meeting last week with new Fed Chair Kevin Warsh. It did not change its key interest rate. The Fed statement made it clear the the Fed believes the economy is on solid footing (solid output and capital expenditures, steady employment), but inflation remains a problem. Three members of the Fed voted in favor of a rate hike, dissenting from the majority. The investing markets had priced in a 100% likelihood of a rate hike in September. That has now dropped to 50/50 (anyone's guess). But a rate hike by October or November is fully expected. As you can see below, the bond market has not had a good year.

A WINNING WEEK FOR STOCKS: All major stock indices were positive this past week with the NASDAQ leading the way up 1.6%. The tech sector performed well overall even though specific tech stocks had varying results. Apple had a positive week, but had a bad day on Friday (down 7.4%) after its sales projections lagged expectations and the company said it was having a hard time getting the chips it needed. Chip maker Micron Technologies fell 5.9% on the same day because Apple commented on the rising costs of its chips. Meta (Facebook) was down 6.5% for the week as its projections fell short of investor expectations. On the other hand, Microsoft (up 21.8%) and Amazon (up 17%) soared as its earnings and guidance for the future beat Wall Street's general expectations. U.S. GDP results (see above) disappointed, but did not move markets much. July saw a lot of turbulence, with most indices down, largely because of the Iran war's ups and downs, concerns about how much money AI companies are spending, and the machinations of the Federal Reserve (or lack thereof).

LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.

SUPPLY OF U.S. MONEY: The US M2 Money index measures the overall supply of money in the U.S. economy. This is a key metric in determining what will happen with inflation. If too much money is created, it tends to drive up inflation. In the last two years, M2 has increased at an annualized rate of 4.98%. In the past year, M2 is up 5.13%. In the last 20 years, the M2 annual rate of increase has been 6.28%. In the 20 years prior to February 1, 2020, it averaged 6.10%. In the two years after February 1, 2020, M2 increased at an annualized rate of 18.33%.

DURABLE GOODS: Last month, new orders for durable goods rose at a modest (and disappointing) rate of 0.3%. Transportation is a volatile category because of the outsized effects of airplane orders, and if you strip out that category, durable goods rose 0.6% for the month and are are up 11.0% for the year, the best it has been in four years. Spending on data centers continues to be the biggest driver of durable good spending growth.

CHINA AND OIL: After the disruption to oil supplies caused by the Iran war, China responded by cutting its oil imports by 40%. It imported 11.6 billion barrels of crude oil per day in 2025. By June, it was importing about 7 million per day. China's economy grew at an annualized pace of 4.3% in the second quarter. China's pullback in its demand for oil helped keep prices more reasonable worldwide. How did they do this? China has a huge stockpile of oil, and it has been drawing down on its reserves. According to data cited in a recent Wall Street Journal article, China can keep doing this for about six months at its current rate. China has also been moving to more electric vehicles and to more coal and nuclear for electricity. However, if the oil disruption continues, we will see if China's reserve depletion becomes a problem both domestically and globally.

BUSY WEEK: While away in Ireland, I tried to keep up with emails and other communications and tasks. But I knew it would still be busy when I got back (always is). But this week had a complication. My daughter and son-in-law have a wedding in Italy, so my wife and I are watching their two little ones, our granddaughters, this week. Deb has taken the lion's share of the exertion (and it takes a lot), but I have had to spend a significant amount of time messing around with a one and a three-year-old this week.

Have a great week!

Our purpose is to honor God by helping our clients see the objective, find the path, and navigate past the obstacles to a more prosperous future.

Douglas R. MacGray, J.D., C.F.P. ®

President

Stonecrop Wealth Advisors, LLC

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(610) 628 4545

dmacgray@stonecropadvisors.com

"Blessed are the young for they shall inherit the national debt." Herbert Hoover*

"If I have put my trust in gold or said to pure gold, 'You are my security,' if I have rejoiced over my great wealth, the fortune my hands had gained,...then these also would be sins to be judged." Job 31:24-25,28 (NIV)

*In commemoration of the 250th anniversary of the United States, I am finding a quote from a president each week, in order. This is the 31st week, and Herbert Hoover was our 31st president

SOURCES:

A WINNING WEEK FOR STOCKS: https://myweeklystock.substack.com/p/weekly-market-recap-jul-27-31-bulls?publication_id=697043&post_id=208976564&isFreemail=true&r=s86er&triedRedirect=true AND https://www.wsj.com/finance/stocks/amazon-and-apple-deliver-the-drama-to-close-a-turbulent-month-41d82dc9?mod=stocks_news_article_pos2

THE U.S. ECONOMY: https://www.ftportfolios.com/Commentary/EconomicResearch/2026/7/30/real-gdp-increased-at-a-1.5percent-annual-rate-in-q2

SUPPLY OF U.S. MONEY: YCharts.com

THE FED: https://www.ftportfolios.com/Commentary/EconomicResearch/2026/7/29/fed-on-the-case

DURABLE GOODS: https://www.ftportfolios.com/Commentary/EconomicResearch/2026/7/27/new-orders-for-durable-goods-rose-0.3percent-in-june

CHINA AND OIL https://www.wsj.com/business/energy-oil/how-china-went-from-dream-customer-to-a-nightmare-for-big-oil-e2d0260a?mod=Searchresults&pos=16&page=1 (c) 2026 Anno Domini, Stonecrop Wealth Advisors, LLC, All Rights Reserved Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.

SDG *S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.

*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.

*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.