By Thierry Hasse, Chief Investment Officer
Elevage Partners | July 28, 2026
Last week we asked whether the AI selloff was a decline or a reallocation. Then two of the market’s largest companies reported, and the answer was less comforting than either: the market’s worries have stopped taking turns. If capital spending, interest rates, energy, and trade sound like the same short list we have returned to for three straight weeks, that repetition is deliberate. The list has not changed. For most of this year each of these took its own week to unsettle investors and then quieted while the next one moved to the front. Last week they arrived together, and began feeding one another.
Spending on Trial
The Fed Adds to the Cost of Waiting
Here is where the pressures stop being separate. The reason unproven spending is punished harder now than it was six months ago is sitting in the bond market. The 10-year Treasury yield climbed to 4.71%, its highest since January 2025, and the 30-year touched 5.19% (Source: Reuters). When the rate used to value a distant payoff rises, a dollar promised years from now is worth less today, so every company asking investors to wait pays a steeper price for the waiting. New Fed Chair Kevin Warsh wanted less hand-holding and more dependence on the data. He got it. Economists are nearly unanimous that the Fed holds rates steady at this week’s meeting (July 28 to 29), yet futures moved from pricing under 11% odds of a rate hike on July 15 to nearly 35% by July 22 (Source: CME FedWatch). We find the irony hard to miss: a chair nominated with an eye toward lower rates is, for now, presiding over a market bracing for higher ones.
What’s Keeping Rates Up
The reason the bond market won’t relax is inflation, and last week it gained two new sources at once. Crude oil topped $100 a barrel for the first time since May as the fragile understanding between Washington and Tehran gave way and the Houthis opened a second front in the Red Sea, striking Saudi tankers on top of the ongoing disruption at the Strait of Hormuz (Source: CNN, Bloomberg, Al Jazeera). Two of the world’s narrowest energy corridors under pressure at the same time removes the option of simply routing around the trouble. Within days, the administration replaced the blanket tariff the Supreme Court struck down earlier this year with fresh duties of 10% to 12.5% on 60 trading partners, covering roughly 99.4% of U.S. imports (Source: CNN, NBC News). Energy costs and tariffs push in the same direction, toward higher prices, and higher prices are what keep the Fed from cutting, which keeps the cost of waiting high, which is precisely what punished Alphabet and Tesla. The way we see it, these were not four separate problems last week. They were one loop, and every arrow pointed the same way.
Decline, or Reallocation Again?
Last week’s question is worth asking a second time, because the answer decides how much this matters. In the prior week’s selloff the damage was concentrated: the mega-caps fell while the equal-weighted index actually rose, a sign the market was rotating within the AI trade rather than leaving it. Last week told a similar story. The cap-weighted S&P 500 slipped about 0.6% for the week while the equal-weighted version held essentially flat (Source: S&P 500 and S&P 500 Equal Weight, week ending July 24). Even with Tesla down 17.8%, the damage stayed concentrated in the heavily weighted names that reported rather than spreading to the average stock. That keeps last week in the reallocation camp: genuinely painful for the companies caught wrong-footed, and far milder for a portfolio that is not concentrated in them. The signal to watch is whether that gap closes, because the week the selling broadens past the mega-caps is the week the loop above starts reaching the whole market.
Amazon and Apple report Thursday, and the Fed decides the day before, and it would be easy to cast this week as one more test to hold your breath through. We would rather name what actually changed. For two years the market paid up for the future and asked few questions. Last week it began asking the present to prove itself, on four fronts at once. In our view that is less a week to trade around than a change in the weather. What we lean on in weather like this is not a sharper forecast. It is a portfolio built not to need one.