The US–Iran conflict has entered a new lull again, animating fresh hopes that the Middle East crisis will go into remission and allow “normal” business‑cycle factors to dominate the outlook for the economy and monetary policy decisions at the Federal Reserve. But as the world has learned since the war started on Feb. 28, looking more than a few days (if not hours) ahead on this topic tends to resemble a coin flip for estimating probabilities.
Resilient Q2 GDP Nowcast Masks Risk For the Rest of the Year
The Iran conflict continues to unsettle the outlook for the US economy, but the effects of the Middle East crisis may be hard to spot in this week’s second‑quarter GDP report. The government’s initial estimate is expected to roughly match Q1’s moderate 2.1% real annualized gain, based on the median of nowcasts compiled by The Capital Spectator, with the Bureau of Economic Analysis set to publish the official data on July 30.
Research Review | 24 July 2026 | Strategy Analytics
The CAPE that Cried Wolf
Dino Palazzo (Board of Governors of the Federal Reserve System)
May 2026
The Capital Spectator’s Takeaway
The paper reports that traditional CAPE ratio’s false warnings of market overvaluation since the 1990s are an accounting illusion caused by mandatory R&D expensing and volatile special-item write-downs. By stripping out these regulatory distortions, CAPE-H eliminates the apparent structural break and restores CAPE’s ability to accurately predict long-term price appreciation and excess stock market returns.
Oil Refiners Catch Fire as Iran Conflict Drags Nuclear Sector Lower
The war with Iran is bad news for the global economy, but it’s lifting the fortunes of most energy stocks, led by oil refiners, according to a set of ETFs. The world has had a painful reminder that fossil fuels from the Middle East can’t be ignored. At the same time, some corners of energy have taken a hit — the nuclear power industry is the major downside outlier since the conflict began on Feb. 28.
Iran Tensions Revive Worries Over Inflation and Rising Yields
In late February, the US 10-year Treasury yield was trending lower, dipping below 4.0% on the final trading day of the month. The macro outlook at the time suggested the benchmark yield would dip even lower in the coming weeks, a view supported by the downside trending behavior that month. But on Feb. 28, the bombs started falling on Iran, an event that reversed the 10-year yield’s slide—a turnaround that has strengthened in July.
Small Caps Challenge Momentum Factor’s Throne
The momentum risk factor has been leading the field in recent history, but there are signs that a rotation may be underway, based on a set of ETFs through yesterday’s close (July 20).
Diversified Portfolios Show Resilience Amid Escalating Iran War
With the Iran war escalating, the conflict is again getting harder to ignore, which strengthens the case for maintaining a globally diversified portfolio. The reasoning isn’t based on assuming that a broad approach to asset allocation will outperform other strategies or deliver superior risk management. Although one or both outcomes are possible, the stronger case for leaning into global diversification is that it rests on the idea that markets can, and often will, deliver surprising results.
Book Bits: 18 July 2026
● Speed: How It Explains the World
Vaclav Smil
Review via The Wall Street Journal
We are often told that the speed of innovation today is faster than ever before and accelerating exponentially. But as we prod and marvel at our smartphones or develop parasocial relationships with our chatbots, it’s useful to remember that a few decades spanning the turn of the 20th century saw the invention of lightbulbs, the electric automobile, home refrigeration and powered flight. How fast are we really going now by comparison? And is faster necessarily better?
That is the question posed in “Speed,” a marvelously encyclopedic book by Vaclav Smil, an environmental scientist and professor emeritus at the University of Manitoba.
US Q2 GDP Growth Expected Near Q1’s Increase
Economic activity is on track to expand close to the pace reported in the first quarter, based on the latest Q2 nowcasts compiled by The Capital Spectator. The median estimate suggests growth will ease slightly from Q1.
Cooler June Inflation Clashes with Fresh Middle East Risk
Federal Reserve officials are talking tough on inflation, but the outlook for monetary policy is still cloudy amid murky geopolitical and economic conditions.