Hall Capital “Market Views” Newsletter July 2026
This is the 65th edition of Market Views from HALL CAPITAL. Our aim is to provide concise views of where we see risk and opportunity for investors.
View on War Impact
- little change since last letter
That is, reduced fossil fuel energy intensity and “demand destruction” due to higher oil prices have mitigated the impact of a temporary major oil supply shock.
Oil prices are likely to stay somewhat elevated relative to where they would have been without war due to the fragility of the cease fire. And oil induced inflation is likely to cause our CPI to remain higher than it would be otherwise, but not so high as to derail the US economy. Other factors influencing the market, such as robust US corporate profit growth, are offsetting these headwinds.
It IS important, however, for the Strait of Hormuz to remain open. If the US honors its side of the bargain, Iran has every reason to keep its side given the fabulous terms of the MOU.
The MOU covers just 60 days, which is not enough time to come to a final agreement. And there will be a lag before full oil deliveries can resume. But, again, as long as the Strait stays open, investors will likely focus on other factors, such as profit growth and Fed policy. Many members of Congress, of both parties, are not happy with the terms. That may not matter. Trump got us into the war without Congressional approval. He may retreat without approval as well.
Thinking of Buying a Big IPO?
- think again
IPOs are no longer limited to small caps. We have seen mega-caps issue IPOs this year. With Open AI and Anthropic in the wings, the excitement is far from over. Size does not eliminate risk, however.
Lest you are tempted to chase after a position in SpaceX or the coming IPO of Open AI, you should acknowledge why you are buying. Is it to be “part of something” or to make a superior long term return? These two companies are long on concept and short on value. That is, they may serve the first rationale to own, but not the second.
Sure, these are important companies and I would have been glad to have been an early-stage venture investor when the valuation was a fraction of the IPO price. Unlike Alphabet and NVIDIA, however, which offer good value with moderate risk, these IPOs offer little value and much risk. While SpaceX operates a nice launch business and Starlink, the key factor (other than a perceived Midas touch from Elon Musk) driving over 90% of the valuation of SpaceX is the size of the addressable market for the xAI division, not launch nor Starlink. Thus, xAI has to work before SpaceX can work as an investment.
There is only one crucial question surrounding AI. No, it’s not whether AI will be broadly adopted. AI WILL change the world, and mostly for the better. And, no it’s not whether AI will decimate the workforce. Like all new technologies, AI will affect some jobs and some professions -- more in some industries than in others. But it is more likely to EXPAND the number of jobs than decimate our entire work force.
The MAIN question is whether there will be sufficient returns to justify the enormous investment in AI infrastructure. The answer to this will have implications for the stock market and even for the broader economy. There will likely be a return to some but not all players. The valuations of SpaceX and Open AI imply that investors are expecting those companies to enjoy extraordinary, outsized growth and profits in the future. There is a risk that Open AI and the xAI division of SpaceX could wither rather than prosper once the shakeout arrives. This risk in NOT priced into the valuations.
Focus List
The list and performance can be obtained only by contacting the office.
Follow Up – from our letter one year ago
"We agree and believe tariffs rates will be reduced, but we don’t know by how much or when."
- Tariffs were reduced from the draconian levels on “Liberation Day” and the reciprocal tariffs were deemed illegal by the courts
"While there’s a chance of embedded long-term inflation, we believe price increases will be transitory even if modest tariffs remain in place."
- The CPI in July of 2025 was 2.7%. It was 2.4% as recently as February of this year before moving up to 4.2% in May, which was driven more by the oil price spike than tariffs.
"We remain overweight equities but also hold some reserves and alternatives…"
- Equities trounced the other asset classes, though gold almost kept up with the S&P 500.
NOTE: Now in addition to ALL our quarterly letters, on our website is a tab with just the Follow Ups.
About HALL CAPITAL
HALL CAPITAL, LLC is a registered investment advisor and was formed by Principals from Arcturus Capital in 2010.
For more information, contact Donald Hall 626 578 5700 x101 dhall@hallcapitalmanagement.com
HALL CAPITAL | 199 S. Los Robles Ave | Suite 535 | Pasadena | CA | 91101