Dear Reader,
This is Dylan Jovine with Behind the Markets.
Happy Tuesday.
Today is Tuesday, July 28th.
What a blessing it is to be back with you.
I want to talk about where the markets stand right now — what happened while I was away, and what it means for your portfolio.
Those of you who’ve been with me a long time know I like to think about the world in terms of split screens.
Right now we have a very clear one.
One Side: Interest Rates
On one side of the split screen is the 10-year bond yield.
I’ve talked about this many times here, but it bears repeating.
The 10-year yield is like a seesaw.
Yield goes up, stocks go down.
Yield comes down, stocks go up.
When I left, the 10-year yield was at 4.40%.
Last week it hit 4.7% — the highest it’s been since the so-called Liberation Day highs back in April of 2025.
That is a lot of pressure on stocks.
Think of 5% as a ceiling.
With the current set of facts, the stock market is not going above that.
It just pushes everything down.
Interest rate yields act like gravity on stocks.
Get above a certain level, they push stocks down.
Come back down, they lift stocks up.
The Iran war has been driving all of this.
When the conflict heats up and it looks like oil prices are going higher, that sends yields up, and that puts pressure on stocks.
That’s the cautious side of my split screen right now.
The Other Side: Profits
I’ll tell you something.
I was thinking about this while driving across this great country of ours.
By the way — if you ever get the chance to stay at the Bright Angel Lodge at the Grand Canyon, do it.
We had these little lodges literally ten or fifteen feet from the edge.
Your backyard is the Grand Canyon.
One of the most extraordinary things I’ve ever seen in my life.
Anyway — the other side of the split screen is corporate profits.
And here is where it gets very interesting.
The AI boom has had a few distinct profit phases so far.
The first was the Nvidia boom.
All of a sudden everybody needed those chips and Nvidia just went straight up.
Palantir went crazy too.
The second phase was what I’ve started calling the Mag Seven buying a trillion dollars worth of everybody else’s stuff boom.
The hyperscalers started building massive infrastructure.
They started buying AMD chips, Micron chips, ARM, all the suppliers.
And those stocks went crazy.
Now we are entering a third phase.
I’m still working on a name for it, but the substance of it is this: the margin expansion boom.
Morgan Stanley put out a great note on this.
They talked to Bank of America, Halliburton, CVS, NextEra Energy, and a range of other companies about what they’re actually seeing as they integrate AI into their operations.
And what those companies are telling them is remarkable.
They’re starting to see about 100 basis points of margin expansion — just from integrating AI into their business operations.
Think about what that means.
Total S&P 500 profits last year were $2.31 trillion.
The average profit margin in the S&P 500 is 15.7%.
If that moves to 16.7% or 17%, that is a 6% to 10% increase in bottom line profits — just from AI adoption.
That is a big deal.
I’ll tell you this from my own experience.
I own this business, and we have been integrating AI here at Behind the Markets.
We have been seeing real results.
I’ve been telling other entrepreneurs on this channel: integrate it as fast as you can, because your competitors already are.
But here’s the key thing I say to my own team.
Unless it drives return on investment — lower costs or faster execution — it’s just a toy.
We are only integrating things that actually move the needle.
The companies in the S&P 500 that are disciplined about this are going to see it show up in their margins.
And when that starts to ripple across the index, it is going to get bigger.
It will compound.
Believe it or not, this boom has more room to run.
In fact, there’s one area where I see all of these themes converging — and it’s something I’ve been spending a lot of time on.
I mentioned oil crossing $100 a barrel earlier. That’s the cautious side of the screen.
But here’s what’s happening on the other side of that same story.
Starting July 4th, every new solar and wind project in America lost its federal tax credits. Gone. The two technologies that dominated clean energy for twenty years just lost their biggest financial advantage.
But one energy source keeps full government backing for eight more years.
It runs around the clock. Zero carbon. No batteries. It doesn’t shut off at sunset.
The Pentagon calls it their number one energy priority. California just mandated it. Google, Meta, and Berkshire Hathaway are already under contract.
Investment in the space has surged 100x in seven years. The Fervo IPO this summer forced Wall Street to cover the sector for the first time.
And one company controls the entire chain — from the ground to the grid. Nobody else does.
This is exactly the kind of structural shift I look for — the kind most investors haven’t noticed yet.
I put together a full briefing on this company and why I think it could be one of the biggest opportunities I’ve seen in a while.
Where I Stand Right Now
Split screen.
On one side, the 10-year yield and the Iran war keep me cautious.
On the other side, the profit expansion story makes me optimistic.
Right now I’m about 60% optimistic and 40% cautious.
For someone as naturally careful as I am, 60% optimistic is actually saying something.
Have a wonderful day.
“The Buck Stops Here,”
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Written by Dylan Jovine