Fidelis Capital LLC
07/31/2026 | Press release | Distributed by Public on 07/31/2026 16:52
Investment Insights: Week Ending July 31
Originally published in "Investment Insights: Week Ending July 31"
By: Aaron Wall, CFA
Partner, Portfolio Manager
Happy Friday everyone! Markets were busy this week. We'll start our commentary by giving a brief update on Q2 earnings season.
Heading into this week, 27% of S&P 500 companies had reported earnings and the trend remains positive. So far, 86% of those companies have posted positive EPS surprises. As more earnings data comes in, we'll be monitoring margin data to get a sense for the durability of what has been strong earnings growth year-to-date.
Now, let's focus on two key stories that moved markets this week.
At 25 years old, he was an early OpenAI employee and rose to fame in 2024 when he posted a highly circulated report online titled, "Situational Awareness: The Decade Ahead".
The post garnered significant traction given its analysis on the development of AI and the potential set of benefits and consequences to its increased intelligence and adoption.
Wall Street moves fast, and in the blink of an eye, Aschenbrenner had a hedge fund named after his work that featured large investments from some of the biggest players on the Street.
The fund's filings became closely watched as Aschenbrenner developed a streak for hitting big winners tied to the overall AI trade, and a highly targeted private investment portfolio buoyed strong performance for investors. What could go wrong?
On Wednesday, it was announced that the fund was running into significant issues with its leverage.
In July, as the AI trade started to fade for a variety of reasons, key stocks in the fund's portfolio began to undergo significant reversals, with many positions down more than 20%. Pullbacks in performance are common and rarely fatal until leverage is brought into the mix.
This story is still developing, but on Wednesday, it was leaked to the media that the fund had to sell its entire stock portfolio to cover outstanding margin calls across the book.
We don't yet know the full scope of the leverage, but the events on Wednesday had an outsized impact on AI names held in the portfolio, which all subsequently posted significant rallies on Thursday after the dust settled.
It's a tale as old as financial markets. Stocks go up, firms double down using leverage, and then things come crashing down when performance weakens.
The fallout from this fund seems well contained at this time, but it is an important phenomenon to be on the watch for, especially in ebullient markets like we are witnessing right now.
As prominent Fed watcher Nick Timiraos of the Wall Street Journal puts it, "Three dissents in the same direction is rare; a fourth or fifth dissent on the 12-person committee would be without precedent in the modern era."
In his press conference after the decision, Warsh continued to reference that he wanted debate in the meetings to be reminiscent of a "good family fight," which it seems unfolded.
From a market perspective, the fireworks came during the press conference as Warsh appeared to purposefully obfuscate the path forward during the Q&A with reporters.
The bond market was most vicious, with yields rising across the long end of the curve, signaling a lack of faith in Warsh's stated commitments to lowering inflation.
Our Head of Fixed Income, Chris Gunster, had this to say after the meeting:
"If you look at the market's response to Warsh's answers, everything was fine until he started providing unclear answers to the media.
Markets quickly took this as a vote of no confidence in Warsh, which is in contrast to his last press conference when markets thought he was going to right the inflation ship.
Another takeaway is that it's very clear Warsh is focused on real rates, which is a good thing. It's also clear that he is focused on being data dependent-not a surprise.
When you are data dependent and lower your communication with the markets, however, that creates volatility in the markets, like what we saw in the aftermath of the meeting."
After this press conference, uncertainty is building towards whether the Fed will hold rates steady again or hike when they meet next in September. Variables outside the Fed's control, like the war in Iran, will play an important role.
We'll be paying close attention to the Fed speaking circuit between now and then to hear how voting members are viewing the economy for clues on what is coming next, but what is clear is that the consequence of less communication from Warsh is more uncertainty.
By: Aaron Wall, CFA
Partner, Portfolio Manager
Happy Friday everyone! Markets were busy this week. We'll start our commentary by giving a brief update on Q2 earnings season.
Heading into this week, 27% of S&P 500 companies had reported earnings and the trend remains positive. So far, 86% of those companies have posted positive EPS surprises. As more earnings data comes in, we'll be monitoring margin data to get a sense for the durability of what has been strong earnings growth year-to-date.
Now, let's focus on two key stories that moved markets this week.
Situational Awareness
As is common throughout technology-driven boom cycles, new stars emerge in the asset management space. A recent rising star has been Leopold Aschenbrenner.At 25 years old, he was an early OpenAI employee and rose to fame in 2024 when he posted a highly circulated report online titled, "Situational Awareness: The Decade Ahead".
The post garnered significant traction given its analysis on the development of AI and the potential set of benefits and consequences to its increased intelligence and adoption.
Wall Street moves fast, and in the blink of an eye, Aschenbrenner had a hedge fund named after his work that featured large investments from some of the biggest players on the Street.
The fund's filings became closely watched as Aschenbrenner developed a streak for hitting big winners tied to the overall AI trade, and a highly targeted private investment portfolio buoyed strong performance for investors. What could go wrong?
On Wednesday, it was announced that the fund was running into significant issues with its leverage.
In July, as the AI trade started to fade for a variety of reasons, key stocks in the fund's portfolio began to undergo significant reversals, with many positions down more than 20%. Pullbacks in performance are common and rarely fatal until leverage is brought into the mix.
This story is still developing, but on Wednesday, it was leaked to the media that the fund had to sell its entire stock portfolio to cover outstanding margin calls across the book.
We don't yet know the full scope of the leverage, but the events on Wednesday had an outsized impact on AI names held in the portfolio, which all subsequently posted significant rallies on Thursday after the dust settled.
It's a tale as old as financial markets. Stocks go up, firms double down using leverage, and then things come crashing down when performance weakens.
The fallout from this fund seems well contained at this time, but it is an important phenomenon to be on the watch for, especially in ebullient markets like we are witnessing right now.
Warsh's Ambiguous Press Conference
On Wednesday, the Federal Reserve opted to hold rates steady, matching market expectations. Three governors dissented, preferring a rate increase at this meeting.As prominent Fed watcher Nick Timiraos of the Wall Street Journal puts it, "Three dissents in the same direction is rare; a fourth or fifth dissent on the 12-person committee would be without precedent in the modern era."
In his press conference after the decision, Warsh continued to reference that he wanted debate in the meetings to be reminiscent of a "good family fight," which it seems unfolded.
From a market perspective, the fireworks came during the press conference as Warsh appeared to purposefully obfuscate the path forward during the Q&A with reporters.
The bond market was most vicious, with yields rising across the long end of the curve, signaling a lack of faith in Warsh's stated commitments to lowering inflation.
Our Head of Fixed Income, Chris Gunster, had this to say after the meeting:
"If you look at the market's response to Warsh's answers, everything was fine until he started providing unclear answers to the media.
Markets quickly took this as a vote of no confidence in Warsh, which is in contrast to his last press conference when markets thought he was going to right the inflation ship.
Another takeaway is that it's very clear Warsh is focused on real rates, which is a good thing. It's also clear that he is focused on being data dependent-not a surprise.
When you are data dependent and lower your communication with the markets, however, that creates volatility in the markets, like what we saw in the aftermath of the meeting."
After this press conference, uncertainty is building towards whether the Fed will hold rates steady again or hike when they meet next in September. Variables outside the Fed's control, like the war in Iran, will play an important role.
We'll be paying close attention to the Fed speaking circuit between now and then to hear how voting members are viewing the economy for clues on what is coming next, but what is clear is that the consequence of less communication from Warsh is more uncertainty.
Closing Time
As always, we are here for you. If you have any questions or concerns, please reach out to a member of your Fidelis Capital team.
Fidelis Capital LLC published this content on July 31, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on July 31, 2026 at 22:52 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]