July Market Recap
The A.I. train veered off it tracks in July as investors recalibrated the prices they are willing to pay for the promises of future growth. The collapse of another ceasefire in Iran and rising oil prices also contributed to some risk-off behavior in equity markets.
With oil again trending higher, Energy (+12.5%) was the best-performing sector last month. Financials (+6%) also enjoyed a strong July. Four of the 11 equity sectors finished lower. Technology (-3.5%) and Industrials (-3.1%) fell the most.
The S&P 500 and NASDAQ finished lower for the second month in a row. The Dow ended July slightly higher. All three major benchmarks have surprising similar year-to-date returns.
Benchmark Returns: July 2026 | YTD 2026
|
Dow Jones
|
S&P 500
|
NASDAQ
|
+0.32% | +9.20%
|
-0.13% | +9.41%
|
-3.20% | +9.17%
|
|---|
Some cracks began to appear in the Technology and A.I. trends during June, and those widened a bit further in July. The relentless demand for cloud computing capacity and data center expansion has meant massive capital spending by tech giants like Alphabet, Microsoft, Meta, and Amazon. Those expenditures have been viewed through a more critical lens in recent months.
As A.I. sentiment has become less exuberant, semiconductor companies and chipmakers have seen their stocks suffer, although Nvidia – the largest company in the world by market capitalization – was essentially flat last month. Still, the rotation of dollars away from big tech and a broadening of participation in this bull market is significant. The equal-weighted S&P 500 gained 1.1% in July and has outperformed the cap-weighted S&P by roughly 3% year-to-date.
Although the US and Israel’s war with Iran has not been a major market-mover this summer, the disintegration of another ceasefire on July 8 had an impact. With the Strait of Hormuz again closed to commercial shipping, oil prices resumed their upward trend. West Texas Intermediate Crude oil ended July at $84.67 per barrel, up nearly 25% from a month earlier.
Given the lack of any diplomatic progress, it’s difficult to see a formal end to the conflict anytime soon. US military strategy has been ineffective enough that a senior US officer reportedly solicited ideas from Pentagon employees via email last week, asking for “new creative and unconventional ways to pressure and punish Iran.”
Roughly 60% of S&P 500 companies had reported Q2 earnings as of July 31 and cumulative earnings are on pace to grow an astonishing 47% from a year ago. That would be the highest year-over-year growth in five years (Q2 2021), when earnings were being compared to pandemic-shutdown lows.
While the Federal Reserve made no changes to interest rates at its July 28-29 meeting, three of the 12 Fed governors voted in favor of a 0.25% hike. That sets the stage for potentially more colorful conversations about rate hikes in the months to come. New Fed Chair Kevin Warsh has talked tough following his first two meetings. Warsh in July said the central bank “will deliver price stability” and “will not hesitate to act” if price pressures require monetary tightening.
Many have suggested that the data would have justified a hike already. The Fed’s preferred inflation gauge (the Personal Consumption Expenditures price index) showed 3.7% inflation over the last 12 months. That’s down from 4.1% annualized a month ago but still well above the Fed’s stated 2% target.
With a consensus building that inflation is likely to remain elevated, bond yields have climbed. Ten-year US Treasuries ended July yielding 4.75%. That’s the highest since January 2025. 10-year Treasury yields have not exceeded 5% in 19 years (July 2007).
Mortgage rates increased to their highest mark in more than a year. The national average interest rate on a 30-year fixed mortgage is now 6.8%, according to Bankrate. The average for 15-year fixed mortgages is 6.1%.
US GDP growth slowed to 1.5% annualized in the second quarter, according to the US Commerce Department. That’s slightly worse than consensus expectations (1.8%) and moderately slower growth than in Q1 (2.1%).
International equities offered a mixed bag in July. Non-US Developed Markets were up 1.6%, but Emerging Markets fell sharply (-6.3%). Small-cap US stocks also lagged. The Russell 2000 index was down 3.1% last month.
Ben Marks
Chief Investment Officer
Brett Angel
Senior Wealth Advisor
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