Global markets delivered mixed results in July as investors broadened their focus beyond some of the year’s strongest-performing AI-related stocks toward more cyclical and value-oriented areas of the market. While the Federal Reserve held interest rates steady as expected, markets continued to digest the implications of persistent inflation, resilient economic growth, and rising long-term bond yields.
U.S. equities were essentially flat during the month, bringing year-to-date returns to 10.1%. Beneath the surface, leadership shifted meaningfully. Energy gained 12.6%, and financials rose 6.2%, while technology declined 3.4%. After an exceptionally strong first half of the year, leadership broadened beyond technology as investors favored sectors with more attractive valuations and greater sensitivity to the economic cycle. Despite the monthly pause, continued AI investment and solid corporate earnings remain supportive over the longer term.
International equities also diverged. Developed markets gained 2.0%, lifting year-to-date returns to 12.0%, while emerging markets declined 3.0% but remain up 20.3% for the year. The decline in emerging markets reflected weakness across several technology-heavy Asian markets, including Taiwan and South Korea, following their strong gains earlier in the year. Meanwhile, developed international markets benefited from stronger performance in Europe and Japan, where leadership broadened beyond technology.
Fixed income markets weakened as investors reassessed the outlook for inflation, economic growth, and government borrowing needs, pushing longer-term Treasury yields higher despite the Federal Reserve leaving short-term interest rates unchanged. U.S. bonds declined 1.3%, while high-yield bonds slipped 0.2%.
Commodity markets gained 7.5% during the month and are now up 23.0% year-to-date, led by higher energy prices as crude oil rallied on expectations of tighter global supplies. Gold rose a modest 0.6% but remains down 6.9% for the year as higher real interest rates and a firmer U.S. dollar continued to weigh on investor demand.
A diversified global 60/40 portfolio declined 0.2% in July but remains up 6.6% year-to-date. While the month highlighted that leadership can shift quickly, it also reinforced the benefits of diversification. Strength in developed international equities, commodities, and value-oriented sectors helped offset weakness in technology, emerging markets, and longer-duration bonds, underscoring the importance of maintaining exposure across a broad range of asset classes rather than relying on a single market theme.
