July's Summary Data and Notable Observations
Our focus this week summarizes July's market performance while providing key observations for investors.
July was a month in which the headline indexes went almost nowhere while a great deal happened underneath. The S&P 500 finished essentially flat, slipping 0.06%, and the Dow eked out a 0.38% gain, but the Nasdaq Composite shed 3.19% as investors soured on AI capital spending mid-month before a late rally on strong mega-cap earnings recovered much of the damage. The Russell 1000 Value Index gained 3.82% in July, while the Russell 2000 declined 3.02%. Among sectors, Energy (+12.60%) and Financials (+6.16%) were the winners, while Information Technology (-3.43%) and Industrials (-3.01%) were the losers.
Overseas, the story was mixed. The MSCI EAFE Index rose 1.98% thanks to strong returns in the UK and Australia, while the MSCI Emerging Markets Index gave back 3.03% as the same AI and semiconductor concerns hit Taiwan and South Korea.
Fixed income had a difficult month, with the Bloomberg US Aggregate losing 1.30% to leave it down 0.69% year to date. The curve steepened as the Fed, under its new leadership, made clear that price stability comes first: the 2-year yield rose 12 basis points to 4.29%, the 10-year added 27 basis points to 4.73%, and the 30-year climbed 32 basis points to 5.27%, its highest level in almost 20 years.
In other markets, the VIX drifted down 0.46 to 15.99. Gold added $38.13 to finish at $4,046.15. The standout was crude oil, which surged $15.40, better than 22%, to close at $84.67 a barrel on escalating tensions in the Middle East. The trade-weighted US dollar fell 0.93%, while Bitcoin rose 2.44% to close around $63,000.
Key Observations
July Was Flat on the Surface, Busy Underneath
Headline indexes did not move much, with the S&P 500 down just 0.06% and the Dow up 0.38%, but leadership changed meaningfully. The Nasdaq fell 3.19%, while Value and Energy led the market.
Value Beat Growth
July was not another mega-cap growth month. Russell 1000 Value was up 3.82%, while AI and semiconductor-heavy areas struggled. That is a healthy broadening sign if it continues.
Energy Was the Clear Sector Winner
Energy rose 12.60% as oil surged more than 22% to $84.67 on renewed Middle East and Strait of Hormuz tensions. The market is still highly sensitive to geopolitical oil risk.
AI Is Becoming a Power Grid Story
The AI bottleneck is shifting from chips to electricity. Data centers, cooling, grid capacity, and power generation are becoming central to the AI investment story.
New Tariffs Emerge as a Slow-Burn Risk
New 10% to 12.5% reciprocal tariffs were imposed on dozens of countries after the temporary global tariff expired. The market did not treat it as a one-day shock, but the second-half risk is margin pressure and goods inflation.
Stablecoins Are Quietly Funding U.S. Debt
Stablecoin issuers now hold roughly $190 billion of Treasuries, making them a meaningful new buyer as foreign government demand changes. That supports dollar dominance, but it also creates a new risk if a large stablecoin faces forced selling.
Earnings Are Now Supporting the Bull Market
The rally is not just multiple expansion anymore. Q2 S&P 500 earnings are tracking around 23.6% year-over-year growth, with revenue growth at 12.8% and all 11 sectors growing.
Rates Moved Higher, and Bonds Struggled
Fixed income had a rough month. The 10-year Treasury rose to 4.73%, the 30-year climbed to 5.27%, and the Bloomberg U.S. Aggregate fell 1.30%. Duration was the problem, not credit.
The Fed Signal Turned More Defensive
The Fed Rate Expectation Strategy shifted fully into fixed income as the short-term yield curve began pricing in a higher probability of future rate hikes. This is more of a risk-off equity signal than a bullish call on bonds.
