July Market Perspectives and Key Themes We’re Watching

By Todd Vandam, CFA

Equity markets were mixed for the month with the S&P 500 down 0.1% and the MSCI EAFE Index up 1.9%. The Nasdaq Composite and the MSCI Emerging market index were notable underperformers, down 3.2% and 3.3% returns respectively while the Semiconductor index, which has been a standout performer year to date, was down over 10% in July.

The US government bond market saw yields rise across the yield curve. The US Treasury 2-year bond yield was up 14 basis points to 4.28%, the US Treasury 10-year bond yield was up 31 basis points to 4.75%, and the US Treasury 30-year bond yield was up 36 basis points to 5.27%, the highest level since 2007.

Within the S&P 500, Energy was the leading sector, up 12.5%, followed by Financials up 6.0%, and Real Estate up 2.5%. Sector underperformers were Technology -3.5%, Industrials -3.1%, and Utilities -2.3%.

The US Dollar index fell 1.3% to 99.91 while WTI oil and Brent Crude oil rose sharply, up 21.8% and 23.6% to $84.67 and $90.12 respectively amidst renewed tensions between the US and Iran over the reopening of the Strait of Hormuz.

Global Market Summary

Global stocks, U.S. sectors and interest rates

Global Stock Market Summary

Index Level WTD MTD QTD YTD
S&P 500 7489 1.0% -0.1% -0.1% 9.4%
Dow Jones Industrials Average 52485 1.0% 0.3% 0.3% 9.2%
NASDAQ Composite 25373 1.6% -3.2% -3.2% 9.2%
MSCI Emerging Markets Index 1665 2.3% -3.3% -3.3% 18.6%
MSCI EAFE Index 3176 2.0% 1.9% 1.9% 9.8%
MSCI All Country World Index 1120 1.4% 0.0% 0.0% 10.4%
MSCI Europe Index 2842 1.8% 1.5% 1.5% 7.5%

Sector Performance

Index WTD MTD QTD YTD
Cons. Disc. 8.3% 0.8% 0.8% -0.3%
Comm. 5.4% 0.5% 0.5% 0.9%
Cons. Stap. 1.1% 1.9% 1.9% 8.8%
S&P 500 1.0% -0.1% -0.1% 9.4%
Financials 1.0% 6.0% 6.0% 3.9%
Healthcare 0.0% 2.2% 2.2% 4.9%
Technology -0.1% -3.5% -3.5% 15.3%
Energy -0.2% 12.5% 12.5% 32.8%
Industrials -1.6% -3.1% -3.1% 15.8%
Materials -1.7% -1.7% -1.7% 9.2%
Real Estate -2.2% 2.5% 2.5% 12.4%
Utilities -4.2% -2.3% -2.3% 3.8%

Global Rates Summary

Jul 31, 2026 Jun 30, 2026 Dec 31, 2025
3-Month Treasury Yield 3.83% 3.87% 3.67%
2-Year Treasury Yield 4.28% 4.14% 3.47%
10-Year Treasury Yield 4.75% 4.44% 4.18%
30-Year Treasury Yield 5.27% 4.91% 4.84%
30-Year Fixed Mortgage 6.66% 6.49% 6.15%
German 10-Year Bund Yield 3.21% 2.86% 2.85%

Currencies and Commodities

Index Level MTD QTD YTD
US Dollar Index 99.91 -1.3% -1.3% 1.6%
Euro 1.15 0.6% 0.6% -2.0%
Chinese RMB 6.75 0.6% 0.6% 3.4%
Japanese Yen 159.22 2.0% 2.0% -1.6%
British Pound 1.35 1.4% 1.4% 0.1%
WTI Oil 84.67 21.8% 21.8% 47.5%
Brent Oil 90.12 23.6% 23.6% 48.1%

Source: Clearonomics, August 3, 2026

Two Themes We’re Watching:

1. Higher Bond Yields

The Federal Reserve bank held the Federal Funds rates steady at its meeting last week and the new Chairman, after his press conference, left the market confused. Confusion over Fed policy and continuing concerns around the Federal Deficit and inflation, have moved US Treasury 30-year yields to the highest level since 2007. We will be watching the follow-on effect of higher yields on financial conditions, borrowing costs, and mortgage rates.

2. Broadening Equity Market and the AI Trade Reverses

The equal weighted version of the S&P 500, a measure of the “average stock” in which each member is weighted 0.2% has rallied to an all-time high while the AI/technology focused NASDAQ 100 was down 10% in July before rebounding at month end. July saw an unwinding in the positive stock performance of perceived AI capital expenditure winners with concerns about the sustainability of strong fundamentals and overcrowded positioning. We believe these are healthy market transitions that demonstrate the strength of earnings outside of the technology sector and the strength of the economy. We believe portfolios need to be diversified to take advantage of this rotation. We will be watching to see if this represents investors simply taking profits or the beginning of a new trend.

US 30-Year Bond Yield Rises to Highest Level Since 2007

Latest leg of selloff follows Fed decision to hold rate steady

Source: Bloomberg

Little Guys Fight Back

The average stocks is in a bull market, as Nasdaq giants stand corrected

Source: Bloomberg

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The information contained herein is for informational purposes only, is not personalized investment advice, and should not be construed as a recommendation to purchase or sell any particular security, sector, or strategy to any individual person or entity. Past performance should not be considered as an indicator of future results.

Forecasts of financial market trends that are based on current market conditions constitute Pallas Capital Advisors, LLC’s judgment, and are subject to change without notice. “Expected” return estimates are subject to uncertainty and error. The ability to achieve similar outcomes is subject to risk factors over which Pallas may have no or limited control. References to expected returns are not promises or even estimates of actual returns an investor may achieve.

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Investment Advice offered through Pallas Capital Advisors, LLC, a registered investment advisor. CRN26_41

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