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The Latest Market Insights
July 2026
Insights Provided By:
Tracy Baughman, AIF®, CIMA®, ATFA
SVP, Chief Investment Officer & Wealth Department Manager
Key Takeaways
- July markets were mixed, shaped by higher rates, sector rotation, and geopolitical pressure.
- Year-to-date equity returns remained positive despite some July weakness.
- Market leadership shifted, with value and energy areas holding up better than growth and technology.
- Energy led the major sectors, supported by oil volatility and supply concerns.
- Inflation, Fed policy, yields, and energy prices remain key areas to watch going into August.
July was a mixed month for markets, with performance shaped by higher interest rates, sector rotation, and renewed geopolitical pressure. The S&P 500 slipped approximately 0.1%, the Nasdaq declined approximately 3.2%, and the Dow gained approximately 0.3%. Small caps also weakened, with the Russell 2000 down approximately 3.0%. Despite the softer month, year-to-date results remained positive through July 31, including approximately 10.1% for the S&P 500, 10.2% for the Dow, 18.9% for the Russell 2000, 11.6% for MSCI EAFE, and 20.0% for MSCI Emerging Markets.
Market Leadership Shifts as Energy Holds Steady
The market rotation was notable and has been most prominent when looking at equal-weight indices. Investors moved away from some of the higher-growth and technology-oriented areas that had led earlier in the year, while value-oriented and energy-related areas held up better. Energy was the strongest major sector, supported by oil volatility and supply-risk concerns.
Geopolitics became a more important market factor during the month. Middle East tensions contributed to volatile oil prices and kept energy-related inflation risk in focus. Ongoing war-related and shipping-risk concerns also reinforced the market’s sensitivity to supply disruptions, commodity prices, and the Federal Reserve’s inflation outlook.
Economic Data Remains Mixed as Treasury Yields Rise
The economic backdrop remained mixed. Unemployment was reported at 4.2%, but job growth remained modest. The Federal Reserve held the federal funds rate at 3.50% to 3.75%, although three members favored a hike. Treasury yields moved higher, creating a headwind for most bond categories and reinforcing the need for duration discipline.
Positive year-to-date equity returns continued to support asset levels compared with the beginning of the year, but July’s weakness in growth stocks, small caps, and fixed income created some offsetting pressure. Entering August, the main issues are inflation persistence, Fed policy, higher yields, energy prices, and whether market leadership continues to broaden.
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