Equity markets continued to grind higher in July, with investors welcoming new global trade deals and moderating inflation as positives for the near-term outlook.
The S&P 500 added another +2% in July and has now gained +8.6% for 2025.
Smaller company stocks also gained +2% for the month, with the Russell 2000 index now roughly flat for the year.
International stocks took a slight breather, with the MSCI ACWI ex-US Index dropping -0.3% in July, though the year-to-date gain of +17.6% still leads global stocks.
Bond markets pulled back slightly, with the Bloomberg Aggregate Bond Index falling -0.3% as long-term rates ticked up a notch. Bonds are up +3.8% year-to-date.
Commodities shed some of their June gains, with both gold and oil markets pulling back from recent highs. The Bloomberg Commodity Index fell -0.5% in July and is up +5% in 2025.
As always, we filter the news and the noise through our data-driven Three Dials framework, which was unchanged during the month of July as we outline below:
The CBOE Volatility Index dropped below 15 for the first time since February, while bullish sentiment outweighed bearishness among individual investors for the first time all year.
Although we’re entering into a historically difficult season for stocks, our Momentum Dial remains Positive through the end of July.
The jobs report for July came in below expectations at just 73,000 jobs added for the month, while data from May and June were revised lower by a whopping 258,000, an early indication of potential strain in what had previously been a robust employment market.
We’re seeing evidence that AI may be limiting job opportunities in entry level positions, which could help explain this flagging employment data. As such, our Fundamental Dial remains Negative.
After years of relative calm in the IPO market, the $20 billion debut of Figma, a software company led by 33-year-old CEO Dylan Field that booked just $228 million in Q1 revenue, suggests that “irrational exuberance” may be returning to certain corners of the tech market. These frothy conditions leave our Valuation Dial in a Negative position.
On balance, our composite positioning remains somewhat defensive, with one dial in a Positive position but two dials remaining Negative.
Sources: Morningstar