Low Tide Alert
August 4, 2026
July provedto be a challenging month for investors across most major asset classes, as aconfluence of factors weighed on market sentiment and prompted a broad butmeasured pullback. Alate-month rally across both domestic and international equity markets helpedmoderate losses, though overall market sentiment remained cautious. Inflationdata, second quarter corporate earnings, and renewed uncertainty around theFederal Reserve's policy trajectory have left investors with few asset classesthat were able to offer meaningful shelter. While the declines were notdramatic by historical standards, the market deterioration is notable.
U.S. equities drifted lower with most major indices finishing the month either roughly flat or modestly in the red. The S&P 500 returned -0.06% for the month, followed by NASDAQ returning -3.19%. Earnings season delivered a mixed bag of results that failed to provide the upside catalyst investors might hope for. Technology and consumer discretionary names, which had provided much of the market's leadership in prior months, gave back some of their gains. This could be a reflection on the current rate environment.1 Defensives held up comparatively better but were not immune to the broader selling pressure.
International equities were similarly under pressure throughout the month. However the month end rally was enough to bring developed markets out of the hole for the month. As tracked by the MSCI EAFE index, developed internationals closed up + 1.98% for the month. Emerging markets finished the month with modest losses despite the aforementioned rally. MSCI Emerging markets index closed down -3.03%. A modestly stronger U.S. dollar through portions of the month created a headwind for unhedged investors holding foreign assets. Emerging markets were pressured by a combination of dollar strength, higher oil prices, and political risk in a handful of key markets.
Fixed income markets were not spared this month, as rising yields pushed bond prices lower across much of the curve. Investment grade debt returned -1.30% as tracked by the Bloomberg U.S. Aggregate Total Return Value Unhedged Index. Corporate bonds posted modest negative total returns, closing the month at -1.67% as tracked by the Bloomberg US Corporate Bond Index. Credit spreads have been narrowly thin lately, which means there is only direction for them to move and it’s just a matter of time… Though they didn’t blow way out which would be major cause for concern, spreads did widen slightly amid the risk-off tone. This was enough to more than offset any income earned during the period.
The, albeit tranquil, interest rate environment was perhaps the defining theme of the first half of 2026 and somehow has continued to remain at the top of the scene. A stronger than expected inflation reading early in the month may have been the primary influence for investors to push rate cut expectations further out on the calendar. Despite the month-over-month CPI down .5% (the largest monthly drop in years) the Fed’s point of view seems to be that inflation is not out of the woods yet.2 Fed officials maintained a cautious tone in public communications, emphasizing data dependence and showing little urgency to adjust policy in the near term. This was upheld at the latest meeting during the last week of July, where rates were once again held.3
1 https://www.reuters.com/world/china/global-markets-wrapup-1-2026-07-29/
2 https://www.bls.gov/news.release/pdf/cpi.pdf
3 https://www.federalreserve.gov/newsevents/pressreleases/monetary20260729a.htm
This commentary is provided for informational purposes only and reflects general market observations. It does not constitute individualized investment advice or a recommendation to buy, sell, or hold any security. Past performance is not indicative of future results.
The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market and it is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies.
The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices.
The MSCI EAFE Index (Europe, Australasia, Far East) is an unmanaged free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.
The MSCI Emerging Markets Index consists of 23 economies including Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, South Africa, Taiwan, Thailand, Turkey and the United Arab Emirates. The MSCI is a float-adjusted market capitalization index.
Bloomberg’s U.S. Aggregate Total Return Value Unhedged Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS(agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).
Bloomberg's World Interest Rate Probability (WIRP) function is a chart that shows the probability of different interest rates for the US benchmark rate. The chart is based on interest rate caps and floors, as well as options on Treasury futures.
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