Global equities eked out a positive return at the start of 2H26 (MSCI World +0.5% MoM), keeping the YTD performance for global equity investors in double digits (+10.5% YTD). The apparent calm at the headline index level belied some outsized moves below the surface. The semiconductor cohort, heroes of 1H26 (Philadelphia Semiconductor Index +102% for 1H26), fell 21% in July. The semiconductor sell-off was exacerbated by forced liquidations from the highly leveraged hedge fund, Situational Awareness, which amplified declines in AI-related stocks through indiscriminate selling. Market sentiment improved after Citadel acquired much of the portfolio, helping semiconductor shares recover toward month-end.
July saw 60% of S&P 500 companies report 2Q26 earnings. Aggregate earnings were up 20% YoY, with earnings for 86% of companies beating analyst expectations. Amongst the mega-cap companies, the month’s big winners were Microsoft and Amazon (+25%, +14% MoM, respectively). The pair reported material earnings acceleration in their cloud divisions (+43% YoY and +37% YoY, respectively), with the results improving the narrative on AI monetisation. Alphabet (flat MoM) and Meta (-1% MoM) recovered from negative 1-day, post-earnings share price reactions (-7% and -8% DoD, respectively) during the month. Both companies increased capex guidance, while Meta’s 3Q26 revenue guidance left investors underwhelmed.
Emerging market (EM) equities struggled in July (MSCI EM -3% MoM) as Korean chip makers, SK Hynix (-30% MoM) and Samsung Electronics (-15% MoM) shaved 4.1% off the MSCI EM Index performance in July. Chinese shares were the star EM performers in July (Hang Seng China Enterprises Index +14.5% MoM) as President Xi Jinping called for accelerating tech self-reliance, positioning China as a global tech leader by 2035, and Beijing mobilised an extraordinary range of state-linked institutions to support equities. The People’s Bank of China (PBOC) also introduced monetary easing measures during the month.
Energy prices spiked again in July (Brent crude +24% MoM to US$90/bbl) as the US-Iran conflict escalated, leading to renewed US airstrikes on Iranian targets and Iran retaliating against US assets and commercial shipping before diplomacy gradually resumed later in the month. Rising energy prices added to inflationary concerns, though the US Federal Reserve (Fed) voted 9 to 3 in favour of keeping US rates on hold at the July meeting. As re-accelerating energy prices added pressure to already elevated inflation levels, new Fed Chair Kevin Warsh reiterated the committee’s commitment to getting US inflation back to the 2% target.
The US government’s 10-year borrowing rate climbed 0.25% to 4.73% p.a. during the month, its highest level in 18 months, and the US dollar weakened against major developed market (DM) currencies (US Dollar Index -1.3% MoM).
