The S&P 500 Index finished flat in July and was largely unchanged over the past three months. Despite the recent pause, the index was still up a respectable 10% YTD. International stocks, measured by the MSCI ACWI Ex USA Index, declined 1% in July but were up 13% YTD, outpacing US equities by 3%. Oil prices increased 21% in July as hostilities between the U.S. and Iran resumed. Interest rates responded in kind with the 10-year Treasury yield rising 30 basis points to 4.7%, ending July at an 18-month high.
While broad market indexes posted modest returns this past month, there was a notable rotation going on under the surface. After rallying for the past three months, technology and AI-focused names experienced sizable selloffs while traditional value sectors posted solid gains. The technology sector declined 8% over the course of July while financial services and health care sectors gained 7% and 3%. Further highlighting this theme was the semiconductor industry group, a recent winner of the AI buildout, falling 17% in July while the software industry group rose 4%. Finally, South Korea and Taiwan, two countries seen as AI beneficiaries, saw their stock markets fall 21% and 11% while Canada and Europe, regions with little AI exposure, returned 3% and 2%.
This recent episode of volatility highlights why avoiding performance chasing and remaining diversified are paramount for investors. Chasing recent top performers often means buying after gains have already occurred and selling after losses have already been locked in, turning a sound plan into poorly timed decisions. Diversification across asset classes and sectors smooths this tendency, reducing reliance on any single position or market segment. Since market leadership rotates unpredictably, identifying tomorrow’s winners in advance is exceptionally difficult. A disciplined, diversified allocation remains the best path to achieving your financial goals and objectives.
IMPORTANT DISCLOSURES
The views, opinions and content presented are for informational purposes only. The charts and/or graphs contained herein are for educational purposes only and should not be used to predict security prices or market levels. The information presented in this piece is the opinion of Aurdan Capital Management and does not reflect the view of any other person or entity. The information provided is believed to be from reliable sources, but we cannot guarantee the accuracy or completeness of the information, no liability is accepted for any inaccuracies, and no assurances can be made with respect to the results obtained for their use. The information contained herein may be subject to change at any time without notice. Past performance is not indicative of future results.