EMR July 2026 Performance Review

Global Economics Date 3 August 2026 Early Morning Reid

July 2026 Performance Review Peter Sidorov, CFA Global markets faced several important cross-currents in July. Re-escalation Senior Economist between the US and Iran drove a renewed rise in oil, leaving Brent crude (+23.6%) as the best-performing major asset. The reflationary backdrop weighed on global Henry Allen bonds, while the light-on-detail Fed decision added curve steepening pressure, Macro Strategist leading the 30yr Treasury yield to end July at a post-2007 high of 5.27% while the yr bund yield hit a post-2011 high of 3.20%. A reassessment of the AI trade was the key theme in equities, with the Philly Semiconductor index (-20.6%) seeing its Jim Reid Global Head of Macro and Thematic Research worst month since 2008 and the KOSPI slumping by -22.2% despite a late rebound, though both are still up over +50% YTD. European stocks outperformed and sectoral rotation meant that many broader indices are still within touching distance of record highs.

Month in Review - The high-level macro overview July had begun with a relatively sanguine tone across markets, with the VIX index dropping to a post-January low of 15.03 on July 10. However, the market backdrop soon turned more volatile as the calm gave way to several cross-winds: a renewed rise in oil amid US-Iran re-escalation, a rise in long-dated yields to multi-year highs in several countries and a sharp reassessment of the AI trade.

With Trump declaring that the MoU agreed with Iran in June was “over” and both sides resuming strikes, Brent crude climbed from $71/bbl at the start of July to just over $100/bbl on July 23, as investors priced the renewed disruption in the Strait of Hormuz and regional risks. Brent retreated to $90/bbl by the end of July as signs emerged of a pause in further escalation. Even with that pullback, Brent was up +23.6% over the month, while WTI rose +21.8%, leaving both benchmarks up by nearly 50% YTD. Geopolitical risks both around Iran and Russia-Ukraine, as well as rising concerns about the impact of the El Niño, contributed to a rise in agricultural prices, with wheat rising +10.1%.

The reflationary concerns catalysed a rise in global yields even as the major central banks kept policy rates steady in July. Those on hold decisions were accompanied by rather different signals. For the Fed, we saw little clarity from Chair Warsh on the Fed’s reaction function, which led to sharp steepening in the Treasury curve, with the 30yr yield reaching a post-2007 high of 5.27%. While 2yr US yields saw a smaller monthly increase than elsewhere (+11.7bps), in part thanks to a soft June CPI print (0.0% core vs +0.2% exp.), the 10yr yield rose by +27bps to 4.74%. The dollar also lost ground in the aftermath of the Fed decision, losing ground against every G10

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3 August 2026 Early Morning Reid

currency over the month. European yields saw similar moves. The ECB held rates steady but signaled that a September hike was probable. 10yr bund yields rose by +35bps to a post-2011 high of 3.20%. By contrast, the BoE’s steady decision was more dovish, with Governor Bailey saying the Bank was not “edging towards a hike”, though the move in 10yr gilts (+29bps) was similar.

In equities, the biggest theme was the reversal in the AI and semiconductor trade. Concerns over valuations in the context of Chinese AI competition, capex intensity and supply constraints weighed on the sector. The Philly Semiconductor index slumped by -20.6%, its largest monthly decline since 2008. The chips sell-off drove extreme volatility in Korea’s KOSPI, which fell -22.2% in total return terms despite a +17.9% rebound on July 30. That said, the KOSPI remained the best-performing major market YTD with a +57% gain. A late month rebound in the AI trade may have in part followed a positioning clear out, but it was also helped by Mag-7 earnings as Microsoft posted its best day since 2008, representing a record $450bn daily…