July 2026 Market Recap

Here are the latest market insights from the Goldman Sachs Wealth Management Investment Strategy Group (ISG). 

In July, geopolitical tensions flared up again over control of the Strait of Hormuz in the Middle East. This led to a collapse in tanker traffic and oil flows, putting upward pressure on commodity markets. Uncertainty around energy prices is set to remain elevated, given likely persistent on-and-off tensions.

Here’s a recap of what happened in the market and economy.

The markets

The S&P 500 was slightly down on the month, returning -0.1%, with large disparities across sectors.

Meanwhile, given its lower technology exposure, the MSCI EAFE returned 0.9% over the month. Emerging market equities underperformed, with the MSCI EM total return index down 3% on the month, driven by a sell-off in Taiwanese and Korean equities, two markets geared toward the AI investment cycle.

July also marked the start of the Q2 earnings season. Early results have been sturdy, with earnings likely to surprise to the upside in most regions.

Elsewhere, the DXY (US dollar index) was down in July, with the greenback edging lower at the end of the month following Fed Chair Kevin Warsh’s dovish comments at the July Fed meeting, which also led the US yield curve to steepen.

In rates, yields were up on the month, driven by a combination of higher commodity prices, which pushed breakeven expectations higher, and resilient growth, which pushed real yields up. The US 10-year Treasury yield rose by 27 basis points.

The economy

In the US, Q2 GDP decelerated to 1.5% quarter over quarter (seasonally adjusted annual rate), but the underlying composition pointed to very strong domestic demand. Personal consumption expenditures rose 3.2% annualized over the quarter, while business investment increased by 8.4% annualized.

Meanwhile, both government spending and net trade weighed on growth, with the latter driven by a large increase in imports linked to capital investment. The slightly weaker than expected Q2 GDP print lowers slightly ISG’s 2026 full-year growth forecast to 2.0%, from 2.1% previously.

On the inflation front, June CPI surprised to the downside, with core CPI decelerating to 2.6% year over year from 2.9% year over year.

ISG continues to expect inflation to decline in the second half of the year, driven by slower shelter inflation, more subdued goods inflation as tariffs have been passed through, and softer services inflation as wage growth remains contained.

In July, the Fed kept interest rates on hold, in line with consensus expectations. While three members dissented in favor of a hike, the press conference leaned in a dovish direction. Warsh noted that recent market moves had tightened financial conditions, implying a reduced need for additional Fed hikes. He downplayed recent AI-related price pressures, and suggested rate hikes could be part of the solution to elevated inflation but added that he “wouldn’t say it’s in isolation.”

Taken together, these signals support ISG’s view that the Fed will stay on hold this year, provided there are no further upside inflation surprises.

Want more market insights?

The US economy and equity markets have shown remarkable resilience in the first half of 2026, overcoming a global energy shock, geopolitical tensions, and investor concerns toward the durability of the rally in semiconductor and broader technology stocks. In a new Live Insights, ISG discusses the key drivers behind this performance.