Technology stocks pulled back in July, while other parts of the market performed better. Investors were also watching interest rates, energy prices, and global events.
Overall, the market held up fairly well. Consumers continued to spend, corporate earnings remained strong, and the economy held up despite some signs of slowing.
Investors Shifted Their Focus Beyond Technology
Technology stocks had driven much of the market’s growth earlier in the year, but they lost some ground in July.
Concerns about high valuations and spending on artificial intelligence contributed to the pullback. At the same time, other sectors, including financials, health care, industrials, energy, and real estate, performed better.
Instead of pulling out of stocks, investors moved money into other parts of the market. This helped keep the broader market relatively steady even as technology stocks pulled back.
Corporate earnings also helped, with many companies reporting better-than-expected results.
Interest Rate Expectations Continued to Change
The Federal Reserve left interest rates unchanged in July as it continued to watch inflation and the economy.
Earlier this year, many investors expected rates to come down. But with inflation remaining a concern, there is now more uncertainty about when rates might change.
Bond yields moved higher during the month. Higher rates can make borrowing more expensive, but they can also mean higher income for some bond investors.
What the Fed does next will largely depend on inflation, employment, and the economy.
Consumer Spending Held Up as Job Growth Slowed
The economic picture was somewhat mixed in July.
Job growth slowed, but unemployment remained steady. Consumer spending also held up despite surveys showing that many people remain concerned about the economy.
Housing activity improved slightly, while lower energy prices helped ease inflation.
Overall, the data pointed to some areas of slowing, but the economy continued to grow.
Energy Prices Remained Tied to Inflation Concerns
Oil prices moved higher at times during July as global tensions increased.
Higher oil prices can raise transportation and shipping costs and contribute to higher prices for everyday goods. That can also put more pressure on inflation and influence where interest rates may go next.
Conflicts in other parts of the world also affected supplies of energy and agricultural products, adding to concerns about prices.
What This Means for Investors
July was a mixed month, with different parts of the market moving in different directions. While technology stocks pulled back, other sectors performed better, and the economy continued to grow.
Inflation, interest rates, energy prices, and global events remain important factors to watch. July also showed that what happens in one sector, even a large one like technology, doesn't always reflect what is happening across the rest of the market.
If you'd like to discuss how current market conditions relate to your investments or retirement planning, schedule a complimentary introductory meeting with our team in Glastonbury or Wilton, Connecticut.
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Tom Hine is a CERTIFIED FINANCIAL PLANNER® professional and owner of Capital Wealth Management. With over 30 years of experience, Tom works with individuals and families on financial planning, retirement strategies, and investment management. He has a particular passion for special needs financial planning, shaped by his personal experience helping raise his sister Amy, who was born with a severe chromosomal condition. Tom understands the emotional and financial challenges that come with caring for a loved one with disabilities and helps clients navigate complex issues like preserving government benefit eligibility, coordinating Special Needs Trusts and ABLE accounts, and long-term care planning. With offices in Glastonbury and Wilton, CT, Tom serves clients across Connecticut and throughout the U.S. Schedule a complimentary introductory meeting with Tom.
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Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks.
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