“Good investors gather information, put that information into current and historical context, then make sound decisions.”
July has been quite profitable for equities thus far, both domestic and international. There has been significant rotation in domestic equities, as is evident from the positive numbers from both sector and capitalization weighted indexes. Additionally, as progress is seen on the tariff agreements thus far, both developed and emerging markets equity indexes are responding positively. As a result, every domestic capitalization weighted index we follow is up in July, as are all but one sector index, and all three international indexes. This global bull market is strong and broad.
In the U.S., large cap equities are still the top performers YTD, however small and mid cap equities have had a slightly stronger July. The S&P 500 Index is up +9.42% YTD, and up +3.03% MTD. The S&P MidCap 400 Index is now up +3.98% YTD, after a +3.78% showing MTD. Finally, the S&P 600 Small Cap Index is still down -1.27% for the year, despite rising +3.34% MTD. From a technical perspective, the S&P 500 is in a long-term uptrend and has fully recovered from the recent correction. The S&P MidCap 400 Index and the S&P 600 Small Cap Index have not fully recovered from the correction, but both have recently broken intermediate-term downtrends, are now engaged with short-term uptrends, and are finally rising above their moving averages.
The only sector index we follow that is down in July is the S&P Consumer Staples Index, down -0.53%. Strong positive performances dominate. The S&P Metals and Mining Index is up +15.46% MTD and up +37.11% YTD. Sector rotation was most obvious with the S&P Transportation Index up +8.77% MTD and up +1.53% YTD, and the S&P Oil & Gas Equipment Index is up +8.06% MTD yet down -12.47% YTD. Sector rotation was also evident with the S&P Pharmaceuticals Index up +6.88% MTD and up +1.06% YTD, the S&P Biotechnology Index is up +5.63% MTD and down -2.76% YTD. This market does not want to leave anyone too far behind. Industrials, Financials, Materials, Internet, and even Utilities indexes were also strong in July.
International equity markets continued their uptrends, breakouts and leadership roles in July as well. The broad MSCI EAFE Index is up +1.40% MTD and is now up +21.12% YTD. The MSCI Europe Index is up +1.46% MTD and up +24.85% YTD. The MSCI Emerging Markets Index has had the best July thus far, up +3.11%, and is now up +18.85% YTD. Several Asian trade agreements have been made in July, with the next big negotiations focusing on the European Union. Just today reports are out on a preliminary trade deal being struck between the U.S. and the E.U. The U.S. and the U.K. announced their tariff trade deal back in May.
Bond markets have not had a good July. The Bloomberg U.S. Corporate High Yield Index has once again been the best performer, up +0.48% MTD, and up +5.07% YTD. The Bloomberg U.S. Aggregate Bond Index is down -0.40% MTD and is now up +3.60% YTD. The Bloomberg Municipal Bond Index is down -1.97% MTD and down -0.99% YTD. The Bloomberg U.S. Long Govt./Corporate Bond Index is down -1.01% MTD and up +2.24% YTD. The Federal Reserve is still center stage as their focus is reportedly now on potential future inflation from tariff negotiations. Meanwhile, bond markets impatiently await the promised rate cuts.
Positive sector rotation during a broadening, advancing equity market is a compelling combination. That being said, equity indexes have already advanced sharply in May, thanks to the Tariff Correction, before continuing higher, yet more restrained, in June and July. The S&P 500 has broken out to an all-time high, largely on strong quarterly earnings reports. Yet the mid cap and small cap sectors haven’t yet fully corrected. August isn’t a very strong month, historically, as profits are realized and strategies for the final quarter of the year are taking shape. We do like our prospects for the second half of 2025.
Edward D. Foy, Manager, SELECTOR® Money Management, Chief Investment Officer, Foy Financial Services, Inc.
© 2025 Edward D. Foy. ed@foyfinancial.com, www.foyfinancial.com.
Sources: StockCharts, Morningstar, Stock Trader’s Almanac.