August 1, 2026
August 2026 Investment Update
Two Ways This Resolves
Last month we wrote that history does not repeat itself, but it rhymes. July gave us even more of the rhyme. It also gave us something more useful than another historical echo: a clearer sense of how a period like this one could end.
When prices have run as far ahead of earnings as they have today, there are only two paths back toward anything resembling normal. Either prices come down, or corporate earnings rise fast enough, and long enough, to grow into the prices already being paid. That is not a forecast. It is arithmetic. Every indicator we follow is an attempt to understand which of those two paths is more likely, and roughly how much runway we have before the question gets answered for us.
Both paths have honest arguments behind them. That is the lens we are bringing to July, and to the months ahead.
July Market Recap
July was the month the concentration cracked. The rotation out of mega-cap technology that we flagged in June accelerated into a broad repricing of this year’s most crowded trade, as semiconductor and memory names sold off sharply and the Nasdaq came within a fraction of a percentage point of correction territory. The Federal Reserve held rates steady on July 29 for a fifth straight meeting, but three officials dissented in favor of a hike, and long-term Treasury yields jumped. Through all of it, the Dow held its ground above 52,000.
Figures reflect index levels from the June 30, 2026 close through the July 30, 2026 close. Final month-end figures will be confirmed after the July 31 session.
What Drove Markets in July?
Four themes shaped the month, and each of them matters for how the rest of the year plays out.
The semiconductor trade came apart
After leading the market for most of the past two years, chip and memory stocks fell hard. The selloff was driven by a cluster of worries rather than a single event: news that a Chinese memory manufacturer had come public to enormous demand, reports of domestic Chinese progress on chipmaking equipment, and above all a growing concern that the largest technology companies are spending more on artificial intelligence infrastructure than the resulting profits currently justify.
At its low for the month, the Nasdaq Composite traded nearly 10% below the record it set in early June, and the Nasdaq 100 crossed into correction territory outright. Notably, the underlying business data did not deteriorate the way the stocks did. Memory contract prices actually rose over the month. What changed was investor willingness to pay for future AI profits that have not yet arrived. That distinction is the central question of this market.
An uncomfortable hold from the Federal Reserve.
On July 29 the Fed left its benchmark rate in a range of 3.50% to 3.75% for the fifth consecutive meeting, in a 9 to 3 vote. What made this hold different is the direction of the dissent: all three dissenting officials wanted to raise rates, not cut them, in response to inflation that has now run above the Fed’s 2% target for more than five years. Energy prices, pushed higher by continued conflict in the Middle East, have added to that pressure.
Chair Kevin Warsh reiterated that the Fed will not provide forward guidance, which leaves markets to work out the path of policy on their own. They did not care for the exercise. The Dow fell more than 1,100 points that day, its worst session of the year, and long-term Treasury yields surged, with the 30-year reaching its highest level in roughly 19 years. Many market participants now consider a rate increase, rather than a cut, the more likely next move. That is a meaningful shift from where expectations sat only a few months ago.
Earnings pulled the mega caps apart
For the past two years, the largest technology companies largely moved as a group. In late July they stopped. Microsoft rose sharply after its cloud business posted its fastest growth since 2022, and Amazon gained on strong second quarter results. Apple fell on a disappointing sales outlook and slowing growth in key segments. When leadership that has moved together begins to separate on company-specific results, it usually signals that investors have shifted from buying a theme to underwriting individual businesses. That is generally healthy. It is also a good deal less comfortable.
SpaceX kept falling, and the IPO window told on itself
The initial public offering market has been extraordinarily active. Roughly $105 billion was raised across 48 offerings in the second quarter, the strongest quarter for IPO proceeds since 2021, with SpaceX’s listing accounting for a large share of that total. Historically, peaks in IPO issuance have tended to cluster near market peaks, for an understandable reason: companies raise capital when buyers are most willing to pay. July offered a clear illustration.
SpaceX now trades roughly 50% below the high it set days after its June debut, and below its offering price, with its first earnings report as a public company and the expiration of insider selling restrictions both arriving in early August. Meanwhile, Jersey Mike’s came to market reportedly more than ten times oversubscribed, priced in the middle of its expected range, and closed its first day of trading down about 6%. Institutional enthusiasm ahead of a deal and durable demand once a stock trades freely are not the same thing. That gap is worth watching.
Positioning Update
Our positioning is unchanged. We continue to lean defensive, a stance we have now held since last fall.
This is not a prediction that markets will fall. It is a reflection of what the current data supports. Our focus remains on stability and resilience, so that portfolios are better prepared if conditions become more challenging. In practical terms, that means:
- A higher-than-usual allocation to cash and cash-equivalent positions, which we feel are currently earning a reasonable yield with relatively little risk while we wait.
- A tilt toward steadier, more defensive areas of the market, particularly consumer staples and healthcare.
- A low-volatility equity position that has continued to behave as intended, cushioning portfolios on days when the broad market falls.
The goal remains twofold: to help soften the impact if the market does pull back, and to keep flexibility on hand, what we sometimes call dry powder, so we can move back toward a more growth-focused mix on better terms when the opportunity comes.
What Matters Most Right Now
We are living through a genuinely unusual period. The data we are looking at has only a handful of historical parallels, and most of them are chapters people remember clearly.
That does not mean a decline is coming, and we are deliberately not making that call. What we can say is that the arithmetic narrows to two possibilities. Either earnings rise to meet prices, or prices adjust toward earnings. There are credible arguments for the first. There is also evidence complicating it, including reports that some companies are trimming AI-related spending without having found the profit improvement they were promised. History leans toward the second. We would rather be prepared for both than confident about either.
We remain optimistic about where the economy and innovation are headed over the coming decade. Artificial intelligence is likely to be genuinely transformative. Companies pushing the frontier today may well prove to be extraordinary long-term investments. The question is not whether those things are true. It is whether current prices already assume them, and whether this is the right moment to lean in aggressively. On that narrower question, the data continues to say no.
None of this requires dramatic action. It reinforces the value of staying grounded in a process that adapts as conditions evolve. When the signals change, we will move accordingly.
As always, if your financial situation, goals, or risk tolerance have changed, please reach out so we can make sure your plan still reflects what matters most to you.
Sources
- CNBC, daily market closing data and U.S. markets coverage, June and July 2026 (cnbc.com)
- CNBC, Federal Reserve July 2026 meeting coverage and rate decision, July 29, 2026 (cnbc.com)
- TheStreet, “Stock Market Today” daily recaps, July 2026 (thestreet.com)
- Renaissance Capital, second quarter 2026 U.S. IPO market data, as reported July 2026
- Fortune and Seeking Alpha, semiconductor and memory sector coverage, July 2026 (fortune.com, seekingalpha.com)
Past performance is not indicative of future results. Any references to relative performance are based on internal portfolio observations and are provided for informational purposes only. Indexes such as the S&P 500 are unmanaged, do not incur fees, and cannot be invested in directly. Individual client results may vary based on factors including timing, allocations, and specific investment objectives.
The opinions expressed are those of Strategic Advisory Partners, who reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. There is no guarantee that their assessment of investments will be accurate. This material is for informational purposes only and should not be construed as investment advice. Past performance is not indicative of future results. All investing involves risk, including the loss of principal, and there can be no guarantee that investment objectives will be met.
