July 2026: Tomoro Market & Portfolio Update

Insights

This Month’s Key Takeaways

Markets continued their strong momentum in July despite elevated interest rates and ongoing geopolitical uncertainty.

Key takeaways:

1. U.S. stocks reached new highs, driven primarily by strong corporate earnings and continued enthusiasm around artificial intelligence.
2. Bond yields remained elevated, creating some of the most attractive income opportunities investors have seen in years.
3. While geopolitical tensions and inflation remain risks, the broader U.S. economy continues to show resilience.

Our perspective: We continue to believe that staying invested, maintaining diversification, and periodically rebalancing portfolios remain the best long-term strategy.

What this means for your portfolio?

Strong markets can be great for growing wealth but they can also quietly change the risk profile of your portfolio.

As U.S. equities, particularly large-cap technology stocks, continue to outperform, many portfolios naturally become more concentrated over time. While this growth has been beneficial for investors, it can also gradually shift a portfolio’s risk profile beyond its intended allocation. Rather than chasing recent winners or attempting to time the market, our focus remains on helping clients achieve their long-term financial goals through disciplined portfolio management. We regularly rebalance portfolios by trimming positions that have grown beyond their target allocation and redeploying those proceeds into other areas of the market where appropriate. Alongside tax-efficient portfolio management, this disciplined approach helps maintain diversification, manage risk, and ensure each portfolio remains aligned with your investment objectives, risk tolerance, and time horizon.

Higher interest rates have created some of the most attractive fixed income opportunities investors have seen in more than a decade. While markets now expect interest rates to remain elevated for longer, today’s environment allows investors to earn meaningful income from high-quality bonds without taking excessive risk. For clients holding excess cash, approaching retirement, or seeking greater portfolio stability, we are evaluating opportunities to lock in these attractive yields through high-quality Treasury, corporate, and municipal bonds. For investors in higher tax brackets, municipal bonds may offer particularly compelling tax-equivalent yields while providing a reliable source of tax-advantaged income. By strengthening the income-generating portion of the portfolio, we can help reduce the need to sell equities during periods of market volatility and better position portfolios to support long-term spending needs.

Geopolitical events and higher energy prices can create short-term market volatility and increase everyday living costs. While these headlines can be unsettling, they are a normal part of long-term investing. That’s why we build diversified portfolios designed to withstand a wide range of market environments rather than relying on any single outcome. We also incorporate inflation into your long-term financial plan, helping ensure your investment strategy and cash flow remain aligned with your goals even as economic conditions evolve.

Biggest Headlines this month

Client question of the month

Why don’t we simply sell technology after such a strong rally?

While tech has generated exceptional returns, consistently predicting when markets will reverse is extremely difficult. We also remember that time in the market beats market timing.

So instead of trying to time the market, we focus on disciplined rebalancing and proper diversification. As positions grow beyond their intended allocation, we gradually trim them and redeploy proceeds into other areas of the portfolio. This approach allows us to capture gains while maintaining appropriate diversification and risk.

Market Overview

Equities

Market Review: U.S. equities continued their strong momentum in July, with the S&P 500 rising approximately 2% during the first week of the month and capping off its strongest quarterly gain in six years. Strong corporate earnings, a resilient U.S. economy, and continued enthusiasm around artificial intelligence (AI) remain the primary drivers of the market. While stock valuations are above long-term averages, much of this is supported by improving earnings expectations, with S&P 500 companies expected to deliver approximately 23% year-over-year earnings growth in the second quarter. International markets were more mixed, as Chinese technology stocks benefited from continued investment in AI, while European equities lagged amid higher energy prices and slower economic growth.

Fixed Income

Fixed income markets remained focused on the outlook for interest rates. While inflation has continued to moderate, it remains above the Federal Reserve’s long-term target, and higher energy prices have reinforced expectations that interest rates could remain elevated for longer than previously anticipated. As a result, U.S. Treasury yields moved higher during the month, with the 2-year Treasury ending near 4.21% and the 10-year Treasury rising to approximately 4.56%. Although higher yields can create short-term price volatility for existing bonds, they have also created some of the most attractive income opportunities investors have seen in over a decade. Today, high-quality Treasury, corporate, and municipal bonds continue to offer compelling yields for investors seeking income while maintaining a relatively conservative risk profile.

Alternatives

Geopolitical tensions in the Middle East intensified during the month following attacks on oil and gas tankers transiting the Strait of Hormuz, raising concerns about potential disruptions to global energy supplies. As a result, oil prices moved higher, with West Texas Intermediate (WTI) crude ending the month at $71.41 per barrel and Brent crude at $76.01. Despite these geopolitical headwinds, the broader U.S. economy remains resilient. While economic growth has moderated from its strongest pace, the services sector continues to expand, employment remains healthy, and inflation has continued to gradually ease.

Chart of the month

What does this chart mean?

• Through July, emerging markets and U.S. small cap stocks have outperformed, while U.S. large cap stocks have continued to post strong gains. At the same time, bonds have generated modest positive returns as higher interest rates continue to provide attractive income, and gold has given back some of last year’s gains.
• The takeaway isn’t to chase whichever asset class is currently leading. Instead, it reinforces why we build diversified portfolios. Market leadership changes over time, and maintaining exposure across multiple asset classes helps position portfolios to participate in opportunities while managing risk when market conditions inevitably shift.
• At Tomoro, we continue to focus on disciplined portfolio construction, periodic rebalancing, and ensuring your investments remain aligned with your long-term financial goals; not this month’s top-performing asset class.

Sources:

• Tomoro Investment Committee
• Goldman Sachs Asset Management, Market Monitor: Week Ending June 12, 2026
• Raymond James Fixed Income Weekly Primer
• BlackRock Investment Institute, Weekly Investment Commentary: Strong earnings key as rates stay high