July market insights

Positive news propels markets.

Article published: August 08, 2023

By: Neil Gilfedder, CFA® Chief Investment Officer

What happened

Markets had a strong run in July, supported by positive news about the economy. In the U.S., large-cap stocks (S&P 500) were up 3.2% for the month and small caps (S&P 600) gained 5.5%. A broad measure of bonds, the Bloomberg U.S. Aggregate Bond Index, closed the month flat (-0.07%). Emerging-market stocks (MSCI Emerging Markets) also had a strong month, gaining 6.2%, while developed-market international stocks (MSCI EAFE) were up 3.2%.

Why it happened

In July, markets welcomed good news on inflation, with the June consumer price index rising a lower-than-expected 0.2% (or 3% from the previous year – the smallest annual rise since March 2021). The Federal Reserve raised its target interest rate another 0.25%, bringing the range to 5.25%-5.5%.  While this hike was widely expected, it was the commentary from Fed Chair Jerome Powell that sent markets higher. He signaled there may be another pause for a few months, but was noncommittal as he also left the door open to further increases if necessary, based on future data. Soon after, the GDP report for the first quarter was released, showing that the U.S. economy grew by a better-than-expected 2.4%, outpacing the 2.0% growth in the prior quarter.

Quarterly corporate earnings reports are another key indicator market observers watch closely. More than half of S&P 500 companies have now reported results from their latest quarter, with earnings expected to decline more than 8.1% from the same period last year. While the current earnings slump is expected to last through next quarter, the 2024 earnings growth outlook improved in July. 

What it means for you

While there was a lot of good news this month, we are aware that risks remain. Inflation and GDP growth seemed to be headed in the right direction, and the job market – which so far has helped us dodge a recession – remained strong overall. That being said, we’re not out of the woods yet. Some economists are more optimistic about the economy, yet consensus forecasts still anticipate U.S. economic growth to weaken for the rest of the year. The only real certainty is that there will always be some uncertainty, and that surprises – both good and bad – will continue to move markets.

If you have any questions or concerns at all, contact your planner, who can discuss the most recent developments with you.

An index is a portfolio of specific securities (such as the S&P 500, Dow Jones Industrial Average, and Nasdaq composite), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. Past performance does not guarantee future results.

Neil Gilfedder, CFA®

Chief Investment Officer

As executive vice president of investment management and chief investment officer, Neil oversees the team that manages investments for all Edelman Financial Engines clients. Neil directs the investment management operations and evolution of our proprietary investment methodology. Neil received a bachelor's degree in philosophy and economics from the University of York and a master's degree in economics from Stanford University.