July 2026 Market Review: The Momentum Unwind and the Bond Market
July looked relatively calm if you only watched the S&P 500 or the Dow, but there was a lot happening under the surface.
In this monthly market review, I discuss the sharp unwind in semiconductors, South Korean stocks, the Nasdaq, and other areas tied to the AI and momentum trade. I also look at why the normal midyear rebalancing process may have contributed to the rotation out of some of the year’s biggest winners and into financials, healthcare, energy, software, and other parts of the market.
I spend some time on leverage and why it can work extremely well when a trade is moving in your favor and become destructive very quickly when it reverses. Using semiconductor and South Korean stock indexes as examples, I show how a roughly 30% to 35% decline in an underlying market can turn into a 70% to 80% loss in a leveraged product.
The other major topic this month is the bond market.
The Federal Reserve held short-term rates steady, but long-term Treasury yields moved higher. I explain why I believe the bond market may be telling the Fed that monetary policy is still too loose, particularly with oil, gasoline, commodities, and inflation expectations moving higher.
I also discuss what rising rates could mean for:
Going into August, I’ll be watching whether the rotation out of the momentum trade continues, whether the S&P 500 can regain its footing, and most importantly, what happens with interest rates.
The ETFs, indexes, securities, and strategies discussed in this video are for illustrative and educational purposes only and do not constitute a recommendation to buy or sell any security. Please refer to the disclosures at the beginning and end of the video.
Matt Williams, CFP®
JTM Williams Capital Management
matt@jtmwilliams.com
703-782-3110
jtmwilliams.com
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Chapters
00:00 – Introduction
02:10 – July Market Performance
05:15 – The Unwind in AI, Semiconductors and Momentum
05:55 – What May Have Triggered the Selloff
09:55 – How Leverage Works Both Ways
13:05 – The Federal Reserve and the Bond Market’s Reaction
15:10 – Did the Fed Make a Policy Error?
16:15 – What Rising Long-Term Rates Mean for Investors
17:55 – Rethinking the Fixed-Income Side of a Portfolio
21:35 – Oil, Inflation Expectations and Treasury Yields
22:35 – What I’m Watching Going Into August