Monthly Investment Portfolio Management

Uncertainty rarely signals an all-clear, and markets don't wait

What you need to know

July delivered mixed market returns as investors navigated a range of crosscurrents in the economic, policy, and market backdrop.
Uncertainty rarely signals "all clear" before markets move higher, as demonstrated by widespread 12-month gains, with multiple indexes hitting record highs along the way.
Rather than position for a single economic or market outcome, prioritize broad diversification to participate in rotating opportunities.
Amid solid economic momentum, we remain constructive on equities, favoring overweight allocations to a blend of U.S. stocks, emerging markets, and cyclical market segments.

Portfolio tip
Start portfolio reviews with the end in mind. A goals-based approach helps you create a diversified portfolio strategy to help you navigate markets today and stay on course as conditions shift.

Equity and fixed-income market performance

Source: Morningstar, 7/31/2026. U.S. large-cap stocks represented by S&P500 TR Index. International large-cap stocks represented by MSCI EAFE NR Index. U.S. mid-cap stocks represented by Russell Mid-cap TR Index. U.S. small-cap stocks represented by Russell 2000 TR index. International small- and mid-cap stocks represented by MSCI EAFE SMID NR Index. Emerging-market equity represented by MSCI Emerging Markets NR Index. U.S. investment-grade bonds represented by Bloomberg US Aggregate TR Index. U.S. high-yield bonds represented by Bloomberg US HY 2% Issuer Cap TR Index. International bonds represented by Bloomberg Global Agg Ex USD TR Hgd Index. Emerging-market debt represented by Bloomberg Emerging Market Agg Index. Cash represented by Bloomberg US Trsy Bellwethers 3Mon TR Index. Past performance does not guarantee future results. Market indexes are unmanaged, cannot be invested into directly and are not meant to depict an actual investment. Chart description

Where have we been?

July delivered mixed stock market returns as investors navigated a range of crosscurrents in the economic, policy, and market backdrop. On the one hand, economic data remained broadly constructive, indicating U.S. growth moderated but continued at a healthy pace, supported by solid consumer spending and steady labor markets. Corporate earnings also continued to demonstrate strength, helping underpin stock markets.

At the same time, risks tied to geopolitical developments, evolving trade policies, and the speed of investment in artificial intelligence clouded the outlook. In addition, higher energy prices, tariffs, and AI demand fueled concerns that inflationary pressures could persist, weighing on markets.

Tech-heavy market segments were among the hardest hit, but returns were not uniformly negative across asset classes and sectors. International developed-market stocks outperformed from an asset class perspective, delivering slightly positive returns. At the sector level, a combination of cyclical and defensive sectors also posted gains, with financials, energy, health care, and real estate among the strongest performers, demonstrating a broadening theme as leadership expanded beyond tech.

Interest rates moved higher, weighing on bond allocations. Interest rates have risen across the maturity spectrum this year, a trend that continued in July.

Persistent inflationary pressures and resilient economic growth have driven longer-term yields higher, with the 10-year Treasury yield moving from around 4.2% at the start of the year to around 4.75% in July. The shorter end of the maturity spectrum has reflected an increasing likelihood that the Fed may need to hike rates to combat inflation, lifting the 2-year yield from 3.5% to around 4.25% over the same period.

Higher yields weighed on fixed income markets, as rising interest rates typically result in lower bond prices. As a result, most bond asset classes fell in July, leaving cash to stand out as the only asset class to deliver a positive return.

Over the past year, resilient economic fundamentals have outweighed persistent uncertainty, with markets delivering solid gains across asset classes. Inflation pressures, shifting Federal Reserve policy expectations, tariffs, and geopolitical tensions have all tested investor sentiment over the past 12 months, creating a persistent wall of worries. Despite these concerns and periodic market weakness, returns over the period were broadly positive.

Resilient economic growth, healthy consumers, rising corporate earnings, and continued AI-driven investment provided a strong boost. The result has been solid, broad-based gains across stock and bond markets, with some markets hitting multiple record highs along the way, reinforcing the value of staying disciplined and diversified through changing market conditions.

What do we recommend going forward?

Even when things feel uncertain, stay diversified and keep the end goal in mind. While headlines continue to evolve, this year has reinforced a familiar lesson: uncertainty rarely provides an all-clear signal before markets move higher. Rather than positioning portfolios for a single economic or market outcome, start portfolio reviews with your goals in mind, then prioritize diversification to capture rotating opportunities.

Your objectives should shape your portfolio's stock and bond mix. From there, our strategic asset allocation guidance can help you build a diversified portfolio aligned with your desired outcomes. While diversification does not guarantee a profit or protect against loss in declining markets, spreading allocations across regions, market capitalizations, maturities, and credit qualities can help mitigate risk, reduce concentration in any single market or theme, and keep you aligned with your objectives as conditions shift.

Amid solid economic momentum, we remain constructive on equities, favoring overweight allocations to a blend of market segments. Geopolitics and evolving central bank monetary policies are likely to remain sources of periodic volatility, but pullbacks may offer an opportunity to buy quality investments at more attractive prices. We expect steady economic momentum, healthy consumer spending, rising corporate profits, and the transformative growth driven by the AI buildout to provide a favorable backdrop for stocks.

For investors looking to deploy excess cash or rebalance their portfolio, we believe a mix of opportunities awaits. Consider overweight allocations to:

U.S. large- and mid-cap stocks. With companies in the S&P 500 on track to collectively grow earnings by more than 25% this year and U.S. economic growth demonstrating relative strength, the fundamentals for U.S. stocks appear solid. Overweighting U.S. large- and mid-cap stocks may help capture a balance of tech and cyclical opportunities, manage concentration risks, and maintain a focus on higher quality investments.
Emerging-market stocks. Like U.S. large-cap stocks, emerging-market stocks lean toward technology, providing beneficial exposure to the AI theme, and overweighting the asset class may help geographically diversify a portfolio's AI-related allocations. We believe emerging market stocks offer exposure to strong earnings growth potential at relatively attractive prices, particularly following their recent pullback.
International developed-market value-style stocks. We're currently underweight international developed-market stocks, relative to other regions, due partly to these markets' weaker economic growth prospects. However, value-style stocks in these markets have displayed strong momentum this year—outperforming their growth-style counterparts by nearly double. We expect their momentum to continue, and we believe their cyclical exposures help diversify tech allocations, particularly as sector leadership rotates.
Industrials and communication services sectors. Within U.S. stock allocations, we favor industrials and communication services, two sectors we expect to benefit from solid economic growth and AI adoption. We believe industrial stocks will be supported by infrastructure spending, while communication services offer exposure to the AI theme at relatively attractive valuations.

Higher-for-longer rates may create opportunities for fixed income investors, despite our underweight view on bonds. Reflecting resilient economic growth and persistent inflationary pressures, we now expect the 10-year Treasury yield to remain broadly within a 4.5%-5.0% range through year-end, up from our previous forecast range of 4.0%-4.5%. While the Federal Reserve held the federal fund rate steady in July, it noted inflation risks, and markets have priced expectations for a rate hike by year end.

Rising rates have weighed on bond prices, but they have also improved forward-return potential, creating more attractive income opportunities for bond investors. In this environment, a diversified ladder of bond maturities may help capture higher yields while balancing reinvestment and interest rate risks amid ongoing inflation uncertainty. On the shorter end of the maturity spectrum, short-term bonds offer a meaningful yield advantage over cash-like options, providing an opportunity to enhance income while maintaining relatively limited interest rate sensitivity.

We’re here for you

Markets may not reward every asset class or sector allocation at the same time, but diversified portfolios are designed with this in mind, helping investors remain disciplined and prepared for shifting conditions. Consider reviewing your portfolio with your financial advisor through the lens of your ultimate goals, setting in place a diversified strategy that keeps the focus on what you aim to achieve.

If you don't have a financial advisor, we invite you to meet with an Edward Jones financial advisor to help ensure your portfolio is aligned with your goals, positioned for opportunities, and built to keep you on course toward the outcomes that matter most.

Strategic portfolio guidance

Defining your strategic investment allocations helps keep your portfolio aligned with your risk and return objectives, and we recommend taking a diversified approach. Our long-term strategic asset allocation guidance represents our view of balanced diversification for the fixed-income and equity portions of a well-diversified portfolio, based on our outlook for the economy and markets over the next 30 years. The exact weightings (neutral weights) to each asset class will depend on the broad allocation to equity and fixed-income investments that most closely aligns with your comfort with risk and financial goals.

Diversification does not ensure a profit or protect against loss in a declining market.