July 2026 Market Review: Geopolitical Shocks and AI Repricing Drive Market Rotation

Global markets remained resilient in July, although market leadership shifted. Strong corporate earnings provided support, while concerns over elevated technology valuations and AI spending prompted a rotation towards energy, financials and value-oriented sectors.

The macroeconomic backdrop remained challenging, with persistent inflation, shifting expectations for monetary policy and renewed geopolitical tensions shaping market sentiment. Higher energy prices added to inflationary pressures, while bond yields moved higher.

Overall, July highlighted a more selective market environment, with earnings resilience supporting risk assets while valuations, rates and geopolitical developments remained key drivers of performance.

Market and Macro Overview

• Global markets saw a notable rotation in July as investors reassessed elevated AI valuations, inflation risks and the outlook for interest rates. Global equities remained broadly resilient, with the MSCI World index edging higher, while technology-heavy markets in Asia and emerging markets came under pressure. In contrast, energy, financials and value-oriented equities generally outperformed amid higher oil prices and renewed geopolitical tensions. Bond markets weakened as rising energy costs revived inflation concerns and pushed longer-term yields higher. Commodities delivered strong returns, led by a sharp rise in oil prices.

  
  

• Several global central banks kept rates unchanged in July, but the outlook for further easing became less certain as stronger growth and renewed energy-price pressures raised inflation concerns. The US Federal Reserve kept its policy rate unchanged although a divided vote highlighted uncertainty over the future direction of monetary policy. The ECB also signaled little urgency to ease policy, while the Bank of England maintained rates despite some policymakers favoring a hike. In Japan, the BoJ held rates at 1% amid concerns over yen weakness and its inflationary impact.

  
  

• United States inflation decreased in June 2026, with headline CPI easing to 3.5% from 4.2% in May 2026, while core CPI declined to 2.6% from 2.9% over the same period. Meanwhile, the US economy grew in Q2 2026, with real GDP expanding at an annual rate of 1.5%, compared with 2.1% in Q1 2026, reflecting increases in consumer spending, investment and exports, partly offset by lower government spending.

• Euro area annual inflation remained above target, despite falling from 3.2% in May 2026 to 2.8% in June 2026, on the back of a drop in food price inflation, services inflation and lower energy prices. Inflation is expected to be 2.9% in July 2026, driven largely by a surge in energy prices during the month. GDP grew 0.4% in Q2’26 in the euro area and by 0.5% in the EU. Ireland (+3.9%) recorded the highest increase compared to the previous quarter.

(Source: Eurostat)

• South Africa’s inflation rose in June 2026, with headline CPI increasing to 5.0% (Previous reading of 4.5%). Transport was the largest contributor to both the annual and monthly changes in the consumer price index (CPI), mainly underpinned by higher fuel prices. Despite the inflationary backdrop, the South African Reserve Bank kept the repo rate unchanged at 7.0% in July, with the MPC citing improving inflation prospects but ongoing concerns over weak economic growth.

(Source: Statistics South Africa)

Equities overview

Equity markets ended July with modest gains, but performance varied significantly across regions and sectors. Global shares were supported by resilient corporate earnings, while concerns around stretched AI valuations weighed on technology stocks, particularly across Asia and emerging markets. Energy and financials were among the stronger areas as higher oil prices and solid earnings favored more cyclical parts of the market. The UK also benefited from its greater exposure to these sectors.

• In the United States, equities posted mixed performance, with the S&P 500 falling 0.1% and the Dow Jones Index rising by 0.3%. Strong company earnings helped support the market, but concerns over high valuations limited gains. Energy was the best-performing sector as oil prices rose amid renewed Middle East tensions, while financials also performed well. Technology stocks fell as investors questioned high AI valuations and spending with the Nasdaq declining by 3.2% while industrials also lagged.

  
  

• European equity markets delivered positive returns in July, outperforming most developed markets, supported by strong performance in defense, energy and industrial sectors. Germany’s DAX rose 2.5% and the Euro STOXX 50 gained 0.5%, helped by stronger-than-expected economic growth, with eurozone GDP expanding 0.4% in Q2.

  
  

• The UK was the strongest developed equity market in July, with the FTSE 100 rising 3.5%. UK equity markets benefited from their low exposure to AI theme and technology-related stocks which underperformed during the month due to investor caution on elevated AI spending. UK’s relatively higher exposure to the energy segment favored domestic equities amid rising oil prices during the month.

  
  

• Japanese equities delivered mixed performance with the Nikkei 225 declining 8.1% as the global sell-off in AI and semiconductor stocks weighed heavily on Japan’s technology-heavy companies. The correction highlights the importance of managing concentration risk within AI-related themes after significant valuation expansion. In contrast, the TOPIX index posted gains of 0.2% as investors rotated from tech stocks to value and cyclical sectors. This rotation helped cushion broader market performance despite underperformance in AI-related leaders.

  
  

• Emerging market equities fell in July, with the MSCI Emerging Markets Index declining 3.3%, driven by weakness in technology-heavy markets such as South Korea and Taiwan. Growing caution over the sustainability of hyperscaler AI capex and increasing competition from China weighed on South Korea’s and Taiwan’s equity markets. On the other hand, China was the strongest performer, as investors divested from South Korea and Taiwan towards Chinese stocks. Firmer commodity prices supported South African and Brazilian equities, which have greater exposure to commodity and resource-related sectors.

  
  

• In South Africa, equity markets ended the month higher in a month when most global markets fell. Resource shares and listed property stocks led, posting gains of 2.2% and 2.3% respectively. South Africa outperformed emerging markets by a wide margin, with the JSE FTSE All Share Index’s 1.1% gain in sharp contrast with the MSCI Emerging Markets Index’s 3.3% decline.

Fixed income overview

Government bond yields moved higher across developed markets as rising energy prices and resilient economic data prompted investors to reassess the outlook for inflation and interest rates.

The U.S. bond market was marked by a sharp surge in Treasury yields to new highs for the year, driven by a hawkish Federal Reserve, persistent inflation, labor market strength, and resilient economic data. Short-term yields rose in anticipation of a potential Fed rate hike, while long-term yields trended higher. Consequently, the Bloomberg Global Aggregate Bond Index posted negative returns of -0.5% over the month.

Source: Zurich

South African bond markets declined with the JSE All Bond Indices falling by 1.4% as inflation concerns persisted, with headline and core inflation remaining above the SARB’s target range.

Commodities overview

• Commodity markets were driven primarily by renewed geopolitical risks and a sharp rebound in energy prices during July 2026. Brent crude oil surged approximately 21.8% to end the month near USD 84.7, with an intra-month high in excess of USD 100 as renewed US strikes and disruptions around the Strait of Hormuz heightened concerns over global oil supply.

Source: Holland Capital Group

• Gold rising around 2.5% to approximately $4,107, marking its first monthly gain in five months. Despite a stronger US dollar and expectations of higher-for-longer interest rates, gold remained supported by ongoing geopolitical uncertainty and demand for defensive assets.

Conclusion

July highlighted the importance of diversification as markets navigated a combination of geopolitical shocks, shifting monetary policy expectations and a reassessment of AI-driven growth prospects. While energy prices and inflation concerns pushed bond yields higher, equity markets experienced a broad rotation away from expensive technology segments towards value-oriented sectors such as energy, financials and industrials.

The resilience of corporate earnings and continued economic growth provided support, although investors became increasingly focused on earnings quality and the sustainability of future returns. Looking ahead, markets are likely to remain sensitive to the path of inflation, central bank policy and geopolitical developments. In this environment, maintaining exposure across asset classes, regions and investment styles remains essential, as opportunities emerge from valuation disparities and changing market leadership.

31 Jul 2026		Performance
INDICES	Value at close	1M	YTD	1Y	3Y	5Y
MSCI AC World	2,677.70	0.1%	11.6%	22.6%	18.8%	11.4%
US
S&P 500	7,489.72	-0.1%	9.4%	18.2%	17.7%	11.3%
DOW JONES	52,485.03	0.3%	9.2%	18.9%	13.9%	8.5%
NASDAQ	25,373.85	-3.2%	9.2%	20.1%	20.9%	11.6%
EUROPE
CAC 40	8,509.64	1.3%	4.4%	9.5%	4.3%	5.2%
FTSE 100	10,868.05	3.5%	9.4%	19.0%	12.2%	9.1%
DAX	25,629.24	2.5%	4.7%	6.5%	15.9%	10.5%
ASIA
NIKKEI 225	64,362.02	-8.1%	27.9%	56.7%	24.7%	18.7%
HANG SENG	25,884.43	13.1%	1.0%	4.5%	8.8%	-0.1%
SENSEX	78,094.65	2.1%	-8.4%	-3.8%	5.5%	8.2%
Africa
South Africa	111,493.10	1.1%	-3.8%	13.2%	12.2%	10.1%
CURRENCIES
USDMUR	47.04	-0.3%	1.5%	1.5%	0.8%	2.0%
GBPMUR	62.92	0.5%	1.6%	2.4%	2.2%	1.3%
EURMUR	53.86	-0.1%	-0.3%	1.3%	2.2%	1.4%
GBP/USD	1.3482	1.7%	0.1%	1.8%	1.6%	-0.6%
EUR/USD	1.1528	0.9%	-1.9%	1.1%	1.6%	-0.6%
USD/ZAR	16.5488	0.9%	-0.1%	-8.0%	-2.5%	2.6%
COMMODITIES
OIL (WTI)	84.67	21.8%	47.5%	21.0%	1.4%	2.9%
Gold	4,107.00	2.5%	-4.8%	25.4%	27.8%	17.7%

Source: Morningstar, Investing.com & MAURITIUS COMMERCIAL BANK LTD

Disclaimer: Intrasia Wealth Ltd (IWL) does not warrant for the correctness and accuracy of the information herein contained which is provided for indicative purposes only. IWL shall not, in any circumstance whatsoever bear responsibility or be held liable for any error, or omission, or any loss which may arise as a result of your reliance upon the present data. Returns for periods greater than one year are annualized.