Executive Summary

Global financial markets produced mixed but broadly resilient returns during July 2026 as investors rotated away from several of the year's strongest artificial-intelligence and semiconductor investments towards energy, financials, value-oriented companies and selected international markets. The MSCI World Index gained approximately 0.5% in US-dollar terms, while the MSCI World excluding the United States advanced around 2.1%.

US equities were comparatively weak. The S&P 500 declined approximately 0.1%, while the technology-heavy Nasdaq Composite fell around 3.2%. Semiconductor shares experienced particularly substantial profit-taking, with the PHLX Semiconductor Index falling more than 20% during the month after its extraordinary gains earlier in 2026.

The change in market leadership did not indicate that artificial-intelligence investment had ended. Corporate expenditure on data centres, processors, networking and electricity infrastructure remained exceptionally strong. Instead, investors became increasingly sensitive to valuations, financing requirements and the enormous quantities of capital being committed to the AI build-out.

Energy returned to prominence as geopolitical tension between the United States and Iran intensified during parts of July. Brent crude briefly moved above $100 per barrel early in the month before subsequently retreating as fears of an immediate escalation moderated. Commodities gained approximately 7.5% during July, supported particularly by energy.

The Federal Reserve maintained its federal funds target range at 3.50%-3.75% on 29 July. The vote was 9-3, with three policymakers favouring an immediate quarter-point increase. The dissents demonstrated that inflation remained sufficiently concerning for part of the Committee to favour renewed monetary tightening.

The European Central Bank maintained its three key policy rates following June's increase. The deposit facility rate remained at 2.25%, with policymakers emphasising that energy prices remained well above pre-conflict levels and that the full inflationary consequences of the Middle East shock had yet to become clear.

The Bank of England also maintained Bank Rate at 3.75%, although the vote shifted further towards tightening. Six policymakers supported no change while three favoured an increase to 4.00%.

Digital assets diverged sharply from technology equities. Bitcoin gained approximately 7.3% and Ether approximately 18.5%, demonstrating that cryptocurrency markets could advance even as Nasdaq and semiconductor shares corrected.

Gold was broadly unchanged during July. Positive momentum and renewed investment demand were offset by rising real yields and reduced immediate safe-haven demand, leaving the metal close to its June level.

Key Themes During July

• Global equity returns remained positive but highly dispersed.
• The S&P 500 declined approximately 0.1%.
• The Nasdaq Composite fell approximately 3.2%.
• Semiconductor shares experienced substantial profit-taking.
• Value, energy and financial companies generally outperformed growth.
• The UK was one of the stronger developed equity markets.
• The Federal Reserve held rates despite three votes for an increase.
• The ECB maintained its deposit rate at 2.25%.
• The Bank of England held Bank Rate at 3.75% with three votes for an increase.
• Bitcoin and Ether substantially outperformed conventional technology equities.

Global Economic Overview

The global economy remained resilient during July, although persistent inflation, elevated energy prices and high government borrowing costs continued to restrict the ability of central banks to support growth. The immediate stagflation fears of March had diminished, but the pre-conflict environment of steadily falling inflation and interest rates had not returned.

United States

US economic activity remained comparatively resilient during the month. Corporate earnings continued to exceed expectations, while investment associated with artificial intelligence remained an important source of economic activity.

At the same time, the labour market showed signs of reduced momentum and households remained exposed to elevated housing, energy, insurance and borrowing costs. The combination encouraged the Federal Reserve to remain cautious rather than adopt a clear tightening or easing trajectory.

Federal Reserve

The Federal Open Market Committee voted 9-3 to maintain its target range at 3.50%-3.75%. Three policymakers preferred an immediate 25-basis-point increase, highlighting continued concern about inflation remaining above the Federal Reserve's objective.

The unusually large number of dissents demonstrated that the policy debate had changed substantially since late 2025. Rather than discussing how rapidly rates should be reduced, officials increasingly debated whether policy needed to remain restrictive or potentially become tighter.

US Inflation

Inflation remained elevated entering the July meeting. Energy costs had declined from their crisis highs but remained significantly above pre-conflict levels, while tariffs and strong investment demand continued to place pressure on selected goods, infrastructure and services.

The Federal Reserve therefore continued to distinguish between temporary price-level increases and inflation capable of affecting wages, expectations and broader pricing behaviour.

Corporate Earnings

Second-quarter corporate results remained an important source of support for the US economy and financial markets. Strong earnings reduced concern that high financing and energy costs were producing an immediate collapse in profitability.

AI-related investment remained particularly significant across cloud computing, semiconductors, electrical equipment, construction and utilities.

Eurozone

Eurozone conditions remained challenging but relatively stable. The region continued to absorb higher energy costs while benefiting from defence, infrastructure and strategic-industrial expenditure.

The ECB maintained the deposit facility rate at 2.25%, the main refinancing rate at 2.40% and the marginal lending facility rate at 2.65%.

Policymakers stressed that the inflationary consequences of the energy shock had not yet fully passed through the economy and retained a data-dependent approach to any further tightening.

United Kingdom

The UK economy continued to experience subdued underlying growth, while inflation remained above the Bank of England's target. The labour market softened gradually, but policymakers remained concerned about the potential for energy and import costs to influence wages and service-sector pricing.

Bank of England

The Monetary Policy Committee voted 6-3 to maintain Bank Rate at 3.75%. Three members preferred to increase Bank Rate by 25 basis points to 4.00%, compared with two votes for an increase at the June meeting.

The shift demonstrated that support for tighter policy was increasing even as the Committee ultimately concluded that existing restrictive financial conditions remained sufficient.

Japan

Japan continued to experience higher domestic interest rates than had prevailed historically, while fiscal investment, corporate governance reform and AI-related manufacturing supported parts of the economy.

Markets increasingly expected the Bank of Japan to continue gradual monetary normalisation if inflation and wage growth remained consistent with its objectives.

China

China continued to rely upon advanced manufacturing, technology investment and policy support while weakness in property and household confidence limited broader domestic demand.

Chinese semiconductor, internet and industrial businesses remained strategically important, although Asian technology markets experienced substantial profit-taking following their exceptional first-half gains.

Global Outlook

The global economy entered August with lower immediate recession risk than had existed during March, but also with significantly less likelihood of rapid monetary easing. The principal question became whether economies could sustain growth with policy rates remaining restrictive for an extended period.

Equity Markets

July was characterised by a pronounced rotation across global equity markets. The MSCI World Index gained approximately 0.5%, while the MSCI World ex-US Index advanced around 2.1%. International markets therefore substantially outperformed the United States.

United States

The S&P 500 declined approximately 0.1%, while the Nasdaq Composite fell around 3.2%. The Dow Jones Industrial Average performed more resiliently as investors rotated towards value-oriented sectors.

The performance represented consolidation rather than a broad collapse. Corporate earnings remained strong, but investors became less willing to pay continually expanding multiples for companies that had already delivered extraordinary gains.

Semiconductors

Semiconductors experienced one of the most dramatic corrections. The PHLX Semiconductor Index fell more than 20%, its largest monthly decline since 2008, although it remained approximately 60% higher for the year at month-end.

The decline reflected profit-taking, concerns about AI capital requirements, rising long-term interest rates and the extraordinary valuations reached following the first-half rally.

Artificial Intelligence

The correction did not materially alter the long-term AI investment cycle. Hyperscalers continued committing significant capital to computing capacity, data centres, networking and electricity infrastructure.

Investor focus increasingly moved from the scale of spending towards the profitability generated by that spending. Companies unable to demonstrate corresponding revenue growth became more vulnerable to valuation compression.

Value Versus Growth

Value substantially outperformed growth during July. Financials, energy, materials and selected defensive sectors benefited as investors reduced exposure to crowded technology positions.

Europe

European equities generally advanced, supported by financials, industrial companies and comparatively attractive valuations. Higher interest rates benefited selected banks, while infrastructure and defence spending continued to support industrial demand.

United Kingdom

The UK was among July's strongest developed markets. The FTSE All-Share gained approximately 3.7%, supported by energy companies, financials and the market's relatively low technology weighting.

The UK market therefore benefited substantially from the global rotation away from expensive growth companies and towards value and commodity-related businesses.

Japan

Japanese equities produced mixed performance following their exceptional gains earlier in 2026. Technology-related companies experienced greater pressure, while banks, industrials and value-oriented businesses proved more resilient.

Asia-Pacific

Technology-heavy Asian markets weakened after extraordinary first-half returns. Korea and Taiwan remained strategically important beneficiaries of AI semiconductor demand, but July demonstrated the risks created by crowded positioning and rapidly rising valuations.

Emerging Markets

The MSCI Emerging Markets Index declined approximately 3.0%, while MSCI Asia ex-Japan fell around 3.2%. Semiconductor supply-chain exposure contributed significantly to the weakness.

Indicative July Performance

Fixed Income Markets

Global sovereign bonds weakened during July as yields rose across most major markets. Persistent government borrowing requirements, elevated inflation and reduced expectations of monetary easing placed pressure on longer-duration securities.

US Treasuries

US Treasury yields remained elevated as the Federal Reserve maintained rates and three policymakers favoured an immediate increase.

Longer maturities also reflected concern about fiscal deficits, government issuance and the large quantities of debt required to finance public spending.

European Government Bonds

European sovereign bonds weakened as markets absorbed June's ECB increase and recognised that additional tightening remained possible if inflation persisted.

Government borrowing for defence and infrastructure also increased anticipated bond supply, particularly within Germany and other larger European economies.

UK Gilts

UK government bonds remained sensitive to the increasingly hawkish Bank of England. The increase from two to three policymakers supporting a rate rise reinforced expectations that borrowing costs could remain elevated.

Japanese Government Bonds

Japanese government-bond yields remained historically elevated as markets anticipated continued Bank of Japan normalisation and greater government borrowing.

Investment-Grade Credit

Global investment-grade corporate bonds declined during July. Heavy corporate issuance contributed to the weakness, including substantial borrowing associated with hyperscaler and AI infrastructure investment.

High-Yield Credit

High-yield bonds proved somewhat more resilient because strong corporate earnings continued to support underlying credit quality.

Private Credit

Private-credit markets remained active but increasingly differentiated. Strong borrowers continued to attract significant competition, while companies with weak interest coverage faced greater refinancing pressure.

The combination of elevated base rates and increased investor attention to liquidity meant covenant protection, portfolio diversification and maturity management remained particularly important.

Foreign Exchange

Currency markets reflected persistent interest-rate differentials, geopolitical uncertainty and the changing performance of international equity markets.

US Dollar

The dollar remained supported by relatively high US interest rates and the increasingly hawkish Federal Reserve debate. However, stronger performance from international markets encouraged greater diversification outside dollar-denominated assets.

Euro

The euro remained supported by the ECB's June rate increase and July decision to maintain its deposit rate at 2.25%.

Sterling

Sterling benefited from expectations that UK rates could remain elevated for an extended period. The three votes for a Bank Rate increase reinforced the relative attractiveness of sterling yields.

Japanese Yen

The yen remained volatile as markets anticipated eventual additional Bank of Japan tightening. Higher Japanese yields offered greater structural support than during earlier years, although international rate differentials remained substantial.

Chinese Renminbi

The renminbi remained closely managed as Chinese authorities balanced export competitiveness, domestic monetary accommodation and financial stability.

Emerging-Market Currencies

Emerging-market currencies produced mixed performance. Higher US yields remained a headwind, while commodity exporters benefited selectively from stronger energy and raw-material prices.

Commodities

Commodities were among July's strongest major asset classes, gaining approximately 7.5% according to J.P. Morgan's monthly market review. Energy markets were particularly volatile as the US-Iran conflict intensified and subsequently moderated during different parts of the month.

Oil and Energy

Brent crude briefly traded above $100 per barrel early in July as geopolitical tension increased, before retreating as immediate concerns surrounding supply disruption moderated.

The continued volatility reinforced the strategic importance of energy security and the sensitivity of inflation expectations to developments surrounding the Strait of Hormuz.

Natural Gas

Natural-gas markets remained sensitive to Middle Eastern shipping conditions and competition for alternative LNG cargoes. European energy security continued to influence industrial and fiscal policy.

Gold

Gold finished July approximately unchanged. Positive momentum and investment demand were offset by rising real yields and other negative risk factors.

Physically backed gold ETFs nevertheless attracted renewed investor interest, reinforcing the metal's continuing role within institutional portfolios.

Copper and Industrial Metals

Industrial metals remained supported by electricity-grid investment, defence expenditure, data-centre construction and broader electrification.

Critical Minerals

Governments and industrial companies continued seeking greater diversification of rare-earth, copper and other strategic mineral supply chains.

Agricultural Commodities

Agricultural markets remained exposed to energy, fertiliser and transportation costs as well as conventional weather-related supply risks.

Digital Assets

Digital assets substantially outperformed conventional technology equities during July, providing one of the month's most notable cross-asset divergences.

Bitcoin

Bitcoin gained approximately 7.3% during July, recovering from the weakness experienced during the first half of 2026.

The rally occurred even as the Nasdaq and semiconductor equities declined, suggesting that digital assets experienced an independent improvement in investor flows and positioning.

Ethereum

Ether gained approximately 18.5% during the month, substantially outperforming Bitcoin and most conventional risk assets.

Institutional interest in tokenisation, stablecoins and blockchain-based financial infrastructure remained supportive of the broader Ethereum ecosystem.

Institutional Participation

Spot Bitcoin ETFs recorded net inflows during July, providing evidence that institutional demand had begun to stabilise after the substantial outflows experienced earlier in 2026.

Tokenisation

Banks and asset managers continued expanding tokenised investment funds, securities and settlement infrastructure. The structural development of regulated blockchain applications remained increasingly separate from short-term cryptocurrency speculation.

Risk Considerations

• Bitcoin gained approximately 7.3%.
• Ether gained approximately 18.5%.
• Crypto outperformed technology equities during the month.
• Institutional fund flows improved.
• Digital assets remained highly sensitive to liquidity and leverage.

Private Equity

Private-equity markets remained active during July despite higher interest rates and increased volatility within public technology markets. Strong corporate earnings and improved exit activity provided support, while the changing composition of public-market returns created new considerations for private valuations.

Deal Activity

Healthcare, infrastructure, energy services, industrial technology and business services remained attractive areas. Investors increasingly sought exposure beyond highly valued AI software and semiconductor businesses.

Technology Valuations

The more than 20% monthly decline in the PHLX Semiconductor Index demonstrated how rapidly public valuations could change even where long-term industry demand remained attractive.

Private technology valuations therefore required careful consideration of public comparables rather than assuming that exceptional first-half multiples could be maintained indefinitely.

Financing

Acquisition financing remained available, but high government yields and restrictive policy rates prevented leverage from becoming materially cheaper.

Transactions therefore continued to require realistic interest coverage and operational value-creation assumptions.

Infrastructure

Data centres, electricity infrastructure, energy security and defence remained major private-capital themes. However, increasing debt issuance by AI-focused hyperscalers highlighted the extraordinary amount of financing required to support the infrastructure build-out.

Exits

Strong equity indices and corporate earnings remained supportive of IPOs and strategic sales, although technology-market volatility complicated pricing for selected growth businesses.

Secondaries

Secondary markets remained attractive for investors seeking mature assets, liquidity and opportunities created by differences between reported private valuations and public-market movements.

CE Global Private Equity Observations

• Technology valuations became increasingly sensitive to public comparables.
• Value and industrial businesses attracted greater investor attention.
• High interest rates continued to limit leverage.
• AI infrastructure remained capital intensive and highly competitive.
• Secondaries remained an important source of portfolio liquidity.

Artificial Intelligence & Technology

Artificial intelligence remained one of the most important long-term investment themes during July, but the market increasingly distinguished between structural growth and short-term valuation momentum.

Semiconductor Correction

The PHLX Semiconductor Index declined more than 20% during July, its largest monthly decline since 2008. Despite the correction, the index remained approximately 60% higher for 2026.

The move demonstrated how quickly investor positioning could reverse when valuations, financing requirements and future growth assumptions became unusually aggressive.

Hyperscaler Investment

Large technology companies continued investing heavily in data centres, processors, networking and electricity. Increasing corporate debt issuance associated with AI investment demonstrated that the infrastructure cycle was becoming an increasingly important factor within both equity and fixed-income markets.

AI Monetisation

Investors increasingly required evidence that AI expenditure produced measurable revenue and free cash flow. Usage, customer retention and productivity became more important valuation metrics than infrastructure spending alone.

Enterprise Adoption

Businesses continued deploying AI within coding, research, administration, customer service and financial analysis. Agentic systems increasingly performed multi-stage processes rather than isolated tasks.

Power Infrastructure

Electricity remained a major limiting factor on data-centre development. Grid connections, transformers, generation, cooling and storage continued to attract significant capital.

Technology Risks

• Semiconductor valuations experienced a major correction.
• AI infrastructure remains exceptionally capital intensive.
• High long-term interest rates increase required investment returns.
• Heavy corporate borrowing may increase balance-sheet risk.
• Investors increasingly require evidence of AI monetisation.

Sector Spotlight

Electrical Equipment and Grid Technology

July's sector spotlight examines electrical equipment and grid technology as artificial intelligence, industrial reshoring and electrification create unprecedented demand for power infrastructure.

Structural Demand

The electricity requirements of AI data centres are being added to existing investment requirements associated with renewable energy, electric vehicles, manufacturing and ageing transmission networks.

Transformers

Transformers remain one of the most important bottlenecks within electricity infrastructure. Large power transformers can require lengthy manufacturing schedules and specialist materials.

Switchgear

Switchgear allows electricity networks to control, protect and isolate equipment. Increasing grid complexity and data-centre development continue to drive demand for both conventional and intelligent systems.

Cables and Transmission

New generation and computing demand require substantial transmission investment. High-voltage cables, substations and grid interconnections therefore represent increasingly strategic assets.

Power Electronics

Data centres and renewable-energy systems require power-conversion equipment capable of maintaining reliable and efficient electricity supply.

Maintenance and Services

The installed base of electrical infrastructure creates recurring demand for inspection, maintenance, testing and replacement, providing less cyclical revenue than new construction alone.

Private-Market Opportunities

• Transformer manufacturers
• Switchgear and protection systems
• High-voltage cable suppliers
• Substation engineering
• Power-management software
• Electrical testing and maintenance

Principal Risks

Rapid expansion can encourage excess capacity, while specialist equipment manufacturers remain exposed to copper, steel and labour costs. Regulatory approvals and grid-planning delays can also affect project timing.

Investment Perspective

Electrical infrastructure offers exposure to several independent structural drivers rather than relying upon artificial intelligence alone. Grid modernisation, electrification, manufacturing investment and data centres all require greater power capacity, creating potentially durable demand for specialist equipment and services.

Regulatory Update

July's regulatory environment centred on monetary policy, energy security, artificial intelligence, infrastructure financing and private-market valuation.

Federal Reserve

The Federal Reserve's 9-3 decision to maintain rates demonstrated increasing support for tighter policy. Three policymakers voted for a 25-basis-point increase.

Businesses therefore needed to maintain funding scenarios involving stable or higher US borrowing costs rather than assuming renewed easing.

European Central Bank

The ECB maintained its deposit rate at 2.25% following June's increase. Policymakers emphasised continued uncertainty surrounding energy prices and the full inflationary consequences of the Middle East conflict.

Bank of England

The Bank of England maintained Bank Rate at 3.75%, but three members supported an increase to 4.00%.

Artificial Intelligence

AI governance continued moving towards formal operational requirements covering model access, data governance, human supervision, cybersecurity and accountability.

Infrastructure Financing

The growing quantity of debt issued to finance AI infrastructure increased attention on corporate leverage, project economics and the concentration of capital expenditure among a relatively small number of technology companies.

Private Markets

The semiconductor correction reinforced the importance of reviewing private-company valuations against current public-market comparables rather than relying upon peak first-half multiples.

Compliance Priorities

• Stress-test financing against stable and rising interest rates.
• Monitor central-bank divergence across major jurisdictions.
• Review AI infrastructure leverage and customer concentration.
• Continue implementation of AI governance frameworks.
• Update technology valuations following the semiconductor correction.
• Maintain robust liquidity and valuation controls within private markets.

Looking Ahead

Markets entered August with global equities close to record levels but with substantially broader leadership than earlier in 2026. The correction in semiconductor shares demonstrated that strong structural growth could coexist with considerable valuation risk.

Federal Reserve

The July FOMC decision left rates at 3.50%-3.75%, but three votes for an immediate increase made incoming inflation and employment data particularly important.

A continued moderation in energy-driven inflation could allow rates to remain unchanged, while renewed inflation pressure could strengthen the case for a September increase.

European Central Bank

The ECB appeared prepared to remain patient after June's rate increase. Additional tightening would depend upon whether higher energy costs continued to spread into domestic prices and wages.

Bank of England

The increase to three votes for tighter policy demonstrated that the August inflation and labour-market data would be important for determining whether Bank Rate remained at 3.75% or eventually increased.

Middle East and Oil

Oil prices remained vulnerable to developments involving the United States, Iran and the Strait of Hormuz. Another escalation could quickly revive inflation concerns and place upward pressure on global bond yields.

Artificial Intelligence

The semiconductor correction would test investor conviction in the AI cycle. Continued strong earnings and capital expenditure could provide support, but investors were increasingly unwilling to overlook valuation and financing risk.

Corporate Earnings

Second-quarter earnings remained one of the strongest supports for global equity markets. Companies would need to demonstrate that higher energy, wage and financing costs were not materially undermining margins.

Digital Assets

Bitcoin and Ether's strong July performance created renewed optimism after a difficult first half. Continued institutional inflows would be required to demonstrate that the recovery represented more than a temporary positioning adjustment.

Private Credit

Persistent high policy rates remained a challenge for weaker borrowers. Investors should continue monitoring interest coverage, refinancing requirements and liquidity within structures offering periodic redemptions.

Private Markets

The rotation towards value, financials and infrastructure could broaden private-market opportunities beyond highly competitive technology assets. Electrical equipment, energy infrastructure and industrial services remain particularly relevant to both AI investment and broader economic resilience.

CE Global Private Equity Perspective

July demonstrated that market leadership can change rapidly even when the underlying economic narrative remains broadly intact. Artificial intelligence continues to generate extraordinary investment and earnings growth, but investors became considerably less willing to accept any valuation simply because a business participates in the AI ecosystem.

The semiconductor correction should therefore be viewed as an important reminder of valuation discipline rather than evidence that the AI investment cycle has ended. Companies supplying critical computing, electrical and networking infrastructure continue to benefit from powerful structural demand, but entry price remains central to long-term returns.

CE Global Private Equity believes the broadening of market leadership creates an increasingly attractive opportunity set across financial services, industrial technology, electricity infrastructure, healthcare, cybersecurity and energy security.

Electrical equipment is particularly compelling because demand is supported by several independent trends: AI data centres, ageing grids, renewable generation, industrial reshoring and broader electrification. Specialist manufacturers and service providers may therefore benefit even if growth within individual technology markets becomes more volatile.

July's central-bank decisions also reinforce the importance of conservative capital structures. The Federal Reserve, ECB and Bank of England are no longer operating within a coordinated easing cycle, and further increases remain possible in several jurisdictions.

CE Global Private Equity therefore continues to favour moderate leverage, strong cash conversion, recurring revenue and investments whose return case does not depend upon falling interest rates or continued multiple expansion. The combination of strong corporate earnings and increasingly restrictive monetary policy makes fundamental operating performance particularly important entering the remainder of 2026.

This market review is provided for general information and discussion purposes only. It does not constitute investment, legal, tax or other professional advice, nor an offer or solicitation to purchase or sell any security, financial instrument or investment product. Market values can rise or fall, and past performance is not a reliable indicator of future results.