July Market Overview

Business person working at desk looking at charts

Global equity markets continued their rally in July, with the S&P 500 rising 5.6% and climbing back into positive territory for 2020 (+2.4% YTD through the end of July).

While we have been pleasantly surprised by the resiliency of the market in the wake of the unprecedented challenges caused by COVID-19, we remind readers that the S&P 500 – which is a market-cap weighted index1 – and many other major indices are dominated by a handful of mega-cap technology companies that are outperforming by a very wide margin. In other words, the remarkable performance of these few is obfuscating the far less robust performance of hundreds of others.

To exemplify this point, we highlight that an equal-weighted version of the S&P 500 index2 is actually down 6.5% YTD through the end of July, a difference of 8.9% relative to the more widely reported market-cap weighted index. In considering data over the last 15 years, there is seldom a difference of this magnitude. We mention this because the dominance of the mega-cap technology companies is causing the performance of many investors’ equity portfolios to look considerably different than the market.

All that said, the positive returns for the month were still encouraging, especially considering corporations began reporting second quarter earnings throughout the month. Earnings results had the potential to yield elevated volatility in light of the myriad challenges companies faced and the inherent difficulty for investors to make accurate forecasts in this environment; however, volatility remained subdued as investors had largely set expectations low enough and remained focused on the recovery.

Elsewhere, in Fixed Income, all major indices climbed in the month as interest rates declined. Rates remain near all-time lows as investors and the Federal Reserve alike are contemplating a long recovery with accommodative monetary policy for the foreseeable future.

Looking forward, we are now just three months away from elections and we anticipate that related news will become an increasing part of the narrative among the investment community. While virtually every poll shows former Vice President Joe Biden leading President Trump by a wide margin, investors must also pay attention to developments in the House and Senate. A recent report from Goldman Sachs highlighted polling data that suggests a Democratic sweep is likely, which would give the Democrats control over the White House, Senate, and House of Representatives. If this comes to fruition, investors will have a higher degree of uncertainty as legislation is likely to be passed more easily. This is particularly relevant as it would provide the Democrats an easier path to raise taxes, which has implications to both corporations and individual investors.

The monthly Market Overview is written by two members of MACRO’s Investment Committee, Mark Cortazzo, CFP®, CIMA®, and Christopher Moffett, CFA.


1. A market-cap weighted index is designed such that a company’s weight in the index is proportionate to its value, thus the performance of the largest companies has a far greater influence of the index return than that of smaller companies.
2. An equal-weighted index is designed such that all members of the index contribute equally to the performance, thus the returns of the largest companies have the same influence on the index return as those of the smallest companies.


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