CPR Invest - Defensive - A EUR - Dist ISIN : LU1203018376

The month of July 2026 was marked by the end of negotiations and the resumption of hostilities between Iran and the United States. As a result, the Brent barrel rose sharply in the first part of the month, reaching $100, before slightly declining at the very end of the month to $89. Ultimately, its increase was 22% for the month, the strongest rise since March.

The uneven movement of inflation indices reflects the volatility of oil prices. In the United States, headline inflation surprised significantly to the downside for June, at 3.5%, partly thanks to the drop in energy prices that month but also due to a clear and widespread decline in underlying inflation. Conversely, inflation surprised to the upside in the eurozone in July, at 2.9%, due to the rebound in oil prices.

Overall, activity surveys are consistent with a moderate growth pace. In the eurozone, the composite PMI rose from 50 to 51.9, thanks to an improvement in industry but especially in services, thus returning to its highest level since the outbreak of the war in Iran. Moreover, GDP growth in Q2 came out at +0.4% quarter-on-quarter. In the United States, both the ISM manufacturing and services surveys slightly declined in June (to 53.4 and 54, respectively) but remain consistent with a growth rate of around 2%. The June employment report was not good and cast doubt on the previous three reports, which had been significantly better than expected. In particular, the private sector excluding healthcare returned to job destruction. In Japan, PMI surveys remain well oriented with 54.7 for manufacturing and 51.9 for services. China, however, continues to stand out, and the deterioration in the economic situation worsened over the month, with the composite PMI falling to its lowest level since 2022.

Several major central banks held their monetary policy committee meetings in July, but none decided to change their rate policy. The ECB left its deposit rate unchanged at 2.25% but opened the door to a hike in September, in response to renewed tensions in energy prices. The Bank of Japan left its main policy rate at 1% but was fairly aggressive about a forthcoming tightening. For its part, the Fed did not change its policy rates but was satisfied with the rise in bond yields since the previous committee, in direct reaction to economic developments. Above all, it confirmed a radical change in its communication regime: it will provide significantly fewer indications than in the past. This also implies a regime change for the bond market.

In July, equity markets moved in a scattered fashion. The S&P 500 ended the month at roughly the same level (-0.1%), with a clear underperformance in the technology sector, while the Eurostoxx 600 rose by 1.2%. The Nikkei's decline was more significant (-8.1% for the month), due to the overall underperformance of the technology sector. The MSCI Emerging lost 3.3% over the month.

Bond yields rose sharply over the month, largely due to the rebound in oil prices. Ultimately, the US and German 10-year rates climbed by about 30 bps over the month, ending at 4.71% and 3.17%, respectively. In Japan, long-term rates increased slightly, with the 10-year rate ending the month at 2.75%. In Europe, credit spreads remained roughly unchanged over the month, staying below levels seen before the war in Iran. The price of gold also ended the month almost unchanged.

During the month, we slightly increased the risk profile of the portfolio, while maintaining an overall cautious allocation. Equity exposure rose by 2.0 points to reach 22.2% at the end of July, mainly through increased exposure to North America (+2.4 points). We took advantage of the correction in technology stocks to tactically reintroduce exposure to semiconductors and memory stocks, while complementing the US allocation with exposure to banks and the MSCI World. At the same time, we reduced certain Asian exposures, notably to South Korea and the Nikkei, in a context of high volatility in regional markets. The equity pocket was the main detractor from performance for the month, notably through US equities and semiconductors, while the fund fell by 1.61% compared to +0.19% for the €STR.

On the fixed income side, we increased credit carry, both in North American Investment Grade and High Yield, notably via CDX indices, while tactically increasing exposure to the 5-year segment of US Treasuries after the rise in yields. Rate sensitivity remains controlled at 4.05, a limited increase of 0.17 points over the month. Credit thus remains the main fixed income driver of the portfolio, while we maintain a measured approach to duration in an environment where the rebound in oil and inflation uncertainties sustain sovereign rate volatility.

In the short term, we maintain a relatively constructive but more selective view of risky assets. Growth remains resilient in the main developed economies, but the rebound in oil increases uncertainty around the disinflation trajectory and limits visibility on the evolution of monetary policies. In equities, we favor a diversified exposure less concentrated on large US technology stocks, with continued interest in Europe, Value, healthcare, and a more balanced approach to the US market. The correction in semiconductors does not call into question the structural trends linked to artificial intelligence, but reinforces the need to be more selective given valuation levels and the investments required to generate expected profits. In the bond markets, we maintain controlled duration and continue to favor credit carry, as sovereign yields may remain volatile. Finally, we remain measured on gold and attentive to the evolution of oil, geopolitical tensions, and upcoming central bank communications.