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 price 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 price of gold ended the month almost unchanged. The erratic movement of inflation indices reflects the volatility of oil prices. In the United States, total 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 decrease in underlying inflation. Conversely, inflation surprised to the upside in the eurozone in July, at 2.9%, due to the rebound in oil prices.
Several major central banks held their monetary policy committee meetings in July, but none decided to change their interest rate policy. The ECB left its deposit rate unchanged at 2.25% but opened the door to a hike in September. The same applies to the Bank of Japan. For its part, the Fed did not change its key 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.
On the fixed income markets, bond yields rose sharply over the month, largely due to the rebound in oil prices. Ultimately, the US and German 10-year yields 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 the levels that prevailed before the war in Iran.
On the equity markets, indices 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 decline was more significant for the Nikkei (-8.1% for the month) and the MSCI Emerging (-3.3% for the month), due to the overall underperformance of the technology sector. Thus, we cannot speak of a "risk off" in the markets but rather of sector rotation, with a sell-off of the broad AI theme to reposition in other sectors such as banks or healthcare. On the micro side, Q3 2025 results are the best earnings season in Europe in three years, with 55% of companies reporting above expectations, compared to 25% below. The sectors showing the strongest results and upward revisions are banks and tech. European earnings revisions are at their highest level in four years. In the US, 86% of S&P 500 companies beat earnings expectations, which could make it the best reporting season in five years.
Regarding the decline in the AI theme, we have identified four reasons. The rise of open source models and token optimization, with concerns that cheaper alternatives may slow the growth of OpenAI or Anthropic. Next, questions about the duration of the memory cycle. Then, financing agreements deemed "circular," where chip manufacturers financially support infrastructures that will later purchase their products. Finally, positioning had become extremely crowded, making semiconductors very vulnerable to any profit-taking. Thus, technical flows remain an important factor in the decline of Tech. Leveraged ETFs generated nearly $19bn in sales via short gamma flows on the Nasdaq and Kospi. The key point is that the correction does not reflect a sudden collapse of fundamentals, but rather the accumulation of several concerns in a sector that has become very crowded.
In July, CPR Megatrends is down 2.57% compared to -0.12% for its benchmark index, the MSCI World (EUR). We suffered from the performance of low tracking error themes such as CPR Climate Actions and CPR Social Equities, which fell by -1.62% and -2.28% respectively. But in this context of thematic rotation, it was our positions related to the AI theme that cost the most. CPR AI is down 7.89% and the Amundi Semiconductors ETF by 13.8%. Our "AI Power" basket is down 5.61%, our "Memory" basket is down sharply by 27.79%. We also suffered from our exposure to Renewable Energies, reputedly linked to AI, with KBI Energy Transition down 7.6%. Only our strong exposures to Amundi S&P World Healthcare ETFs and Ishares US Banks partially offset the losses, with respective performances of 0.60% and 2.17%.