Although during the first half of the year the stock markets were driven by large-cap technology companies, July was challenging for them, with the popular Nasdaq index falling during the month and with significant adjustments in companies such as Netflix, Microsoft and Google, which fell 6.89%, 6.40% and 5.60%, respectively.

The rotation seen toward small-cap companies helped close the year-long gap between the S&P 500 and the Russell 2000 to 3.65%, a difference that at its peak reached a 14-point advantage for the S&P. And while rotation by size set the tone, during July we also saw changes in preferences by company type, with Value versus Growth companies being favored. With this, the main U.S. stock indexes ended the month mixed, with the Dow Jones being the most favored, up 4.41%, followed by a 1.13% return for the S&P 500 and finally the Nasdaq down 0.75%.

On the other hand, a moderate growth environment in the United States, with a slowly cooling labor market and favorable inflation readings, were catalysts for fixed income markets during the month. Term benefited within portfolios with 20-year and 10-year U.S. Treasuries yielding 2.53% and 2.13%, respectively during the period; short-term bonds and cash equivalents lagged this time around. The FED held its fifth monetary policy meeting during the last day of the month; the vote was unanimous to keep the reference rate unchanged at the current range of 5.25-5.50%, however, the door was opened to a possible lowering during the month of September. We will see going forward if the inflation and employment data justify it.

Finally, in the political environment, volatility was not far behind. The assassination attempt on former U.S. President and Republican candidate Donald Trump on July 13 bolstered his chances of winning. Two days later the Republican was ratified by his party while the Democrats were navigating an internal crisis over Biden's stay in the presidential race that widened Trump's lead. However, as of today, the environment has changed completely; with Biden's withdrawal on July 21 and the virtual nomination of Vice President Kamala Harris as the Democratic candidate, the polls have closed again, even putting Harris ahead of Trump in the important swing states. We will know the outcome of this story in November. Likewise, we expect a complex environment for local politics and volatility in the exchange rate during the next few months prior to the entry of the new administration.