For the global equity markets July looked calm at index level, but beneath the surface it was a month of sharp rotation. The MSCI All-country World Index dipped modestly (-0.6% in EUR) as better-than-expected second-quarter earnings helped reassure investors that corporate profitability remained strong. The month was dominated by three powerful themes: 1) renewed US-Iran tensions that briefly pushed oil and commodity prices up, 2) a reassessment of the AI trade that triggered a sharp sell-off in semiconductors, and 3) fresh tariff announcements from the Trump administration. As investors became more selective toward richly valued growth stocks, market leadership shifted decisively toward lower-valued areas, with Energy and Financials driving a strong outperformance of value over growth. In fact, value stocks rose 3.6%, while growth fell 2.5%, creating a gap of more than six percentage points in just one month between the two equity strategies. The most remarkable reversal came in Technology. Semiconductor stocks fell precipitously (MSCI World Semiconductors Index -13.2% in USD), and US momentum strategies had their weakest month since 2008, as investors questioned high AI valuations and became more selective about future profit winners. US equities fell for a second straight month as Q2 earnings showed strong headline beats but revealed weaker consumer trends, including discretionary spending cuts and rising credit concerns. Regional dispersion was unusually high. Europe was resilient, with the Stoxx Europe 600 index reaching a record high, while Japan split sharply between a flat TOPIX (broad equity index) and a nearly 8% fall in the more tech-heavy Nikkei225. Emerging markets were weakest, led by South Korea’s extraordinary volatility: the KOSPI index fell more than 30% from its June highs, dropped 16.4% in four days, then rebounded almost 18% in a single day! Korean chip giants SK Hynix and Samsung Electronics experienced steep sell-offs falling by 35% and 21% in July – the two companies represent around 40% of the entire KOSPI. By contrast, China was the major exception, rising more than 13% (Hang Seng index) despite broader emerging-market weakness, helped by optimism around lower-cost AI models. Oil was another key driver. The renewed US-Iran conflict briefly pushed Brent crude above $100 per barrel, lifting commodities and energy stocks but also reviving inflation concerns. The Federal Reserve held its policy rate, and the 30-year US Treasury yield rose to a 19-year high as bond markets priced in more persistent inflation risks. Fixed income markets weakened as rising yields pressured bond prices across most sectors. U.S. rates moved higher across the curve, with the 10-year Treasury near 4.75% and the 2-year around 4.25%, reflecting sticky inflation and renewed expectations of tighter Fed policy. The sell-off was driven mainly by duration risk, not credit stress. Longer-duration investment-grade bonds suffered most, while high yield held up better. Cash was the only major fixed income segment to post a positive return. Overall, July showed a market that was somewhat flat overall, but highly unstable underneath: AI momentum cracked, value revived, oil reshaped inflation expectations, and regional performance diverged sharply.
    The US equity market posted its second-consecutive negative month, as second-quarter earnings kicked off with mixed results. The tech-heavy equity index Nasdaq100 sank -6,6% in July (in USD), while the flagship S&P500 was almost flat, returning -0.1%. The striking paradox was that the S&P500 earnings were exceptionally strong, yet the index still ended broadly flat. The headline numbers were remarkable: with 63% of companies reporting, corporate earnings were on track to rise 36% year-on-year, and an unusually high 85% of companies beat analysts’ expectations — even though expectations had already been revised higher before reporting season! The most remarkable feature was the narrowness of growth. Around three-quarters of total S&P500 earnings growth came from just two sectors — Information Technology and Communication Services — while the “Magnificent Seven” stocks continued to dominate the broader market. The surprise was the abrupt rotation: US momentum stocks suffered their weakest month since 2008, as investors abandoned expensive AI winners for cheaper alternatives such as Energy and Financials. Investors demanded more than profit beats: they wanted proof that massive AI capex will generate attractive returns. Macro pressure added to the reversal: strong economic data, persistent inflation concerns, and higher energy prices reinforced expectations that both inflation and interest rates could remain elevated for longer, which crushed bond markets. Since the start of the year, higher inflation and resilient economic growth have pushed yields significantly higher. The 10-year Treasury yield increased from around 4.2% to 4.75%, while the 2-year yield rose from 3.5% to 4.25%, reflecting growing expectations that the Fed may need to tighten policy further to control inflation. In July the trend intensified as markets questioned the Fed's commitment to bringing inflation back to target, thus causing a sharp steepening of the yield curve. Long-term bonds underperformed, with the 30-year Treasury yield, at 5.27%, reaching its highest level since 2007. The Fed did leave rates unchanged at 3.50%–3.75%, but three policymakers indeed voted for a 25 basis points rate hike. Corporate credit markets were weaker. US investment-grade credit spreads widened slightly, underperforming comparable Treasuries. Financial issuers outperformed, while technology bonds came under pressure amid concerns related to AI. In short, July was remarkable because extraordinary earnings were not enough: the market shifted from rewarding growth to questioning valuations, AI returns and the durability of the rally.
    European equity markets showed resilience,  with the Stoxx Europe 600 reaching 655.2  – an all-time high – on the last day of the month. Performance, however, differed sharply by market and sector. The standout winner was the UK, where the FTSE All-Share equity index rose 3.7%, helped by its low exposure to Technology and stronger weightings in Energy and Financials. Higher oil prices boosted energy stocks, while banks also supported returns; intersetingly, the mid-cap FTSE250 outperformed the large-cap FTSE100. Continental Europe markets results was more mixed. A key drag came from concerns that Chinese competitors could threaten Europe’s leading chip-equipment manufacturers – the Dutch giant ASML fell approximately 18% during the month, despite raising full-year guidance. Utilities and Healthcare stocks also declined, while Energy was the best-performing sector and Financials benefited from solid continental banks earnings. Macroeconomic data added an important twist: eurozone GDP grew 0.4% quarter-on-quarter in Q2 after flat growth in Q1, while inflation rose to 2.9%, above the ECB’s target. This combination of resilient growth and sticky inflation increased speculation that the ECB may need to raise rates, even after keeping them unchanged at 2.25% in July. In the UK, the Bank of England also held rates steady at 3.75%, with inflation easing to 2.8% from 3.0%. Markets largely ignored the political change, as Andy Burnham replaced Sir Keir Starmer as prime minister. European bond markets weakened in July as investors reassessed the outlook for interest rates. Early inthe month, softer-than-expected inflation data led markets to price in fewer rate hikes, but a sharp rise in oil and natural gas prices later reversed that trend. When the ECB kept its rates unchanged, it provided little indication of future easing – while resilient economic growth supported expectations for higher rates. As a result, sovereign bond yields across Europe rose to multi-year highs. Italian 10-year yields recorded the largest increase, not because of concerns about Italy’s fiscal position, but because Italian government bonds tend to react more strongly than core European bonds to changes in euro area rate expectations. In the UK, bond markets were influenced by both inflation concerns and domestic fiscal credibility issues. Gilt yields initially underperformed but later stabilized after the appointment of a new Chancellor with renewed commitments to fiscal discipline. Overall, July in Europe highlighted a striking rotation away from AI-sensitive technology stocks and toward Energy, Financials and defense-related names.
    In unison with European enthusiasm, the stocks on the Bulgarian Stock Exchange (BSE) also recorded a positive result for July. All indices on the domestic exchange turned green for the month, with the flagship SOFIX jumping by more than 3.1%. An increase in activity continues to be observed – the number of transactions is about 1/3 more than a year earlier, and the volume of turnover in euros – by 2/3! In July, two years have passed since the establishment of the newest segment of the BSE – EuroBridge. During this period, nearly 16 000 transactions were realized and a turnover of EUR 63 million. The segment allows dual listing of Bulgarian companies and simultaneous trading of their shares on the BSE and on the large market of Deutsche Borse – Xetra. Currently, two Bulgarian public companies have access to the Frankfurt Stock Exchange through EuroBridge - Shelly Group AD and Sirma Group AD. BSE data show that for 2 years, Shelly's combined turnover on the Bulgarian and German markets has increased almost 3 times. For the month, among the blue chips on the Bulgarian stock exchange, the best performer for July (for the second month in a row) was the holding "Chimimport" AD, with a yield of over 31%, and the worst – the financial holding "Eurohold Bulgaria" AD, with a little over 5% decline.

Sources: Bloomberg, BSE