Despite a last-minute rally, the stock market fell slightly in July, thanks mainly to a pullback in the dominant tech sector. The S&P 500 finished the month down by 0.1% while the Nasdaq dropped by 3.2%. The only index to finish in the black was the Dow, which notched about a 0.5% gain.1 The bigger story in July, though, was the significant jump in long-term interest rates. The 10-year government bond rose by almost a quarter percent from 4.46–4.67%.2
While the flat market had several causes, the interest rate jump was due mainly to inflation, which remains a big concern as the war in Iran continues to impact the price of oil and other goods. As hope for a resolution to the conflict remains elusive, investors are increasingly worried that inflation could remain a problem for some time.
Although rising long-term interest rates can create some good opportunities for income investors to lock in good yields, they ultimately create a headwind for the financial markets overall. As I often point out, when interest rates go up, the value of all invested assets generally comes down. You’ll see that impact slightly reflected already in your latest statement, which I’ll discuss more in a moment.
Fed Sits Tight for Now
Although inflation worries affected the markets during a month in which the Federal Reserve held a meeting, the Fed opted to leave short-term rates at their current levels for the time being. That’s expected to change before year’s end. In fact, it’s likely that long-term rates are rising now partly in anticipation that the Fed will soon start hiking short-term rates to help deal with the inflation problem. Ironically, 2026 began with most economists expecting the Fed would be well positioned to lower short-term rates a couple of times this year.
Apart from all the geopolitical uncertainties (let’s not forget there are two other major wars still dragging on in Europe and the Middle East), the economy remains relatively stable. Although it is showing signs of slowing in terms of both consumer spending and growth,3in general, there are still no real red flags of a recession, which is good news.
Your Portfolios
Getting back to your portfolios, for those of you in any of our stock-dividend strategies, you’re still outperforming the market year-to-date. As of the July 31 close, the S&P 500 was up by about 9% for the year, while all of our stock-dividend strategies were up by somewhere between 10–17%.
Of course, most of you are in our more conservative portfolios of individual bonds and bond-like instruments because you know that an income-first, growth-second approach aligns best with your goals and risk tolerance. And, as noted, rising interest rates did create a headwind for most of these strategies in July, resulting in basically a flat month for the median portfolio.
For most of you, the asset values in your July statement should be about the same as they were in June, depending on your individual holdings. More broadly, July’s headwind put our median total return rate for the year at about 1%, which is behind our goal. Ideally, we’d like to see our portfolios up by about 2.5–3% at this time of year.
While we may or may not get back on track in the coming months, the good news during times like this is that when you’re investing for income first, growth second, any fluctuation up or down in your asset values on paper is largely irrelevant because your income remains unaffected.
I think it’s also worth noting that when you compare the five different categories of assets in our fixed income portfolios to the indexes that track their overall market performance, our holdings are beating the markets in nearly every category. That’s due to how we manage our portfolios with a focus on specific assets that fit well with the income-first, growth-second model.
Are You Good?
With all this said, I want to stress again that our main goal is to help ensure that you are always happy and comfortable with your strategy. Are you still okay with the amount of risk you’re taking, or would you like to talk about making some adjustments? Maybe you’re spending less income than you anticipated and want to talk about possibly reinvesting more of your interest and dividends to try to increase your future growth and income potential. Maybe you’re getting nervous about all the geopolitical uncertainty and want to get a bit more conservative. Whatever the case may be, let us know.
Even if you only have a question or two about your portfolio, or you just want to tell us you’re happy and satisfied with everything as is, never hesitate to give us a call. Don’t ever think you need to wait until your next official review meeting to discuss things. We’re here for you every day, all year.
Speaking of which, this year is flying by, so take care, and enjoy your last full month of summer!
Sources:
- https://www.investopedia.com/stock-market-today-dow-jones-s-and-p-500-07312026-12031593
- https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
- https://www.theguardian.com/business/2026/jul/30/us-economy-growth-inflation-second-quarter
August Recipe: Watermelon Caprese Salad
Ingredients:
- 4 ounces fresh mozzarella, cut into 1/2-inch pieces
- ¼ teaspoon salt
- ¼ teaspoon ground pepper
- 4 cups cubed seedless watermelon
- ¼ cup thinly sliced fresh basil
- 1 tablespoon best-quality balsamic vinegar or balsamic glaze (see tip)
- 1 tablespoon extra-virgin olive oil (optional)
Directions
- Stir 4 ounces mozzarella, 1/4 teaspoon salt, and 1/4 teaspoon pepper together in a medium bowl.
- Add 4 cups watermelon and 1/4 cup basil; toss to combine.
- Drizzle with 1 tablespoon balsamic vinegar (or glaze) and 1 tablespoon olive oil (if desired).
The Watermelon Caprese Salad recipe: Watermelon Caprese Salad