Market commentary: Jul 2026

Client portfolio performance

The year to 31 July produced strong returns led by international equities and infrastructure. The ongoing closure of the Strait of Hormuz continues to be headline news. This is warranted as clearly this has serious implications for the global economy. But so far markets are shrugging this off as investors focus on companies investing enormous amounts of capital on developing Artificial Intelligence (AI).

AI domination

While AI itself isn’t dominating the world – as some people think it might – it is certainly the theme dominating the minds of investors and share markets.

A small number of companies now make up an outsized share of the US share market, pushing concentration to levels not seen in decades. The 10 largest companies are approaching 40% of the total value of the S&P500 (500 largest US companies).

Similar levels of concentration emerged in Japan’s 1980’s boom and the US Nifty Fifty era. In 1964, the top 10 stocks reached 39% of the S&P500 index. The largest holdings included AT&T, General Motors, Exxon Mobil, IBM and Texaco – a diverse range of industries.

Today’s concentration is different because most of the largest companies, including NVIDIA, Microsoft, Amazon, Google, Meta, Broadcom, and Apple, are tied to a single theme: AI development.

As investors crowd into AI-related stocks, some high-quality businesses have been left behind. Companies with growing profits, strong dividends many of which are trading at discounts to their historical valuations. Examples include Royal Caribbean (cruise ships), Proctor & Gamble (consumer goods), and Citigroup (banking).

Looking outside the US share market, global markets offer attractive opportunities, particularly in Europe and parts of Asia. Valuations are compelling, often among world leaders in their industries. They include UK-based drug giant AstraZeneca and China-based Tencent (the largest gaming company in the world).

Our international equity strategy maintains a balanced and diversified positioning that is not dependent on any single outcome, theme or market narrative. While the market has focused heavily on AI infrastructure build-out and semiconductor demand, we are looking at opportunities across the broader AI ecosystem, and businesses (e.g. healthcare, financials, manufacturing) that can successfully embed AI into their products and services.

Richard Grimes, CERTIFIED FINANCIAL PLANNER (CFP^CM), Director and Financial Adviser