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Our market summary
July was mixed for investors. Market leadership shifted away from high-growth technology and AI stocks towards better-valued areas such as energy and financials.
Rising oil prices added inflation concerns, weighing on bonds, while resilient company
earnings helped support sentiment. Find out more by reading our market summary.
Performance review
Returns for the Cirilium Blend Portfolios were negative in July, ranging from a loss of 1.5% for the Conservative Blend Portfolio and gradually improving to 0.8% loss for the Adventurous Blend Portfolio. This came amidst a more challenging market backdrop, as re-escalation in the US-Iran conflict sent oil prices higher, while semiconductor stocks that performed so strongly last quarter experienced a sharp reversal. This was particularly painful for tech sensitive regions like the US and Asia. Meanwhile, the energy sector and consequently the UK, were the best performers. Although the UK contributed positively, equities were a drag overall. Bonds struggled too, primarily due to the inflationary impact of higher oil prices, but the US Federal Reserve (the Fed) did not help either. Interest rates remained on hold despite speculation of an increase, but Treasury yields still rose as the new Fed Chair, Kevin Warsh, gave little away regarding the Fed’s next move. This increases uncertainty so investors demand higher yields for holding US debt, contributing to the negative returns from our government and corporate bond holdings.
The performance figures shown refer to past performance. Past performance is not a reliable indicator of future performance.
Portfolio activity
We implemented our newly refreshed strategic asset allocation over July. Within our equity holdings, the changes were relatively modest, with a reduction in our European allocations rotating into Japanese exposures. Our fixed income changes saw a reduction in investment-grade bonds in favour of government bonds and the new inclusion of index-linked gilts. For the most part, we were trading existing holdings into the new weights, but we also added a few new managers following the conclusion of a number of research processes. We added new equity holdings, namely the Quilter Investors UK Equity Growth, Artemis US Smaller Companies, Ashmore Emerging Markets Equity funds, and in alternatives we added the Man Multi-Manager Alternative Fund.
Investment outlook
Markets have enjoyed an exceptional run, driven by enthusiasm around AI, resilient economic growth, and a corporate earnings backdrop that continues to exceed expectations. However, after such strong returns, it is worth ensuring the fundamental case remains sound. Below are some factors that we are considering.
How much should you pay for high growth?
Valuations look expensive across most major equity regions, although this is partly justified by the strength of corporate fundamentals. Earnings continue to rise, growth forecasts remain robust, and profit margins have proven remarkably resilient. The key challenge is that expectations are now extremely high. The Q2 earnings season has been strong, but market returns have been more lacklustre. We are starting to see increased scepticism of even higher AI capital expenditure, which is an interesting change in dynamic that warrants close monitoring.
Digestion issues
Momentum remains supportive, but signs of crowding are beginning to emerge and the recent selloff in Korea is a reminder of what happens when leveraged bets unwind. A few blockbuster IPOs (including the recently listed SpaceX) boosts equity supply just as investor positioning in AI-related themes appears increasingly full. New issues need funding and when lockups expire it may create additional selling pressure if founders and early investors rush for the exit.
Expectations and outcomes
From a macroeconomic perspective, markets appear very relaxed about inflation risks. Effects of the US-Iran conflict have been assumed as temporary, and bond markets appear confident that inflation will continue to moderate. However, the events of 2022 demonstrated that macro shocks can take time to feed through the system. For now, markets are pricing a benign outcome which risks disappointment.
Portfolio managers
Ian Jensen-Humphreys
Portfolio Manager
Sacha Chorley
Portfolio Manager
CJ Cowan
Portfolio ManagerApprover: Quilter August 2026
QIP 23857/29/18239
