Market Note
When good is bad
Sector and factor rotations continue to roar amid major drawdowns from winning H1 exposures.
Chart Source(s): Charles Schwab, Bloomberg
Strange and relatively illogical performance patterns are appearing in the market due to sentiment and technical driven price action.
Earnings season has thus far witnessed the average relative return (vs. the S&P 500) for companies missing on EPS rising by 1.15% the day after reporting while the average relative performance following a beat is -0.41%.
These developments highlight the issues currently faced by fundamental Equity Long/Short strategies where there is price adversity coming from both sides of the book.
The big hiccup in the Tech/AI trade currently is considered a major driver of the price action as losses from big H1 winners cause de-risking.
Additionally, seasonality is also a contributing factor as liquidity has fallen sharply in US equities after peaking in June amid index rebalancings and historic IPO listings.
Global Markets & Economic Data
- US: U Mich. Consumer Confidence remained resilient in July hitting 54, its highest level since February. New home sales ticked up in June, led by increased activity in all regions besides the West.
- Europe/Switzerland/UK: The ECB kept interest rates unchanged at 2.4% and made hawkish comments. Swiss exports fell 4.3% y/y in June, weighed down by lower sales of chemical and pharmaceutical products. The UK unemployment rate held steady at 4.9% in May
- China/Japan: Chinese FDI fell 5% y/y in June, less than expected. Japanese inflation continued to trend up reaching 1.7% in June
Index Returns Summary
| Asset Class | MTD | YTD |
|---|---|---|
| MSCI World | -0.33% | 9.62% |
| MSCI Asia Pacific | -1.18% | 11.91% |
| MSCI Europe | -0.16% | 8.17% |
| MSCI China | 3.98% | -10.93% |
| Bloomberg Barclays Global Aggregate Index | -0.44% | -0.64% |
| Bloomberg Commodities Index | 6.66% | 19.04% |
| HFRX Global | -0.92% | 3.88% |
| HFRX Macro/CTA | -1.42% | 4.29% |
| HFRX Equity Hedge | -1.91% | 6.76% |
*Index data as of July 17, 2026
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