Market Commentary

Each month, our wealth management team provides insights into market trends, economic developments, and key factors shaping the financial landscape.

FRANK P. SUDAL, CFP^®, CFA
Trust Investment Management

One of the more surprising themes of 2026 has been the economy's ability to withstand higher interest rates. Many investors entered the year expecting borrowing costs to place increasing pressure on consumers, businesses, and financial markets. Instead, economic activity has remained relatively stable, corporate earnings have generally held up well, and investors have continued to find reasons for optimism despite an investment environment very different from the low-interest-rate conditions that shaped markets for much of the previous decade.

July provided a reminder that markets do not move higher in a straight line. Most major asset classes posted modest declines during the month as investors weighed inflation data, Federal Reserve policy expectations, and corporate earnings results. Developed international equities were an exception, generating positive returns while many other market segments paused after strong advances earlier in the year. Although monthly results were weaker than those experienced during much of the first half of 2026, longer-term trends remained largely intact.

One of the more notable developments this year has been the broadening of market leadership. Earlier in the year, much of the market's strength appeared concentrated among a relatively small group of technology-related companies. More recently, investor interest has expanded into smaller companies, financial institutions, healthcare firms, and other areas that previously received less attention. Broader participation does not eliminate market risk, but it often reflects greater confidence in the overall economy and can provide a healthier foundation for longer-term returns.

Inflation also moved in a more favorable direction during the summer. While inflation remains above the Federal Reserve's long-term objective, easing energy prices and moderating price pressures have helped improve investor sentiment. The conversation has gradually shifted from concerns about rising inflation to questions regarding the pace at which conditions may continue to normalize.

The Federal Reserve left interest rates unchanged during July, maintaining a measured approach as policymakers evaluate incoming economic data. Markets continue to balance encouraging inflation trends against an economy that has remained more resilient than many anticipated.

For fixed-income investors, today's yield environment continues to offer opportunities that were difficult to find for much of the prior decade. Although bond prices may experience periods of volatility as interest-rate expectations evolve, higher yields once again allow quality fixed-income investments to serve as meaningful sources of income while contributing to portfolio diversification.

As the second half of 2026 unfolds, the key themes remain economic resilience, earnings growth, inflation trends, and disciplined diversification. Successful investing depends less on reacting to short-term market movements and more on maintaining a well-diversified portfolio aligned with long-term objectives.

Total Returns (%) as of July 31, 2026

Fixed Income	YTD	1 Mo	3 Mo	1 Yr	3 Yrs	5 Yrs	10 Yrs
U.S Aggregate	-0.61	-1.31	-0.76	2.70	3.73	-0.40	1.32
High Yield	1.36	-0.34	0.29	4.65	7.88	3.59	4.68
International	0.10	-1.14	0.26	1.23	3.90	-0.05	1.46
Equities
U.S. Large Cap	10.12	-0.07	4.19	19.53	19.29	12.83	15.05
U.S. Small Cap	21.53	-1.92	6.32	33.56	13.19	7.40	10.70
Developed International	11.78	1.56	4.59	25.14	15.94	9.26	9.31
Emerging Markets	18.30	-5.92	1.99	34.69	18.09	7.10	8.39

Index Proxies: U.S. Aggregate - iShares Core US Aggregate Bond ETF, High Yield - iShares iBoxx $ High Yield Corp Bd ETF, International - Vanguard Total International Bond ETF, U.S. Large Cap - iShares Core S&P 500 ETF, U.S. Small Cap - iShares Core S&P Small-Cap ETF, Developed International - iShares MSCI EAFE ETF, Emerging Markets - iShares MSCI Emerging Markets ETF.

Total Returns (%) as of July 31, 2026

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