Global equities got another solid month under their belt with emerging markets still leading the way in July. The MSCI EM Index gained 6.0% and was bolstered by dovish comments from the Federal Reserve. Non-US developed market stocks were in the black at 2.9%, according to the MSCI EAFE Index, amid a growth recovery in Europe. US equities also fared well as early indications of another robust earnings season propelled gains of 2.1% for the S&P 500 and 0.7% for the Russell 2000 indices. So far this year, the MSCI EM Index has returned 25.5% and the MSCI EAFE 17.1%, soundly beating the S&P 500’s 11.6% performance.

US fixed-income returns were mostly modestly positive in July as the Treasury curve oscillated – increasing at the front- and back-ends, and staying flat at the 10-year point. The Barclays US Aggregate Bond Index returned 0.4% with most gains coming from credit and mortgage-backed securities. The Barclays US Long Treasury Index declined 0.6% amid a slight uptick in yields towards the end of the month. US credit continued to rally as spreads compressed further with the Barclays US High Yield Index returning 1.1%.

In commodities, WTI Crude prices touched $50, a first since May. This, combined with rising copper and iron ore prices, fueled gains of 2.3%, according to the Bloomberg Commodity Index.

So far, 2017 has been marked by low volatility and soaring equities. Despite relative outperformance year-to-date we maintain our overweight recommendation in international equities. In fixed income, we continue to see shrinking opportunities in credit market; we believe investors with dedicated high-yield mandates should consider reducing their allocation in favor of other risk assets. Most importantly, we remind clients to remain committed to a risk-balanced approach in this period of low volatility and extended equity rally.