July saw a continued rally in the equity markets, with the S&P 500 index gaining 3.11 percent. This impressive performance was fueled by cooling inflation and the resilience of the U.S. economy, despite the Federal Reserve raising interest rates by 25 basis points, reaching the highest level since January 2001, with a federal funds target range of 5.25 percent to 5.50 percent.
However, some of the positive factors that contributed to the rally may be shifting. Oil prices surged more than 15 percent in July after Saudi Arabia announced an extension of its one million barrel per day supply cut. Additionally, interest rates on the 10-year U.S. Treasury Note climbed above 4.0 percent, up from 3.32 percent in May. Furthermore, the U.S. dollar showed signs of strengthening, having declined by over 12 percent since last September. While a weaker dollar can benefit U.S. companies operating abroad by reducing product costs and potentially boosting profits, a stronger dollar may create headwinds.