Devon Funds Morning Note - 03 August 2026

Monday 3rd August 2026

July Wrap

Global

US equities ended July on a positive note, with both the S&P 500 and Nasdaq finishing up in the green, supported by the Mag 7 stocks, which pushed 2.5% higher. Amazon rallied 15.0% on stronger revenue growth, Alphabet gained 6.7%, while Apple fell 7.4%. Cyclicals were weaker on higher oil and higher bond yields.

It was a volatile July for markets, with the major indices buffeted by shifting Fed expectations, renewed Middle East tensions and a sharp rotation within Tech. Early in the month, weaker labour data and hopes the Fed could stay patient helped support risk appetite, while AI-linked stocks periodically rebounded on strong earnings and cloud spending trends.

As the month progressed, that optimism became less stable. Inflation stayed sticky enough to keep policy uncertainty elevated, and by late July the Fed’s decision to hold rates was interpreted as hawkish, especially with three dissents calling for a hike and markets lifting the odds of further tightening. Bond yields moved higher through the month, with long-dated Treasury yields approaching multi-decade highs, which tightened financial conditions and weighed on high-multiple growth names.

Technology remained the key driver of market direction, but leadership inside the sector shifted quickly. The Nasdaq came under pressure mid-month as investors questioned the sustainability of the AI spending boom and semiconductor stocks suffered a sharp correction, only to rebound strongly later on renewed confidence after Microsoft’s Azure-led earnings surprise.

Geopolitics added another layer of volatility. Repeated tension involving the US and Iran lifted oil prices at points during the month and fed concerns about inflation persistence, even as some sessions saw markets look through the conflict and refocus on earnings. By month-end, investors were balancing resilient corporate results and selective enthusiasm for AI against tighter financial conditions and a more complicated inflation backdrop.

Overall, July was a month of resilience rather than calm: the S&P 500 and Nasdaq remained near elevated levels for much of the period, but the path was uneven, with sharper drawdowns, larger intraday swings and more aggressive sector rotation than earlier in the year. The S&P 500 managed to add 0.1% overall, up 9.2% year-to-date, while the Nasdaq fell 1.8% over July, although following the S&P, up 9.2% year-to-date.

New Zealand

The NZX 50 finished Friday’s session down 0.5%, although it stayed in the green for the month, returning 0.6% overall and up 1.1% year-to-date. Top gainers over the month included AFT Pharmaceuticals (+31.4%), SkyCity Entertainment (+12.7%), and Mainfreight (+11.5%).

In market news, Michael Hill (+3.7%) provided a positive FY26 update, recording sales growth across all markets and stronger-than-expected earnings. Elsewhere, Fonterra announced NZ milk collections for the first month of the 2026/27 season were 6.5% above June last season.

In macro data, July at-wharf-gate logs showed a recovery from June’s losses, helped mainly by lower shipper costs. China demand remained steady, with inventories stable. India was softer, with delayed monsoon rains and flood damage reducing production and weakening pine timber prices. Looking ahead, continued conflict in the Middle East, higher freight costs, and a stronger NZ dollar look to weigh on September pricing.

In housing, New Zealand’s market is in its longest and deepest downturn in 30 to 40 years, according to Cotality data, with national property values falling another 0.3% in July after a similar decline in June – leaving values down 1% over the past three months, and 0.7% lower than a year ago, and around 18% below the January 2022 peak. The weakness is broad-based, with Auckland, Wellington and Tauranga all lower in July, while Christchurch and Dunedin edged slightly higher.

Australia

Across the Tasman, the ASX 200 traded higher to end the month, eking out a 0.1% gain. Over the month, the index rallied 2.3% and is now up 4.7% year-to-date. Top contributors over the month included Viva Energy (+37.7%), AMP Limited (+34.0%), and NAB (+9.2%).

On the day, Materials was the best-performing sector, up 1.4%, helped by firmer copper and gold prices. BHP (+2.0%) and Sandfire (+2.4%) both gained, while gold stocks also caught a bid, led by Newmont, Emerald Resources and Predictive. Fortescue was the main drag in the sector after soft shipment and cost guidance, a large impairment at Iron Bridge, and a weaker-than-hoped Chinese stimulus readout.

Real estate also finished higher, rising 0.7%, as lower yields supported the sector and data-centre names regained favour. Goodman, DigiCo, Vicinity and Dexus all moved up. Tech was mixed: NextDC and Megaport rallied strongly on the AI infrastructure theme, but software names WiseTech and Xero pulled back as the recent short-squeeze partially unwound.

Health care was the weakest sector, falling 1.8%, as CSL, Cochlear and ResMed all gave back recent gains. Consumer staples also softened. Overall, the market tone remained constructive but selective, with investors rotating toward miners and infrastructure-linked names while trimming exposure to crowded defensive and software positions.

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