Value Leads Sector Rotation as Energy and Real Estate Gain Ground, While Tech Momentum Slows
Value Rotation Holds as July Draws to a Close. The rotation into value has remained intact through late July 2026, and over the past week it has accelerated rather than faded. Since the end of April, the Value has gained 9%, compared with just 1.6% for the Growth. The divergence widened further over the last week, with value broadly unchanged while growth declined by more than two percentage points.
Market regime signals, however, remain evenly balanced. Even after the latest macroeconomic updates, probabilities are split almost perfectly across three scenarios—expansion, overheating, and slowdown—with none emerging as the dominant narrative. The 10Y–2Y Treasury yield curve remains positively sloped and has steepened modestly, while high-yield credit spreads have continued to tighten. Both developments point toward an expansionary backdrop, but neither is strong enough to resolve the broader uncertainty.
June inflation surprised to the downside at 3.5% year-over-year, yet the newly appointed Federal Reserve Chair, Kevin Warsh, quickly tempered expectations, stressing that it is not yet “mission accomplished.” As a result, markets continue to assign meaningful odds to another rate hike in September. This creates an unusual backdrop for value stocks, which typically outperform in periods of rising rather than falling interest rates, and helps explain why the rotation has persisted despite a strengthening U.S. dollar.
Technology: Prices Have Yet to Reflect the Deteriorating Score The outlook for U.S.
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