Last week, the S&P 500 advanced 1.05% and closed at 7,490 points, raising its year-to-date return to 9.41%. Market consensus places the index’s average target at 7,857 points by the end of 2026, which would represent additional upside potential of 4.9%. The yield on the 10-year U.S. Treasury increased 4 basis points to 4.72% and remains at elevated levels. Meanwhile, the U.S. dollar index, DXY, retreated 1.6% to 99.80. The VIX declined to around 16 points, although it continues above the average of recent years. From these levels, we expect a short-term uptick in volatility. <\/p>\n\n
The market advance was led by the consumer discretionary sector, with a gain of 8.3%; communication services, with 5.4%; and consumer staples, with 1.2%. Meanwhile, rising tensions and attacks between the United States and Iran drove oil to close the week at around $85 per barrel. The Federal Reserve held interest rates unchanged within the range of 3.50% to 3.75%. The most significant data point this week will be the July employment report, to be released on Friday, August 7. The market anticipates the creation of 80,000 new jobs and an unemployment rate of 4.2%. The second quarter 2026 earnings season also continues, with Palantir, AMD, SpaceX, Eli Lilly, and Shopify among the most notable names reporting results. <\/p>\n\n
In the fixed income market, the spread between investment-grade bonds and U.S. Treasuries widened. We expect this trend to continue in the short term, which favors positioning in instruments linked to interest rates over exposure to credit risk. <\/p>\n\n
In this context, the market has adjusted its expectations regarding the Federal Reserve’s interest rate trajectory during 2026. It currently prices in a 25 basis point increase in September and a year-end close with rates at 4%. This shift in expectations is reflected in the rise of long-term interest rates, while the equity market remains near its highs. At the same time, the S&P 500 is trading at a price-to-earnings ratio, or PER, of 18.5 times, slightly below its five-year average of 19 times. <\/p>\n\n
With lower risk of economic slowdown and a possible recession, we are entering an environment of greater uncertainty and volatility in interest rates. Nevertheless, valuations remain reasonable and offer an attractive medium-term opportunity. We recommend focusing on quality sectors, supported by strong balance sheets, that can perform adequately in this environment. In particular, we highlight areas such as semiconductors, technology, banking, and industrials. <\/p>\n\n