Exante’s latest equity review finds that July’s seemingly placid headline numbers concealed one of the most turbulent rotations of the current cycle.
The S&P 500 closed the month only marginally lower, with its forward multiple compressing from 20.6x to 19.7x, yet earnings told a starkly different story. According to Exante, the index’s blended Q2 earnings growth rate accelerated from 23.2% at quarter-end to 47.4% by 31 July, the strongest print since Q2 2021.
Exante notes that the calm at index level disguised a sharp leadership reversal. Information Technology, having led gains in the first half with a 17.2% rise, became July’s weakest sector, falling 3.5%, while Energy, Financials and Health Care climbed to the top of the leaderboard. Three dissents at the Fed’s 29 July meeting, alongside rising odds of a September rate move, added a further layer of rotation risk.
The AI trade itself has fractured, Exante’s research shows. Applications rallied 24.2% between 30 June and 31 July, while Fabrication Materials and Memory & Storage fell 30.4% and 23.6% respectively, a spread of more than 54 percentage points. Forward earnings revisions told an almost inverted story, with Fabrication Materials up 20.9% and Memory & Storage up 10.8%, despite both posting the heaviest price declines.
Exante highlights South Korea’s KOSPI as a high-beta proxy for the memory cycle, surging past 7,000 in May before a record single-day intraday gain of more than 14% on 31 July, yet still finishing the month down 22.2%.
Meanwhile, the hyperscaler CapEx debate moved from narrative to scrutiny. Alphabet’s cloud backlog reached $514bn and its FY guidance rose to $195bn-$205bn, but shares fell after free cash flow turned negative at $5.86bn. Amazon’s EPS beat was driven largely by a $53bn markup tied to its Anthropic stake rather than operating performance, Exante observes.
For more, read the full review here.
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