PNC Directions Portfolio and Performance Review 

 

1-month
(Cumulative)

1-year
(Cumulative)

3-year
(Annualized)

5-year
(Annualized)

US Equities:
Russell 3000

-0.47%

19.60%

18.76%

11.82%

International Equities:
MSCI ACWI ex USA IMI

0.17%

27.06%

16.95%

8.76%

U.S. Fixed Income:
Bloomberg US Aggregate Bond

-1.30%

2.71%

3.73%

-0.40%

Source: Morningstar

  • July was a more selective month for markets, despite another strong earnings backdrop. Corporate earnings remained a key support for equities, with Q2 results extending a seventh consecutive quarter of double-digit S&P 500 earnings growth. Investors, however, were less willing to reward the entire market indiscriminately. Company-specific results, guidance, and capital spending discipline mattered more, especially within growth-oriented areas where expectations were already high. This reflects a market environment where company fundamentals played a greater role in performance outcomes, but it also raises the bar for market leadership.
  • The Fed remained patient, which is not the same as dovish. Fed rates remained unchanged at the July meeting, while disagreement among policymakers reinforced that inflation is still not fully resolved. Meanwhile, the higher-for-longer environment marches on, and will weigh on equity valuations, credit conditions, and the attraction of income-oriented assets.
  • Inflation is improving, but energy prices are still a risk to the inflation path. Recent data showed some moderation, but price stability remains a work in progress. Oil prices eased sharply into late June, which helped reduce some immediate pressure from the earlier energy shock, but prices moved higher again in July as geopolitical risk remained active. This matters because energy can push inflation and inflation expectations higher, even when parts of the domestic economy are slowing. The interaction between inflation trends and energy prices remains an area investors continue to monitor.
  • The economy still looks slower, not broken. Real GDP increased at a 1.5% annualized rate in the second quarter, according to the BEA’s advance estimate, positive but below most consensus expectations and slower than the first quarter’s 2.1% pace. Consumer spending and business investment continued to support growth, while imports, softer government spending, and slower investment momentum weighed on the headline figure. The details still point to an economy that is expanding, but more selectively. That environment should keep the focus on balance-sheet quality, pricing power, and disciplined capital allocation.
  • Earnings remained a bright spot, though the quality of growth still matters. As of July 24, roughly 27% of S&P 500 companies had announced Q2 results with blended year-over-year earnings growth of 37.9%, up from an estimated 23.2% at quarter-end on June 30. That is a strong headline number, but it should be read with context, as unusually large company-specific surprises contributed meaningfully to the index-level result. Investors are increasingly asking whether AI-related spending can translate into sustainable margins, cash flow, and repeatable earnings growth, not just top-line revenue growth or compelling investment themes.

  • Foreign Large Cap Blend returned 2.06% for the period ending on 7/31/2026, according to the MSCI World ex USA NR USD index. An improving economic sentiment in the Eurozone underpinned by a generally positive growth outlook amongst developed countries contributed to these positive headline returns. However, energy price risks amid Middle East hostilities may influence future monetary policy decisions by the European Central Bank.
  • Large Cap Value returned 2.01%, according to the S&P 500 Value TR USD Index. Value stocks outperformed growth counterparts during the month, reflecting broader participation across market segments. Performance was supported by investors who are focused on earnings strength, valuation discipline, and opportunities outside the narrow group of recent market leaders.
  • Mid Cap Value delivered another positive month, with the S&P Mid Cap 400 Value TR USD Index returning 0.24%. While modest, the result reflected continued interest in companies with more established business models, stable earnings profiles, and comparatively attractive valuations. Mid-cap value also offered diversification benefits away from the concentration risks present in larger-cap equity benchmarks.

  • Small Cap Growth struggled during the month, returning -5.86% as measured by the Russell 2000 Growth TR USD Index. The decline was consistent with a broader pullback in growth-oriented segments, particularly among companies more sensitive to interest rates and external financing conditions. While small-cap growth may be influenced by innovation-related investment trends, including AI-related investment, performance remains closely tied to the macroeconomic and rate environment.
  • Mid Cap Growth returned -4.78% for the month, based on the S&P MidCap 400 Growth TR USD Index. This result was also consistent with weaker performance across growth-oriented equities as investors favored more attractively valued areas of the market. Mid-cap growth companies can be more exposed to shifts in interest rates and earnings expectations, particularly when interest rates remain elevated. 
  • Emerging Markets declined for a second consecutive month, with the MSCI EM NR USD Index returning -3.07% as of 7/31/2026. Performance may have been influenced by investor sentiment, profit-taking activity, and geopolitical and trade-policy uncertainty. Longer-term earnings expectations remain encouraging, but near-term volatility is still a risk to monitor.

  • No asset allocation changes were made during July and positioning remains strategic. However, our near-term tactical view has become modestly more cautious. Strong corporate earnings and continued economic growth remain constructive, but elevated interest rates, uneven inflation progress, geopolitical uncertainty, and a more selective market leadership argue for maintaining a sense of caution. Portfolios continue to prioritize quality, diversification, and measured risk exposure rather than making a broad defensive shift or aiming for tactical opportunity gains.

For questions about your account holdings or performance, please contact your PNC Wealth Management Advisor.

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