Market Overview
Global equity markets recorded a modest gain in July, as a series of unsettling developments kept investors on edge.
The month was a turbulent one for stock markets around the world, marked by wavering enthusiasm for artificial intelligence (AI) amid persistent concerns that the extravagant spending by technology companies to build out AI infrastructure may not lead to as much profit as hoped, especially with global interest rates expected to rise in the near term. News in mid-July that a Chinese start-up had released a new open-source AI model with capabilities comparable to the costlier ones produced by U.S.-based AI giants Anthropic and OpenAI sparked a sell-off of semiconductor manufacturers’ stocks. The sell-off accelerated a few days later with the blockbuster initial public offering of a leading Chinese chipmaker, which stoked worries about stiffening competition in the semiconductor industry that could potentially threaten the dominant market positions of its leaders. In a reflection of the prevailing sentiment during the month, nine of the top 10 detractors from the MSCI All Country World Index’s overall performance in July were semiconductor-linked stocks.
Mounting geopolitical risks also stoked market anxiety, as fighting in the U.S.-Iran war resumed after the U.S. declared in early July that the fragile ceasefire agreement between the two countries was “over” amid a dispute over who controls the Strait of Hormuz, which remains severely restricted for commercial traffic. News that the Iran-aligned Yemeni militia had announced a blockade of the Bab al-Mandab Strait—a narrow waterway located on Yemen’s southwest tip that connects the Red Sea to the Gulf of Aden and has served as an alternative route for transporting crude oil and gas from Saudi Arabia—raised the specter of a widening conflict that could further disrupt the worldwide supply of crude oil and worsen global inflation. Crude oil prices, which had been drifting steadily downward after the announcement of the tentative ceasefire in early April, turned volatile after the truce collapsed, as the war reverted to the familiar cycle of the two sides trading military attacks, followed by threats by the U.S. to escalate the conflict, followed by pauses in the fighting, then hints of resuming negotiations to end the conflict.
The economic fallout from the Iran war remained top of mind for policymakers in key central banks as they deliberated over interest rate policy paths. In the U.S., the Federal Reserve (Fed), as expected, held interest rates steady for a fifth consecutive policy meeting, even as escalating violence in the Middle East and the launch of a new U.S. tariff regime threatened to exacerbate price pressure. While the Fed remained adamant about its intention to rein in domestic inflation back to its 2% target, its unwillingness to explicitly commit to deploying rate hikes to achieve this goal fueled concerns that the U.S. central bank’s approach under new Chair Kevin Warsh had left it vulnerable to falling behind the curve in mitigating inflation risk. This uncertainty led to a sell-off of long-dated U.S. government bonds; the resultant rise in yields, in turn, put pressure on global stock markets by undercutting their appeal. As of the end of the month, Fed-funds futures traders were pricing in a 65.0% likelihood that the Fed will lift interest rates in September, according to the CME’s FedWatch tool. The yield on the benchmark 10-year U.S. Treasury note ended July at 4.74%, 27 basis points (bps) higher than a month earlier.
Across the Atlantic, the European Central Bank (ECB) held interest rates steady at its policy meeting in July after raising them last month for the first time in nearly three years. With hopes that energy prices would continue to moderate fading amid a resumption in hostilities in the Iran war, the ECB warned that “the full inflationary impact of the energy shock has yet to play out” and left the door open for a rate hike in September. At the end of July, traders were pricing in two additional 25-bp hikes by the first quarter of next year, with the next increase delivered in either September or October. Elsewhere in Europe, the Bank of England (BOE) left interest rates unchanged for a fifth consecutive policy meeting, as inflation in the U.K. continued to hover near the British central bank’s 2% target. The BOE stated that there was scant evidence that inflationary pressure was seeping into the broader domestic economy but was prepared to raise interest rates if it did. Markets were pricing in a 73% chance that the BOE will hold rates steady at its next policy meeting in September. The yield on the 10-year German Bund, Europe’s principal safe-haven asset, ended July at 3.23%, 37 bps higher than a month earlier.
Meanwhile, in Japan, the Bank of Japan (BOJ) held rates steady, citing the need to gauge the impact of its last rate hike in June, even as the Japanese central bank expressed growing worries that domestic inflation may exceed its 2% target. As of the end of the month, traders were betting on a 69% chance that the BOJ will increase interest rates by October, according to pricing of overnight swaps. Elsewhere in Asia, China’s central bank affirmed that it would maintain an appropriately accommodative monetary policy stance in an effort to spur flagging consumer demand.
The start of the latest earnings season painted an encouraging picture of how company profits had held up despite stiff macro headwinds, according to data from FactSet. In the U.S., 62% of the companies in the S&P 500 Index reported actual second-quarter results; of these companies, 86% topped consensus estimates, outperforming the long-term average of 67%. The second-quarter earnings growth rate is estimated to have increased 48.0% from a year earlier. In Europe, 63% of the companies in the STOXX 600 Index reported actual second-quarter results; of these companies, 51% posted better-than-expected earnings, lagging the 54% that do so in a typical quarter. The second-quarter earnings growth rate is expected to have expanded 17.2% from a year earlier. In Japan, 37% of the companies in the TOPIX reported actual results for the April-June period; of these companies, 71% reported positive earnings surprises, surpassing the 60% beat rate over the past four quarters. The earnings growth rate for the April-June period is estimated to have increased 49.8% from a year earlier. In Hong Kong, 8% of the companies in the Hang Seng Index reported actual second-quarter results; of these companies, 75% reported better-than-expected earnings, surpassing the 48% beat rate over the past four quarters. The second-quarter earnings growth rate is estimated to have increased 5.24% from a year earlier.
Against this backdrop, equity markets in the developed world rose, while those in the developing world fell. In the U.S., the S&P 500 Index slipped, as shares of index heavyweight hyperscalers either soared or tumbled after their outlays for AI were revealed in their quarterly results. Across the Atlantic, the STOXX 600 Index rose modestly and outperformed, as Europe’s limited exposure to major AI stocks buoyed the index’s overall performance. In Japan, the TOPIX rose, as a faltering AI trade led investors to rotate to shares of banks, insurers, transportation, and consumer-related companies. Meanwhile, in the developing world, Taiwan’s TAIEX and Korea’s KOSPI both tumbled due to fears that the dominant market positions of index heavyweight chipmakers could be threatened by intensifying industry competition.
Information technology was the worst-performing sector, thanks to a sell-off of semiconductor-linked stocks triggered by concerns about the return on investment from the capital expenditures to build out AI infrastructure and increasing Chinese competition in the chip manufacturing industry that could threaten the dominant market positions of its leaders. Energy was the best-performing sector in July, as shares of oil producers soared after reporting stellar quarterly results, thanks to the Iran war-induced surge in the price of crude oil.
Outlook
Our outlook at the beginning of 2026 anticipated elevated uncertainty, and this view was reaffirmed in early March with the outbreak of war in Iran. The conflict has already had a profound effect on oil and other commodity prices, interest rates, and a wide range of financial assets. There continues to be great uncertainty surrounding both the duration of the conflict and its eventual resolution.
The most immediate financial market effects have been the surge in fuel and other commodity prices, along with an increased risk of shortages in key inputs for agricultural and manufacturing activity. While near-term pressure on this front has subsided recently, the fragile state of negotiations and significant importance of the region to global supply maintain this as a key economic risk likely for the remainder of this year with important implications for economic activity, inflation and interest rates.
Unsurprisingly, the Midstream Energy sector has been a significant contributor to portfolio performance since the outbreak of the conflict and remains among the strongest sector contributors year to date. Recent developments have reinforced the importance of energy security and the critical infrastructure required to supply global energy demand. Unlike upstream and downstream energy businesses that may experience greater sensitivity to commodity prices and refining margins, midstream companies benefit primarily from fixed-fee, high-visibility revenue streams tied to essential infrastructure assets. As governments and markets increasingly prioritize energy security and supply reliability, we expect these characteristics to remain supportive for the sector.
Defensive utilities have been the largest contributor to year-to-date performance in both absolute and relative terms versus the benchmark. It is perhaps unsurprising that one of the most defensive sectors within our infrastructure universe has outperformed amid heightened uncertainty. We continue to view utilities as a core allocation while volatility persists. At the same time, the sector is benefiting from powerful secular trends, including electrification and rising electricity demand associated with technological innovation, data centre development, and electrified transportation. We expect these structural drivers to support sustained investment in power infrastructure and provide resilience even in the face of conflict-driven economic weakness.
Communication services have also provided stability, with largely resilient—and in some cases exceptional—year-to-date total returns among our holdings. In our view, the sector should retain its defensive appeal given generally undemanding valuations, ongoing industry consolidation, and continued exponential growth in global data creation and transmission needs. This dynamic also applies to telecommunication tower REITs, in our view, which have recently exhibited greater sensitivity to higher interest rates (along with growth concerns) than we believe is fundamentally warranted. Should slower economic growth eventually lead to lower long-term interest rates, this dynamic could become a meaningful tailwind for the sector.
Transportation infrastructure remains the area most exposed, in our view, both to the direct impact of higher fuel costs and to potential slowing in global economic activity affecting trade flows, port volumes, and rail and ground transportation demand. That said, our experience has often shown that abrupt disruptions affecting critical transportation infrastructure can create attractive investment opportunities. Energy price shocks and cyclical slowdowns tend to be temporary, whereas the value of these assets is ultimately driven by long-life cash flows and supported over time by energy price normalisation, lower interest rates, and economic recovery.
In sum, while the outbreak of war introduces new risks and uncertainties into an already complex investment landscape, it also reinforces the defensive characteristics that make infrastructure securities an important component of diversified investment portfolios.
The current environment also underscores several of the key secular investment themes that the Caldwell-Lazard CorePlus Infrastructure Fund is designed to emphasize, including energy transition (encompassing both renewable development and energy security) and the strengthening of global supply chain resilience and efficiency.
We believe the portfolio remains well positioned to capitalize on these opportunities across real asset infrastructure businesses as well as key enabling industries—including materials, services, and technologies—that both support and benefit from continued investment in critical infrastructure.
The information contained herein provides general information about the Fund at a point in time. Investors are strongly encouraged to consult with a financial advisor and review the Simplified Prospectus and Fund Facts documents carefully prior to making investment decisions about the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.
Information and opinions presented have been obtained or derived from sources believed by Lazard Asset Management LLC or its afflliates (“Lazard”) to be reliable. Lazard makes no representation as to their accuracy or completeness. All opinions expressed herein are as of the published date and are subject to change.
Allocations and security selection are subject to change. The performance quoted represents past performance. Past performance is not a reliable indicator of future results. Mention of these securities should not be considered a recommendation or solicitation to purchase or sell the securities. It should not be assumed that any investment in these securities was, or will prove to be, profitable, or that the investment decisions we make in the future will be profitable or equal to the investment performance of securities referenced herein. There is no assurance that any securities referenced herein are currently held in the portfolio or that securities sold have not been repurchased. The securities mentioned may not represent the entire portfolio.
Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in certain non-domestic countries may be less liquid, more volatile, and less subject to governmental supervision than in one’s home market. The values of these securities may be affected by changes in currency rates, application of a country’s specific tax laws, changes in government administration, and economic and monetary policy. Emerging markets securities carry special risks, such as less developed or less efficient trading markets, a lack of company information, and differing auditing and legal standards. The securities markets of emerging markets countries can be extremely volatile; performance can also be influenced by political, social, and economic factors affecting companies in these countries.
Securities and instruments of infrastructure companies are more susceptible to adverse economic or regulatory occurrences affecting their industries. Infrastructure companies may be subject to a variety of factors that may adversely affect their business or operations, including additional costs, competition, regulatory implications, and certain other factors.
Certain information contained herein constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “target,” “intent,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events may differ materially from those reflected or contemplated in such forward-looking statements.
Published on August 14, 2026.