July was a turbulent month for global equities, dominated by a sharp contraction in valuations across the Artificial Intelligence (AI) sector—particularly semiconductors—and by geopolitical pressures stemming from the conflict in Iran.
Europe managed to buck the trend, with the Stoxx 600 approaching all-time highs as of July 31, supported by stronger-than-expected eurozone GDP growth (+0.4% in the second quarter, the fastest pace in more than a year) and by its relatively lower exposure to AI-related companies.
Global bonds fell fairly sharply as rising oil prices reignited inflation concerns.
S&P 500: -0.13%
Nasdaq: -6.61%
Stoxx Europe: +1.16%
MSCI All Country World Index (EUR): -1.57% (the dollar fell 0.92%, while the index fell 0.68% in USD).
Global Fixed Income Index (EUR): -1.16%
July once again brought two of the main factors shaping market performance in 2026 to the forefront: on the one hand, the growing burden of public debt and its potential impact on interest rates and inflation; on the other, the increasing concentration of risk in a small number of companies and sectors, particularly those associated with artificial intelligence and semiconductors.
Debt, Interest Rates, and Inflation.
I’m sorry, but politicians seem determined to make us talk about this, so we have no choice.
In the short term, markets are driven primarily by liquidity flowing into and out of the system. In the long term, they are driven by the economic strength of countries and the quality of companies.
Liquidity enters and exits the system largely through central banks. When central banks purchase assets or lend money to commercial banks, they put more money into circulation, which is known as injecting liquidity into the system. When they do the opposite—that is, sell assets or withdraw money from the system—they are draining liquidity.
Central banks are the monetary authorities responsible for issuing money in each country. In theory, they are independent. Why do I say “in theory”? Because recently, we have seen several presidents attempt to interfere with their work so that central banks will help them manage the country—or, rather, finance their high levels of spending.[1]
In this chart, you can see the increase in US debt during this century: more than 583%. I promise you, this is not an exciting AI company or Bitcoin—it is US debt. That represents an annual increase of 7.5%.
Source : Bloomberg
According to a very interesting report by Hoisington Investment Management Company, the equilibrium range for inflation in the United States may be shifting from approximately 1.5%–3.5% to 3.5%–4.5%, with a meaningful risk of periods above 5%. The reason is that the economy is now more expensive to operate. There is less globalization, a greater need to invest in energy, power grids, chips, defense, and AI, and slower growth in the labor force.
In the past, globalization helped keep inflation low because production was cheaper and there was a large global supply of goods. Now, the opposite is happening: companies and countries are prioritizing security and resilience over minimizing costs, and that makes everything more expensive.
The report also says that money in the economy is no longer as “idle” as it once was. If the Fed buys large quantities of bonds and more money circulates through the economy, that can push inflation higher. Therefore, if the Fed is too accommodative, it may fuel inflation; however, if it tightens too aggressively, it may significantly cool the economy. Which path should it follow? The second is more painful in the short term, but healthier in the long term.
The report is constructive on an idea that markets may find uncomfortable: long-term interest rates could continue trending upward or, at the very least, become more volatile than they were during the 1990–2020 cycle.
There are two reasons for this. First, the expected-inflation component of nominal yields should rise if equilibrium inflation is higher. Second, the term premium and real interest rates could increase because of stronger demand for capital, global fragmentation, and the Treasury market’s greater sensitivity to the supply of government debt.
Let me try to explain this more simply. When you buy a long-term bond, the market focuses primarily on two things:
Expected future inflation.
The additional compensation required for lending money over a long period of time—the “term premium.”
If both of these increase, long-term interest rates also rise.
Expected Future Inflation.
If people believe that inflation will be higher in the future, long-term bonds must offer higher interest rates to prevent investors from losing purchasing power.
2. Higher Term Premiums and Real Interest Rates[2]
Term premium: the “extra” return the market demands for lending money over many years because there is greater uncertainty.
Real interest rates: interest rates adjusted for inflation.
The report says that this component could also increase because of:
Greater demand for capital: companies and governments need more money. They are competing for the same pool of capital, which is not growing as quickly as their financing needs.
Lower savings: in the United States, the savings rate has fallen to very low levels, reducing the economy’s ability to absorb growing demand for capital.
Global fragmentation: less trade and less integration among countries, which makes financing more expensive.
Greater Treasury debt issuance: if the government issues a large number of bonds, the market may demand higher yields in order to buy them.
Could long-term interest rates already be pricing this in? I believe they are.
Source: Bloomberg
If you look closely, they are trending toward 5%, near the peak reached in October 2023. It appears that investors are exercising some caution about the future.
Against this backdrop, the world’s two leading central banks—the US Federal Reserve and the European Central Bank—held their policy meetings. The ECB ruled out an immediate rate increase, but President Lagarde laid the groundwork for a possible hike in September as inflationary pressures from energy prices and tariffs continued to build. The Fed kept interest rates at 3.50%–3.75% for the fifth consecutive meeting. What was most striking, however, was that the decision included three dissenting votes in favor of raising rates—an unusual development that reflected a clearer-than-normal internal division.
Concentration Risk
The idea of creating stock market indexes arose from a very practical need: to summarize the performance of a group of stocks in a single number.
Before indexes existed, investors could check the share price of each company individually, but it was difficult to determine whether the market as a whole was rising or falling. Indexes transformed many individual price movements into a simple signal that was easy to interpret.
In an economy such as that of the United States—characterized by free markets, legal certainty, comparatively lighter regulation, and deeply developed capital markets—research, creativity, and private enterprise are more likely to thrive. In short, there are strong incentives for entrepreneurial activity.
It is therefore unsurprising that the United States is one of the countries where the greatest number of companies are created and where many of them go on to achieve significant success. A substantial proportion of these companies eventually become publicly traded, allowing investors to participate in their growth.
Today, there are many different indexes, although the most representative and widely followed worldwide is probably the S&P 500. It includes 500 of the largest companies in the United States and has become the main benchmark for measuring the performance of the US stock market.
From here, a simple but powerful idea emerges: if indexes capture the performance of the market, why not invest directly in them?
That need led to the development of index funds. John C. Bogle, the founder of Vanguard and one of their greatest advocates, summarized the idea with a now-classic phrase: “Don’t look for the needle in the haystack. Just buy the haystack.”[3].
El objetivo de este tipo de inversión no es apostar por un sector o por unas pocas compañías, sino construir una cartera ampliamente diversificada que permita al inversor capturar el crecimiento del mercado en su conjunto.
Sin embargo, la realidad no siempre es tan equilibrada. Cuando surge euforia en torno a un sector, el capital tiende a concentrarse en él. Primero por sus fundamentales, después por la narrativa que amplifican los bancos de inversión, y finalmente por el comportamiento de los propios inversores, donde entra en juego el conocido FOMO (fear of missing out). Este proceso suele repetirse: suben los precios, aumenta la capitalización de las compañías y, con ello, su peso dentro de los índices.
Aquí es donde aparece una de las principales debilidades de los índices ponderados por capitalización. Ya hemos comentado en otras ocasiones el riesgo de concentración, un número reducido de compañías puede llegar a representar una parte muy relevante del índice.
Esto plantea una cuestión clave para el inversor: cuando inviertes en un fondo o ETF referenciado a un índice, ¿estás realmente invirtiendo en un mercado diversificado o en un puñado de compañías? Actualmente, las ocho mayores posiciones del S&P 500 concentran en torno al 35% del índice, mientras que las otras 492 representan el 65% restante, con un claro sesgo hacia el sector tecnológico.
Por tanto, aunque a priori pueda parecer una inversión diversificada, en la práctica supone una exposición significativa a un número reducido de compañías y a un mismo sector, además en un contexto de valoraciones exigentes frente a sus medias históricas. Es un riesgo que, al menos, conviene tener presente.
Podéis ver en esta tabla lo que ha ocurrido en el pasado cuando existía una alta concentración.
Fuente: Bloomberg & Altum’s own research
Does this mean that the companies with the largest weights in the S&P 500 are going to fall? No, because I do not know. In addition, they are good companies.
However, it does mean accepting a clear risk: concentrating investments in a sector with extremely demanding valuations. The euphoria continues to revolve around artificial intelligence, although the focus is no longer exclusively on major platforms such as Amazon, Alphabet, Microsoft, or Meta. It has expanded across the entire value chain: semiconductors, energy, data center construction companies, and so on.
In fact, enthusiasm has been particularly intense in the semiconductor sector, which had gained approximately 106% year to date through June, as you can see in the chart.
Source: Bloomberg
But what happened after June? A 42% decline in just over one month[4].
Source: Bloomberg
Is this healthy? Absolutely not.
What about those who invested believing they had found El Dorado? Yes, it is true that they are responsible for their own decisions. But that does not mean we should not be aware of where we are investing. When we buy an index, we are also accepting—often without realizing it—a high degree of concentration in certain sectors.
If we take this phenomenon to the extreme, South Korea provides a particularly illustrative example. The Kospi Index consists of 954 companies, but its two largest holdings alone—Samsung Electronics and SK Hynix—represent more than 52% of the total. More than half of the index is concentrated in two companies, both of which operate in the semiconductor sector.
And what happened? Through June, the index had risen by approximately 111%. It then fell by 56%. This move clearly illustrates the risks of excessive concentration.
Source: Bloomberg
South Korea is admittedly an extreme example, but it is important not to lose sight of the fact that concentration in the S&P 500 is currently near historic highs: the eight largest companies account for approximately 35% of the index. This does not mean that these companies are going to decline, but it does mean that the index’s performance increasingly depends on a small number of holdings. Personally, I would rather not participate in this type of dynamic, as it would mean trying to be the first person to find a seat when the music stops.
This concentration risk is one of the reasons why, at Altum, we have applied an equal-weight methodology to the Altum 500 US Catholic Ethos Index in the United States and the Altum 100 EU Catholic Ethos Index in Europe. By assigning the same weight to every company, the result is a more balanced exposure that is less dependent on the largest holdings.
We believe this approach provides more balanced diversification and reduces dependence on a small number of companies. It also allows investors to participate in the growth of the market as a whole while distributing risk more evenly.
Altum 500 Us Catholic Ethos Index
Source : Bloomberg
Altum 100 EU Catholic Ethos Index
Source : Bloomberg
The stock market is not a casino. It is the tool that allows you to become a shareholder in outstanding companies.
[1] In reality, central banks are not the only ones. Commercial banks also have the privilege of creating money. How does this work?
In Spain, the reserve requirement is 1%. This means that when Pepe deposits €100 into a checking account at Bank A, the bank can lend out up to 99% of that amount—in other words, €99—to Juan. Juan then deposits those €99 into his checking account at Bank B, which can in turn lend out €98.01 from that deposit, and so on.
This creates the absurd situation in which several people are effectively considered owners of the same money.
[2] Nominal interest rates consist of three components: expected inflation, real interest rates, and the term premium.
July Market Review
July was a turbulent month for global equities, dominated by a sharp contraction in valuations across the Artificial Intelligence (AI) sector—particularly semiconductors—and by geopolitical pressures stemming from the conflict in Iran.
Europe managed to buck the trend, with the Stoxx 600 approaching all-time highs as of July 31, supported by stronger-than-expected eurozone GDP growth (+0.4% in the second quarter, the fastest pace in more than a year) and by its relatively lower exposure to AI-related companies.
July once again brought two of the main factors shaping market performance in 2026 to the forefront: on the one hand, the growing burden of public debt and its potential impact on interest rates and inflation; on the other, the increasing concentration of risk in a small number of companies and sectors, particularly those associated with artificial intelligence and semiconductors.
Debt, Interest Rates, and Inflation.
I’m sorry, but politicians seem determined to make us talk about this, so we have no choice.
In the short term, markets are driven primarily by liquidity flowing into and out of the system. In the long term, they are driven by the economic strength of countries and the quality of companies.
Liquidity enters and exits the system largely through central banks. When central banks purchase assets or lend money to commercial banks, they put more money into circulation, which is known as injecting liquidity into the system. When they do the opposite—that is, sell assets or withdraw money from the system—they are draining liquidity.
Central banks are the monetary authorities responsible for issuing money in each country. In theory, they are independent. Why do I say “in theory”? Because recently, we have seen several presidents attempt to interfere with their work so that central banks will help them manage the country—or, rather, finance their high levels of spending.[1]
In this chart, you can see the increase in US debt during this century: more than 583%. I promise you, this is not an exciting AI company or Bitcoin—it is US debt. That represents an annual increase of 7.5%.
Source : Bloomberg
According to a very interesting report by Hoisington Investment Management Company, the equilibrium range for inflation in the United States may be shifting from approximately 1.5%–3.5% to 3.5%–4.5%, with a meaningful risk of periods above 5%. The reason is that the economy is now more expensive to operate. There is less globalization, a greater need to invest in energy, power grids, chips, defense, and AI, and slower growth in the labor force.
In the past, globalization helped keep inflation low because production was cheaper and there was a large global supply of goods. Now, the opposite is happening: companies and countries are prioritizing security and resilience over minimizing costs, and that makes everything more expensive.
The report also says that money in the economy is no longer as “idle” as it once was. If the Fed buys large quantities of bonds and more money circulates through the economy, that can push inflation higher. Therefore, if the Fed is too accommodative, it may fuel inflation; however, if it tightens too aggressively, it may significantly cool the economy. Which path should it follow? The second is more painful in the short term, but healthier in the long term.
The report is constructive on an idea that markets may find uncomfortable: long-term interest rates could continue trending upward or, at the very least, become more volatile than they were during the 1990–2020 cycle.
There are two reasons for this. First, the expected-inflation component of nominal yields should rise if equilibrium inflation is higher. Second, the term premium and real interest rates could increase because of stronger demand for capital, global fragmentation, and the Treasury market’s greater sensitivity to the supply of government debt.
Let me try to explain this more simply. When you buy a long-term bond, the market focuses primarily on two things:
If both of these increase, long-term interest rates also rise.
If people believe that inflation will be higher in the future, long-term bonds must offer higher interest rates to prevent investors from losing purchasing power.
2. Higher Term Premiums and Real Interest Rates[2]
The report says that this component could also increase because of:
Could long-term interest rates already be pricing this in? I believe they are.
If you look closely, they are trending toward 5%, near the peak reached in October 2023. It appears that investors are exercising some caution about the future.
Against this backdrop, the world’s two leading central banks—the US Federal Reserve and the European Central Bank—held their policy meetings. The ECB ruled out an immediate rate increase, but President Lagarde laid the groundwork for a possible hike in September as inflationary pressures from energy prices and tariffs continued to build. The Fed kept interest rates at 3.50%–3.75% for the fifth consecutive meeting. What was most striking, however, was that the decision included three dissenting votes in favor of raising rates—an unusual development that reflected a clearer-than-normal internal division.
Concentration Risk
The idea of creating stock market indexes arose from a very practical need: to summarize the performance of a group of stocks in a single number.
Before indexes existed, investors could check the share price of each company individually, but it was difficult to determine whether the market as a whole was rising or falling. Indexes transformed many individual price movements into a simple signal that was easy to interpret.
In an economy such as that of the United States—characterized by free markets, legal certainty, comparatively lighter regulation, and deeply developed capital markets—research, creativity, and private enterprise are more likely to thrive. In short, there are strong incentives for entrepreneurial activity.
It is therefore unsurprising that the United States is one of the countries where the greatest number of companies are created and where many of them go on to achieve significant success. A substantial proportion of these companies eventually become publicly traded, allowing investors to participate in their growth.
Today, there are many different indexes, although the most representative and widely followed worldwide is probably the S&P 500. It includes 500 of the largest companies in the United States and has become the main benchmark for measuring the performance of the US stock market.
From here, a simple but powerful idea emerges: if indexes capture the performance of the market, why not invest directly in them?
That need led to the development of index funds. John C. Bogle, the founder of Vanguard and one of their greatest advocates, summarized the idea with a now-classic phrase: “Don’t look for the needle in the haystack. Just buy the haystack.”[3].
El objetivo de este tipo de inversión no es apostar por un sector o por unas pocas compañías, sino construir una cartera ampliamente diversificada que permita al inversor capturar el crecimiento del mercado en su conjunto.
Sin embargo, la realidad no siempre es tan equilibrada. Cuando surge euforia en torno a un sector, el capital tiende a concentrarse en él. Primero por sus fundamentales, después por la narrativa que amplifican los bancos de inversión, y finalmente por el comportamiento de los propios inversores, donde entra en juego el conocido FOMO (fear of missing out). Este proceso suele repetirse: suben los precios, aumenta la capitalización de las compañías y, con ello, su peso dentro de los índices.
Aquí es donde aparece una de las principales debilidades de los índices ponderados por capitalización. Ya hemos comentado en otras ocasiones el riesgo de concentración, un número reducido de compañías puede llegar a representar una parte muy relevante del índice.
Esto plantea una cuestión clave para el inversor: cuando inviertes en un fondo o ETF referenciado a un índice, ¿estás realmente invirtiendo en un mercado diversificado o en un puñado de compañías? Actualmente, las ocho mayores posiciones del S&P 500 concentran en torno al 35% del índice, mientras que las otras 492 representan el 65% restante, con un claro sesgo hacia el sector tecnológico.
Por tanto, aunque a priori pueda parecer una inversión diversificada, en la práctica supone una exposición significativa a un número reducido de compañías y a un mismo sector, además en un contexto de valoraciones exigentes frente a sus medias históricas. Es un riesgo que, al menos, conviene tener presente.
Podéis ver en esta tabla lo que ha ocurrido en el pasado cuando existía una alta concentración.
Fuente: Bloomberg & Altum’s own research
Does this mean that the companies with the largest weights in the S&P 500 are going to fall? No, because I do not know. In addition, they are good companies.
However, it does mean accepting a clear risk: concentrating investments in a sector with extremely demanding valuations. The euphoria continues to revolve around artificial intelligence, although the focus is no longer exclusively on major platforms such as Amazon, Alphabet, Microsoft, or Meta. It has expanded across the entire value chain: semiconductors, energy, data center construction companies, and so on.
In fact, enthusiasm has been particularly intense in the semiconductor sector, which had gained approximately 106% year to date through June, as you can see in the chart.
Source: Bloomberg
But what happened after June? A 42% decline in just over one month[4].
Source: Bloomberg
Is this healthy? Absolutely not.
What about those who invested believing they had found El Dorado? Yes, it is true that they are responsible for their own decisions. But that does not mean we should not be aware of where we are investing. When we buy an index, we are also accepting—often without realizing it—a high degree of concentration in certain sectors.
If we take this phenomenon to the extreme, South Korea provides a particularly illustrative example. The Kospi Index consists of 954 companies, but its two largest holdings alone—Samsung Electronics and SK Hynix—represent more than 52% of the total. More than half of the index is concentrated in two companies, both of which operate in the semiconductor sector.
And what happened? Through June, the index had risen by approximately 111%. It then fell by 56%. This move clearly illustrates the risks of excessive concentration.
Source: Bloomberg
South Korea is admittedly an extreme example, but it is important not to lose sight of the fact that concentration in the S&P 500 is currently near historic highs: the eight largest companies account for approximately 35% of the index. This does not mean that these companies are going to decline, but it does mean that the index’s performance increasingly depends on a small number of holdings. Personally, I would rather not participate in this type of dynamic, as it would mean trying to be the first person to find a seat when the music stops.
This concentration risk is one of the reasons why, at Altum, we have applied an equal-weight methodology to the Altum 500 US Catholic Ethos Index in the United States and the Altum 100 EU Catholic Ethos Index in Europe. By assigning the same weight to every company, the result is a more balanced exposure that is less dependent on the largest holdings.
We believe this approach provides more balanced diversification and reduces dependence on a small number of companies. It also allows investors to participate in the growth of the market as a whole while distributing risk more evenly.
Altum 500 Us Catholic Ethos Index
Source : Bloomberg
Altum 100 EU Catholic Ethos Index
Source : Bloomberg
The stock market is not a casino. It is the tool that allows you to become a shareholder in outstanding companies.
[1] In reality, central banks are not the only ones. Commercial banks also have the privilege of creating money. How does this work?
In Spain, the reserve requirement is 1%. This means that when Pepe deposits €100 into a checking account at Bank A, the bank can lend out up to 99% of that amount—in other words, €99—to Juan. Juan then deposits those €99 into his checking account at Bank B, which can in turn lend out €98.01 from that deposit, and so on.
This creates the absurd situation in which several people are effectively considered owners of the same money.
[2] Nominal interest rates consist of three components: expected inflation, real interest rates, and the term premium.
[3] The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns
[4] As measured by the SOX Index (the Philadelphia Semiconductor Index).
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