Market Insights July 20, 2026

Semiconductors, a technical correction within an intact cycle

After an exceptional rally driven by the AI theme, the semiconductor sector is undergoing a period of consolidation. In recent months, gains had become increasingly concentrated in a limited number of stocks, often supported by significant leverage. The gradual unwinding of these positions is now amplifying downside moves and contributing to the correction in the sector's benchmark index (SOX), which has declined by around 20% from its June peak. Meanwhile, the Korean market, which is heavily exposed to the sector, has fallen by approximately 30%.

This consolidation is taking place in a more challenging environment, marked by rising geopolitical uncertainty and the persistence of elevated interest rates.
Nevertheless, fundamentals remain robust. The first wave of earnings releases has generally exceeded expectations, while leading industry players continue to announce ambitious investment plans. In this context, we believe the current correction reflects a technical adjustment rather than a deterioration in the underlying cycle.

Geopolitical tensions delay the bon market recovery

After an encouraging period of easing, bond markets have once again come under pressure from rising yields over recent weeks. While the latest U.S. inflation data confirmed a sharper-than-expected slowdown in price increases, initially supporting a decline in long-term interest rates, this move proved short-lived. Investors quickly had to contend with a renewed deterioration in the geopolitical environment and a fresh rise in energy prices.

Nevertheless, the release of lower-than-expected U.S. inflation figures is a reassuring development. It confirms that price pressures continue to normalize despite an economy that remains resilient. At the same time, Kevin Warsh, the new Chairman of the Federal Reserve, adopted a more measured tone than at the start of his tenure. Without abandoning his commitment to price stability, he acknowledged that the progress made on the inflation front deserved to be taken into account before any monetary policy decision.

These developments could have paved the way for a further decline in bond yields. However, the renewed escalation of tensions in the Middle East over the past ten days has significantly altered investor sentiment. The rebound in oil prices has revived concerns over a renewed increase in inflationary pressures. As a result, U.S. Treasury yields have moved higher again, pulling most global bond markets up with them.

We nevertheless believe that the scope of this move remains limited. In our view, the 5% yield level on the U.S. 10-year Treasury represents an important psychological and economic ceiling. At such levels, financial conditions become sufficiently restrictive to gradually slow economic activity, thereby limiting the potential for a sustained rise in interest rates.

Against this backdrop, our strategy remains unchanged. With the exception of the Swiss bond market, where yields remain too low, we continue to view periods of weakness across the major bond markets as attractive opportunities to increase exposure. Current yield levels offer compelling entry points for long-term investors, particularly in high-quality bonds. We continue to favour longer maturities, ranging from seven to ten years, which we believe are best positioned to benefit from a future decline in yields once inflationary pressures continue to normalize. This approach allows investors to lock in historically attractive yields while also offering meaningful capital appreciation potential when the monetary cycle enters a new easing phase.

This week’s figure: 88 $

The resurgence of tensions in Iran has supported oil prices, with Brent crude reaching USD 88 per barrel. Nevertheless, the advance remains limited, as markets continue to be favouring a scenario of diplomatic de-escalation over the summer.