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Led by Emerging Markets (+5.8% July) and the tech-heavy Nasdaq 100 index (+3.8% July), markets staged an encore performance of June’s gains with a broadening rally in July as better-than-feared earnings kept the “soft landing” narrative alive despite further monetary tightening across the globe.

With placid conditions allowing for unhedged exposure, TCM Risk Managed Indexing strategies captured nearly all of the month’s gains while Hedged Disruptor (+7.9% Jul) continued to benefit from the ongoing growth stock rally and recent exposure increases led to the best month of the year for Alpha Seeker (+1.0% July) and Legacy Navigator (+2.2% Jul) portfolios.

Apparently confident that those who let inflation loose have now contained it without a recession, markets are nearing a critical juncture where this assumption is tested by reality. As demonstrated most dramatically in the runup to the Great Financial Crisis of 2008 (chart below), these types of “hope rallies” create latent risk that can be realized quickly if reality fails to cooperate. As stocks close in on all time highs in the midst of one of the largest interest rate shocks in history, the “soft landing zone” is getting narrower by the day. With the portfolio sails currently open to catch the prevailing market wind, we will keep watching the VIX for signs of a storm.