July was characterised above all by renewed uncertainty over the Iran conflict. After a period of relative calm in the preceding months, sabre-rattling resumed, accompanied by a sharp rise in oil prices. As our community is aware, rising oil prices are always linked to rising inflation expectations, which in turn are poison for bond and equity markets.
Review – Semiconductor Manufacturers See Sharp Corrections – Kevin Warsh Confuses Markets and Drives Up Yields at the Long End!
Added to this was the fact that many popular shares in the AI and semiconductor sectors suffered sharp price falls, resulting in heavy losses for hedge funds and unsuspecting retail investors. Towards the end of the month, it emerged that a prodigy in his mid-twenties from Berlin had gambled away billions and was forced to close his hedge fund.
As is so often the case, trees do not grow to the sky, and anyone who, like Icarus, flies too close to the sun will sooner or later burn their wings. We will see whether the correction at the end of the month is sufficient to stabilise the market or whether prices will have to fall further.
On the one hand, many markets appear to be normally, though not cheaply, valued at index level; on the other hand, individual shares in the semiconductor sector and popular thematic stocks such as SpaceX are so expensive that there is still considerable scope for prices to fall. Investors would therefore be well advised to diversify widely and build global portfolios. They should exercise caution with popular companies that report little or no profit.
Whilst the winners of recent months have suffered a sharp correction in July, the losers have once again shown encouraging signs of life. This applies to broadly diversified commodity investments, as well as copper mining shares. The same can be seen in stock markets that are more heavily weighted towards commodities – namely Latin America and frontier economies – which we invest in via a successful strategy from Redwheel.
These were joined by European equities, as well as shares from the healthcare sector and India. We can now also see a clear bottoming-out in the shares of private market asset managers.
Popular indices heavily influenced by technology and semiconductor stocks all had a difficult July. These include the country indices for South Korea and Taiwan, as well as the MSCI Emerging Markets Index, the S&P 500 and the Nasdaq 100 Index.
Anyone looking at so-called equity factors will note that shares classified under the ‘value’ and ‘momentum’ factors suffered a sharp setback following exceptionally strong performance in previous months. This was primarily because semiconductor stocks currently carry very heavy weightings in both indices. However, all other factors (quality and company size) also suffered small losses in July. Only the equally weighted multi-factor strategy had a positive month.
The same applies to our active managers, who are invested to a significant extent in semiconductor shares (e.g. CT Global Technology and CT Global Focus). They’re both in the red, though losses are still below those of their respective benchmarks.
Focus: Global Bond Markets
After global bonds had posted gains in May and June and were back in positive territory since the start of the year, they slipped back into negative territory in July.
This was primarily due to the Fed’s unfortunate press conference at the end of July. After Kevin Warsh had positively surprised the bond markets in his first speech and, despite his appointment by Donald Trump, positioned himself as an ‘inflation hawk’ who would bring inflation back towards the 2 per cent level, he suddenly transformed into an indecisive ‘dove’.
Some market participants had expected the Fed to implement a one-off interest rate rise whilst announcing that this was a form of ‘inflation insurance’ – much like the ‘insurance rate cut’ that had taken place under Powell. However, this did not happen, which now makes Kevin Warsh look like a mouse that barked. The bond market took this very badly and sold off long-dated US government bonds in particular.
Yields on 10-year US government bonds are now clearly back above 4.5% p.a., and those on 30-year government bonds are well above 5% p.a. This makes refinancing more expensive for the US government, as well as for private individuals’ mortgages.
Euro-denominated investors also saw modest losses on short-term bonds. However, losses in July were much more pronounced for long-term government bonds. In other segments such as high-yield and subordinated bonds, as well as bonds from emerging markets, losses were limited; in some cases, there were even gains.
The slump in US government bonds clearly reflects a sharp loss of confidence in both the US government and the US Federal Reserve.
Despite the unwelcome losses on bonds in July, it is important to emphasise that current interest rates are significantly above the expected medium-term inflation rate. Bond holders should therefore feel confident in holding onto their positions, as these are needed within a portfolio context to complement risk assets.
Nevertheless, we would steer clear of long-dated government bonds and instead opt for bonds with short or medium-term durations. High yield and emerging markets are also worth considering, as these currently show only a low correlation with US government bonds.
Focus: Commodity Markets & Bitcoin
The uncertainty in bond markets was also reflected by weakness in the U.S. Dollar, as well as the stabilisation of the gold price and other commodity markets. Oil and gas prices also benefited from the resurgent crisis in Iran.
Whilst it was still unclear in June whether the price of gold might slump towards USD 3,500, it is now becoming clear that the support levels at USD 4,000 are holding, and new buyers are entering the market. This is simultaneously stabilising the shares of gold mining companies, which had been heavily sold off in recent months.
The same applies to the Bloomberg Commodity Index (Bloomberg Commodity Index Total Return BCOMTR:Index), which had stabilised in June and was heavily oversold from a technical perspective. It managed to break out upwards in July and is still trading well above its 200-day moving average. The medium-term uptrend is therefore intact.
At the end of June, I said that community members who were somewhat disappointed with their commodities positions should remain calm, as Kevin Warsh cannot single-handedly eliminate the uncertainties of our time. July then quickly made it clear that a certain allocation to commodities can make sense. Admittedly, we should build up our commodity allocations during periods of price weakness rather than simply chasing uptrends. As is the case with all financial investments…
Bitcoin is stabilising above 60,000 US dollars but is currently irrelevant. Thematic investors seem to be venting their energy in other arenas now. We see no need to include Bitcoin in a portfolio strategy. We would therefore urge you not to overdo it with such emotional or ideological investments and to focus instead on traditional asset classes.
Focus: Property & Private Markets
REITs also had a good July following a very strong first half of the year, which comes as something of a surprise given rising long-term interest rates. However, valuations are not excessive, and property is probably safer in the long term than US government bonds.
Private equity and private credit investments had a stable July despite the many redemption commitments faced by numerous funds. They can serve as a useful portfolio diversifier, even though I would describe the returns as rather unremarkable compared to public markets.
Shares in private asset managers have shown a clear technical improvement following the sell-off over the last 24 months and are, in some cases, trading above their 200-day moving average again. Even the shares of Blue Owl, the private credit firm that has arguably attracted the most negative headlines, are attempting to push above their 200-day moving average. Seen in this light, the correction is likely over, even if the market segment appears overbought in the short term. So, wait to buy until current prices have settled down a little!
This once again clearly demonstrates that it is worth investing in high-quality assets that are experiencing short-term difficulties. I am firmly convinced that the valuation of investment instruments at the time of purchase ultimately determines investment success or failure. So please make use of our valuation traffic light system on pages 6 to 9 of this monthly report!
Focus: Currencies
After the US dollar had risen sharply following Kevin Warsh’s first press conference and on the back of strong US corporate earnings – with the DXY Index standing at 102 points – it edged down slightly again in July. The index is currently hovering between 99 and 100 points and now appears to have stabilised or is even slightly oversold.
The US government tends to favour a weaker dollar, and the currency appears overvalued given America’s high level of debt and based on its purchasing power parity. Some diversification into more stable currencies such as CHF, SGD, AUD and NOK may be advisable.
If community members are interested in foreign currency financing, we currently favour CHF, SGD and HKD over the Japanese yen.
Our Investment Styles
We generally advocate three investment strategies or philosophies which we can confidently assume are highly likely to lead to success in the long term. They are well-tried and have delivered good results for investors who have consistently followed them, even if there are significant short-term fluctuations.
1) Traditional Index Investing (Jack Bogle, the Founder of Vanguard)
Traditional indexing is based on the idea of simply buying the entire market at the lowest possible cost, without giving further thought to which market segments might perform better or worse. As a rule, market-capitalisation-weighted indices for equity and bond markets are calculated and invested in via low-cost index funds or ETFs.
This strategy works very well and there is no reason to question it. However, on the equity side, the strategy also means that many indices in the MSCI and FTSE Russell families are currently heavily dominated by US equities. It is therefore important to assess the extent to which one’s own portfolio might also be – and should be – overweight in the US.
When it comes to bond indices, the fact is that traditional indices are inevitably more heavily invested in bonds from higher-debt issuers than in those from less indebted companies. For this reason, investors keen on traditional fixed income ETFs should take the trouble to compare bond indices with systematically designed indices (e.g. Dimensional Fund Advisors) or high-quality actively managed bond portfolios (e.g. Pimco Income).
2) Factor-Based or Scientific Investing (Eugene Fama / Kenneth French)
Factor investing stems primarily from the so-called Chicago School and is associated with Nobel Prize-winning economist Eugene Fama. Eugene Fama and Kenneth French, along with other economists, recognised that the entire equity market can be broken down into certain factors, which should enable investors to achieve excess returns.
Many of these factors are not investable by retail investors; however, all the main factors – such as small companies (Size), profitable companies (Quality), undervalued companies (Value), stocks with strong price movements (Momentum) or all factors equally weighted (Multifactor) – are available as easily investable ETFs or index funds. In addition to global factor indices, there are now also regional factor indices for the USA, Europe and emerging markets.
Since the start of the year, the value and momentum factors have achieved strong excess returns. Shares in small companies (the size factor) have performed very well so far this year, after lagging large caps for several years. The quality factor has improved significantly following a poor showing in previous years and has been only slightly behind the broader market since the start of the year.
As far as factor investing in bonds is concerned, it might be more appropriate to refer to this as systematic investing rather than factor investing. Generally, fewer bonds are purchased than is the case with the traditional indices of the FTSE Russell and Bloomberg families. This approach makes it possible to reduce the risk associated with individual issuers and achieve a better overall return without deviating significantly from the nature of the benchmark index. Systematically constructed bond portfolios can therefore generally outperform traditional bond indices slightly. This has also been the case so far in 2026.
3) Investing Focused on a Few Securities (Warren Buffett / Charlie Munger / Henrik Bessembinder)
So-called ‘stock picking’ or ‘bond picking’ has increasingly fallen out of favour in the age of indexing, as these strategies are often associated with high management fees. This is not incorrect; however, our community has access to the very favourable institutional pricing of actively managed strategies, which is why the strategies of good stock and bond pickers compare very favourably with low cost ETFs.
Admittedly, there are only a few experts like Warren Buffett and Charlie Munger; however, Henrik Bessembinder’s research has made it clear that the long-term price performance of an index is generally determined by just a handful of stocks. Most of the shares included in an index do not generate any added value for investors and could, in fact, be ignored. However, as only a few investors can consistently identify these relevant shares, traditional indexing is also supported by Bessembinder’s research. Ultimately, it is better to buy the few good shares along with the rest, rather than not owning them at all…
Nevertheless, there are a few experts who generate significant added value with concentrated portfolios, which is why we do not wish to withhold them from our community. Most of our active managers have had a very good year so far; however, we note that some of the managers who have deliberately stayed out of the semiconductor and AI sectors have suffered significant underperformance.
The manager of the CT Global Technology Fund, who has been highlighted on several occasions, was unable to escape the market correction in July, but suffered relatively smaller losses than, for example, the Nasdaq 100 Index, and in our view represents a very good long-term solution for investments in the technology sector.
Our general guideline (exceptions prove the rule!) is that, in the very short term, we rely on money market ETFs and index funds. For bonds with normal duration and for special situations in the bond market, we rely on systematic strategies or active managers at institutional prices. For global equity strategies, we rely on a mix of factor indices and active managers. For specific equity themes such as technology, healthcare and emerging markets, we usually rely on active managers. For investments in traditional equity markets, we usually rely on indices.
Our Model Portfolio Performance
We use the Dimensional World Allocation Portfolios as our standard model portfolios, as they provide a highly representative picture of global financial markets, are very cost-effective to acquire and cover all our FairHorizons in all relevant currencies (USD, EUR, GBP and SGD).
All six building blocks have had an exceptionally good year so far, which was primarily due to the strong performance of the Dimensional equity strategy. It is currently benefiting significantly from the strong performance of small-cap companies as well as the overweighting of the value factor. Due to their very low costs, we are happy to showcase these strategies to our community members who are very dissatisfied with the asset management services provided by major private banks.
The current performance of the Dimensional portfolios is very encouraging and reinforces the fact that it can be worthwhile to stick with the same strategy over the long term. I would even go so far as to suggest that these portfolios outperform more than 90 per cent of all asset management services offered by private banks and independent providers. This is because the low costs and systematic approach cannot be replicated by private banks and are often derided by ‘Warren Buffett wannabes’.
For investors whose reference currency is EUR or GBP, Vanguard also offers a range of investable model portfolios (Vanguard LifeStrategy), which likewise serve as an alternative to the asset management services provided by private banks. Furthermore, for euro-denominated investors, there are a few interesting solutions for the FairHorizons Yellow (7–10 years) and Orange (10–15 years) time horizons that are also suitable for long-term investment (e.g. ARERO, Global Portfolio One).
All the strategies mentioned have had a good to very good year so far, although the outperformance of the Dimensional World strategies stands out particularly well!
Outlook – Was the Semiconductor Crash the Market-Cleansing Event?
The third quarter of a stock market year is traditionally regarded as rather volatile and characterised by ‘accidents’ and setbacks. The question now is whether the crash in semiconductor shares and the winding up of Leopold Aschenbrenner’s hedge fund can already be regarded as a market-cleansing event!? After all, we are only at the beginning of August and still have quite a lot of the ‘third quarter’ ahead of us.
Many of the major global equity indices tested their longer-term upward trends against the so-called 200-day moving average at the end of July and bounced back up from it. This is usually seen as a positive sign. However, within the space of a few days, we have moved from a technically oversold situation to a technically overbought one, based on so-called Relative Strength Indexes (RSI).
Seen in this light, a breather should be on the cards for now. I wouldn’t be surprised if many markets were to test their 200-day moving average once again. Given the US President’s erratic behaviour, anything is possible, even though there is currently talk once again of an agreement regarding the Strait of Hormuz.
As has been emphasised on several occasions, the respective valuations of a financial instrument are ultimately the best guide for an investor. So, if we look at the current valuations of high return and safety investment components in our high-rise charts (pages 6–9), we can see that current yields on the safety components are all above the expected medium-term inflation rate of around 2 per cent per annum, regardless of the investment horizon (FairHorizons: purple to green). The returns on money market investments are close to current inflation rates and help preserve purchasing power, even if we must contend with the sharp rise in oil and gas prices.
Regarding our high return components which we select for longer-term investment horizons (FairHorizons yellow to red), we always communicate a minimum target return of 6 per cent per annum or a projected long-term return of between 6 and 8 per cent per annum. This corresponds to price-to-earnings ratios (P/E ratios) of between 14 and 17.
Most of our high return components currently have valuations that make these long-term returns possible. Only the Nasdaq 100, the S&P 500, the MSCI World and the MSCI World Quality Index are significantly below this level, which is why these indices could lag the performance of other markets in the coming years. It may be argued, however, that these indices represent the best and most profitable companies in the world, even if they are not currently available at favourable prices. Perhaps these companies are, after all, a safer bet than long-term bonds issued by heavily indebted countries!?
Shares in Europe, Asia and emerging markets carry risk premiums (i.e. target returns) of between 7 and 8 per cent per annum, which is why we have no hesitation in taking a long position here.
The valuations of the components of our ‘losers of 2025’ – namely Indian equities, REITs, quality factor ETFs and quality fund managers, the healthcare sector and listed private equity firms – remain attractive to very attractive. The healthcare sector is already benefiting from a rotation out of the technology sector, and the Indian market also appears to be stabilising. In my view, valuation levels here are very attractive. The same applies to shares in private asset managers. They can now be added to broadly diversified portfolios as ‘satellite investments’, even if they appear overbought in the short term.
Shares in precious metal and copper producers are very attractive following a sharp correction and can serve as a portfolio diversifier. The same applies to our preferred commodity indices. The reality of global conflicts and spiralling government debt in industrialised nations remains unchanged and tends to be inflationary, which is benefitting commodity prices.
Anyone who has considered an allocation of around 10–15 per cent to commodities since 2020 has been able to significantly optimise a portfolio consisting of stocks and bonds. We would therefore use commodity price corrections as an opportunity to build up a 10–15 per cent allocation within an investment portfolio.
Over the long term, investments in metals and precious metals have outperformed commodities that must be acquired via futures, which involve significant (roll-over) costs and erode returns. These include energy and agricultural commodities, which account for around 60–70 per cent of some commodity indices. This explains our preference for metals and precious metals, or shares in metal and precious metal producers.
As regards our three preferred investment styles, we can only emphasise that all three strategies perform very well in the long term, even if they may prove disappointing in the short term. Investors should therefore definitely stick to their chosen investment styles and not change them simply because of short-term disappointment. Anyone wishing to simply follow current trends with fresh capital should continue to investigate value strategies as well as multi-factor strategies. The positive trend of recent years appears to be continuing, and valuations remain favourable.
As a rule, we recommend indexing for money market investments, active management for most bond strategies, and a mix of indexing and stock picking for equity investments. That’s how we do it ourselves, and we’re delighted when we see the results.
For ‘fresh money’, we recommend our proven concept of FairHorizons, which we have developed based on established asset allocation principles. It offers a simple way of creating portfolios that can beat inflation and earn attractive risk premiums. We would suggest the following strategy for the coming quarters as part of the FairHorizon concept:
- (purple) Invest money that will be needed in a maximum of one year in the money market modules P5 and P7 or benchmark Portfolio 1.
- (blue) Invest money that will not be needed for a maximum of 4 years in portfolio module Portfolio 2 or combine modules B15 and O1 in a ratio of 80/20.
- (green) Invest funds that will not be needed for up to 7 years in portfolio module Portfolio 3 or combine modules B15 and O1 in a ratio of 60/40.
- (yellow) Invest funds that will not be used for up to 10 years in portfolio module Portfolio 4 or combine modules B15 and O1 in a ratio of 40/60.
- (orange and red) Invest money that will not be needed for more than 10 years in portfolio module Portfolio 6 or our quality equity portfolio Q.
Please also look at our standard investment portfolio ideas on pages 34–36, which follow the principles of investment legends like Jack Bogle, Eugene Fama/Kenneth French and Warren Buffett/Charlie Munger. Whilst all of them represent different investment philosophies, they’re all very effective and successful in the long term.
If you are worried whether your portfolio is well equipped for the significant changes in today’s world, just get in touch with us. We’ll be more than happy to check for you. Otherwise, I would be delighted if you could tell your friends and family about Das Family Office so that they can also become part of our community.
With best wishes for a beautiful summer!
Yours,
Mario Becker
