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July 2026 QiM Fact(or) Sheet

3 August, 2026
8 MIN READ 8 MIN READ
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Alejandra Munoz

Investment Associate

Source: SEI QiM using data from FactSet and Bloomberg. Period: 31 July 2025 to 31 July 2026. The Morgan Stanley US TMT Momentum index is a long-short equal notional pair basket of top/bottom 50 most liquid technology stocks based on 12 month return. S&P 500 Momentum is a long-only index; Past performance is not an indication of the future performance

  • Market: Equities declined as the semiconductor trade came under pressure, while renewed Middle East tensions pushed oil prices higher.
    • Higher oil prices and bond yields increased pressure on expensive growth stocks.
    • Semiconductors fell on profit-taking after a strong second quarter, before concerns around the pace of AI spending extended the decline. 
    • Forced deleveraging, including the unwind of Situational Awareness’s leveraged AI portfolio, added to the selling.
  • Macro: US activity remained firm, although hiring and spending moderated.
  • Earnings: Another strong season, but high expectations limited share-price gains. 
    • CY 2026 earnings growth estimates increased from 15.8% at the end of March to 29.8%.
  • Sectors: Information Technology was the main drag as semiconductors sold off. Communication Services also lagged on CAPEX worries (Alphabet and Meta), while Energy led on higher oil prices.
  • Countries: Korea and Taiwan were dragged down by their semiconductor constituents, while China was helped by lack of it. The UK and Canada were supported by high exposure to Energy and Financials. 
  • Factors: Momentum reversed sharply as the AI names that led Q2 became the main source of weakness. Forced deleveraging of crowded positioning added to the decline. Low Volatility benefited from its defensive construction, while Value was supported by Energy and Financials.

Factor families

Exhibit 1: July 2026 QiM Investable factor proxies versus respective capitalization weighted indexes

 

July heat map

Source: SEI, based on data from MSCI, Axioma and FactSet. Data as of July 31, 2026. Returns quoted in USD. Metrics are composites of underlying ratios that SEI has determined to be appropriate measures of each factor. Data refers to past performance of top-tercile factor-proxy portfolios vs. the capitalisation-weighted benchmark and rebalanced quarterly. Returns are for illustrative purposes only and do not represent actual fund performance. Excess returns measured against (in descending order): MSCI ACWI Large Cap, MSCI USA Large Cap, MSCI EAFE Large Cap, MSCI EM Large Cap, MSCI USA Small Cap, MSCI EAFE Small Cap Indexes. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance is no guarantee of future results. 

Adaptive Outlook

Summary: Trend, valuation, and macro signals converged on an overweight Value position. Notable shift in the macro signal, where rate tightening expectations moved to favour Value, aligning with the persistent trend and attractive relative valuations that have supported the Value overweight since mid-2025.

  • Trend: Value's outperformance remains intact but is losing pace. Factor acceleration has turned neutral, and defensive characteristics are gaining traction.
  • Valuation: Quality factors trade at their cheapest relative valuation globally, while Momentum sits at the most expensive.
  • Macro: The rate environment shifted. Tightening expectations now favour Value over Momentum. Economic activity indicators remain supportive but are insufficient to offset rate headwinds.

 

Exhibit 2: July 2026 adaptive factor family positioning

July DFA Chart

 

Source: SEI, the axis displays z-score exposure versus benchmark, as of July 31, 2026. Long term average exposure from January 31, 2003, to current. Benchmark: MSCI World Index.

Z-scores tell us how exposed a portfolio is to a factor, compared to a benchmark, based on what's normal for that factor. It is a common "currency" of portfolio exposures, making unrelated raw metrics like P/E or ROE comparable to each other. 

A value of zero means the portfolio is neutral to the benchmark for that factor.

Higher values mean the portfolio has more exposure to that factor than the benchmark.

Economic indicators 

US.: Activity remains firm as hiring and spending moderate

Jobs: Labour market remains resilient despite slower hiring

  • Nonfarm Payrolls: at 57.0K, below expectations and prior month. (129K)
  • Unemployment Rate: 4.2%, marginally below expectations and prior month (4.3%). 
  • Initial Jobless Claims: 202.75K monthly average, below prior month average of  222.5K.

Inflation: Underlying price pressures ease but remain elevated

  • Core CPI: 2.6 (YoY), below expectations and prior month. (2.9%)
  • Core PCE Deflator: 3.3% (YoY), in line with expectations and marginally below prior month. (3.4%)
  • Hourly Earnings (preliminary): 3.5% (YoY), in line with expectations and marginally above prior month. (3.4%)

Consumer: Spending moderates while confidence remains subdued

  • Retail Sales: 0.20% (MoM, SA), below expectations and prior month. (1.0%) 
  • Michigan Sentiment (preliminary): 54.4, above expectations and prior month. (49.5)
  • Consumer Confidence: 90.8, marginally below expectations and prior month. (92.2)

Manufacturing and Services: Business activity remains expansionary 

  • S&P PMI Manufacturing SA (preliminary): 53.8, marginally below expectations and in line with prior month. 
  • S&P PMI Services, SA (preliminary): 53.6, above expectations and prior month. (51.2)
  • Empire State Index, SA: 15.6, above expectations and above prior month. (5.7)

Source: FactSet. Past performance is not a reliable indicator of future results.

 

The rest of the world 

China: Growth remains supported despite signs of cooling

  • Exports: 27% (YoY), above expectations and prior month. (19.4%)
  • S&P PMI manufacturing: 51.7, in line with expectations and prior month. 
  • S&P PMI services: 54.1, above expectations and in line with prior month.
  • CPI: 1.0% (YoY), below expectations and prior month. (1.2%)

Japan: Manufacturing remains strong as services improve

  • CPI Core National: 1.6% (YoY), marginally above prior month.
  • S&P Manufacturing PMI (preliminary): 54.7, in line with expectations and prior month.
  • S&P Services PMI: 52.2, marginally above prior month. (51.8)

Germany: Growth shows tentative signs of stabilisation

  • CPI: 2.3% (YoY), in line with expectations and prior month.
  • S&P Manufacturing PMI (preliminary): 52.2, above expectations and prior month. (50.3)
  • S&P Services PMI (preliminary): 49.6, above expectations and prior month. (48.6)

U.K.: Inflation eases as business activity strengthens

  • CPI Core: 2.6% (YoY), below expectations and in line with prior month.   
    • Services inflation eased marginally from 3.7% to 3.6%, while goods inflation slowed from 2.0% to 1.7%, indicating a gradual easing in underlying price pressures.
  • S&P Manufacturing PMI (preliminary): 52.8, in line with expectations and prior month.
  • S&P Services PMI (preliminary): 51.8, above expectations and prior month. (48.8)

Source: FactSet. Past performance is not a reliable indicator of future results.

Sector and country returns

Exhibit 3: MSCI All Country World Index

Source: SEI, MSCI. As of July 31, 2026. Past performance is not a reliable indicator of future results.

Glossary and index definitions

For financial term and index definitions, please see: https://www.seic.com/ent/imu-communications-financial-glossary

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