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Jul-26 Outlook

TrendWell Digest: July 2026 ETF Picks

June was a regime-change month. Kevin Warsh chaired his first FOMC meeting on June 17, holding rates at 3.5–3.75% while scrapping forward guidance entirely—and the new dot plot flipped from projecting cuts to a possible hike by year-end, with nine of eighteen officials penciling in at least one increase. The same day, the U.S. and Iran signed a ceasefire memorandum, sending Brent crude tumbling from roughly $95 to $73 by month-end as the war premium unwound, even as May's headline CPI printed 4.2% against a calmer 2.9% core. With unemployment steady at 4.3% and payrolls averaging 188,000 over three months, the labor market remains firm beneath the policy noise. This month's five picks—spanning small caps, blue chips, mid-cap value, and gold—align with exactly these crosscurrents. Based on more than 25 years of historical data (back to October 2000), when all of these predictive drivers have aligned as they do now, this group has delivered an average annualized return of 18%.

IJR — iShares Core S&P Small-Cap 600 ETF

IJR tracks the S&P Small-Cap 600 Index, offering exposure to smaller U.S. companies.

  • Muted AI forecast for consumer discretionary: Google's TimesFM AI forecasting model projects just a 1% return next month for consumer-discretionary stocks (XLY). The relationship is contrarian—months entering with modest model expectations for consumer cyclicals carry no froth to unwind, an environment where small caps have historically led. IJR has averaged 15% annualized when the XLY forecast was 1% or lower, versus 8% when the model projected more.
  • Muted AI forecast for energy: TimesFM projects roughly a 1% return next month for energy stocks (XLE)—consistent with the ceasefire-driven unwind of oil's war premium. Subdued energy expectations translate directly into input-cost relief for fuel-sensitive small businesses. IJR has averaged 14% annualized when the XLE forecast was this low or lower, versus 7% otherwise.

IJT — iShares S&P Small-Cap 600 Growth ETF

IJT tracks small-cap U.S. growth companies in their expansion phase.

  • Staples stuck mid-range: XLP (Consumer Staples) trades at 51% of its 52-week price range—no defensive bid. When investors aren't crowding into staples for safety, risk appetite is flowing toward growth segments instead. IJT has averaged 26% annualized when XLP sat at this point in its range or lower, versus 6% when staples pushed toward their highs.
  • Bear-market odds near zero for mid-caps: A Hidden Markov Model—an algorithm that classifies market regimes from price behavior—assigns just a 2% probability that mid-sized U.S. stocks (MDY, the S&P MidCap 400) are in a bear market. Small-cap growth thrives in confirmed bull regimes, and a small residue of acknowledged risk has historically outperformed total complacency: IJT averaged 13% annualized when the MDY bear probability was 2% or higher, versus 0% when the model read effectively no risk at all.

DIA — SPDR Dow Jones Industrial Average ETF

DIA tracks the Dow Jones Industrial Average, providing exposure to 30 large U.S. blue-chip companies.

  • Muted AI forecast for REITs: TimesFM projects about a 1% next-month return for U.S. real-estate stocks (IYR). With June's hawkish Fed pivot removing the rate-cut fuel REITs depend on, income-seeking capital tends to stay parked in dividend-paying blue chips instead. DIA has averaged 35% annualized when the IYR forecast was 1% or lower, versus 5% when the model projected stronger REIT gains.
  • Stable unemployment: The three-month change in the unemployment rate (LNU01300000) is flat at 0%—matching a jobless rate that has held at 4.3%. A steady labor market underpins earnings for the Dow's mature industrial and consumer franchises. DIA has averaged 19% annualized when unemployment held flat, versus 2% when it was rising.
  • Bear-market odds near zero for the Dow: The HMM regime model assigns a 2% probability that DIA is in a bear market. When that probability sat at 2% or modestly higher—bull regime intact, but without pure complacency—DIA returned 8% annualized, versus 5% below that threshold.

IJJ — iShares S&P Mid-Cap 400 Value ETF

IJJ tracks mid-cap U.S. value stocks, blending the size premium of mid-caps with value-factor exposure.

  • Money markets repricing the Fed: The prior month's change in the spread between 3-month Treasury yields and the Fed funds rate (T3MFF) jumped more than 3x, as June's dot plot flipped market pricing from cuts toward a possible hike. That kind of repricing historically accompanies economic strength—an environment where cyclical mid-cap value leads. IJJ has averaged 33% annualized when T3MFF moved this sharply or more, versus 9% otherwise.
  • Stable unemployment: The flat three-month change in the unemployment rate (LNU01300000) supports the consumer spending and business investment that mid-cap value names depend on. IJJ has averaged 26% annualized when unemployment held steady, versus 2% when it was rising.
  • Muted AI forecast for energy: TimesFM's roughly 1% projected return for XLE signals continued input-cost relief for the industrial and manufacturing names concentrated in mid-cap value. IJJ has averaged 13% annualized when the XLE forecast was this low or lower, versus 6% otherwise.

GLD — SPDR Gold Shares

GLD tracks the price of physical gold bullion.

  • Policy-spread volatility awakening: The six-month volatility of the T3MFF spread (3-month Treasuries versus the Fed funds rate) registers 17% of its historical norm—modest in absolute terms, but movement in Fed-policy pricing is precisely what drives hedge demand for gold. When this volatility ran at 17% of historical or higher, GLD averaged 23% annualized, versus 5% when the spread was fully dormant.
  • July seasonality: July falls in the seasonally stronger half of the calendar for gold. In July and the other months in this favorable seasonal group, GLD has averaged 23% annualized, versus 10% across the remaining months.
  • Speculators net short Nasdaq futures: Commitments of Traders (COT) data show speculative traders holding a deeply net-short position in Nasdaq-100 (NQ) index futures—defensive positioning in tech that classically coincides with hedging flows into gold. When NQ net speculative positioning was this negative or lower, GLD averaged 20% annualized, versus 10% when speculators were more bullish on tech.

Conclusion

July's setup is defined by resolution and repricing: the ceasefire has drained oil's war premium, the labor market has held its footing, and the Warsh Fed has decisively shifted the rate conversation from cuts to a possible hike. The regime models see near-zero bear-market risk in equities even as futures positioning shows speculators hedged—a combination that historically favors small caps and mid-cap value on the equity side, with GLD as the complement if policy uncertainty deepens. Across more than a quarter century of data, this alignment of drivers has been a favorable one—and we hope your portfolio continues to TrendWell.

This article is for informational purposes only and does not constitute financial advice.

Sources:

  • Federal Reserve FOMC Statement, June 17, 2026 (federalreserve.gov)
  • CNBC, "Fed interest rate decision June 2026," June 17, 2026 (cnbc.com)
  • Capital.com, "Crude Oil Price Forecast: US-Iran Ceasefire and OPEC+ Supply," June 30, 2026 (capital.com)
  • Fortune, "Markets feel relief as the U.S. and Iran agree to a ceasefire," June 28, 2026 (fortune.com)