Key Takeaways:

• The S&P 500 was roughly flat, down 0.06%, as a semiconductor selloff dragged on mega-cap technology.
• The Moat Index gained 3.96%, outperforming the S&P 500 as its lower mega-cap technology exposure and financials tilt paid off.
• LPL Financial and Bristol-Myers Squibb led Moat Index gains, while semiconductor holdings weighed on results.
• The SMID Moat Index rose 1.83%, outpacing small- and mid-cap benchmarks that declined, led by health care and consumer holdings.

Index performance is not illustrative of fund performance. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

U.S. equities were mixed in July as a sharp reversal in semiconductor and artificial intelligence shares pulled the market's largest names lower. The S&P 500 finished roughly flat, down 0.06%, weighed down by its mega-cap technology constituents, while the S&P 500 Equal Weight Index rose 1.01%, highlighting that weakness was concentrated among the market’s largest companies rather than across the broader market. An early-month chip selloff, triggered by concerns over stretched AI-related valuations and cooling high-bandwidth memory demand, set the tone, and the Nasdaq Composite fell 3.19%. At its July 28–29 meeting, the Federal Reserve held rates steady in a range of 3.50% to 3.75%, though three policymakers dissented in favor of a hike as inflation remained above target. Energy and financials led the market, buoyed by a surge in oil prices amid U.S.–Iran tensions, while technology and industrials lagged.

The Morningstar Wide Moat Focus Index (the “Moat Index”) gained 3.96% in July, outperforming the S&P 500 as the semiconductor selloff hit the mega-cap technology names that the equal-weighted Index holds at far lower concentrations than the benchmark. The Index's tilt toward financials and health care, sectors that led the market during the month, provided a further tailwind. Both stock selection and sector allocation contributed to the relative gain, with selection the larger driver. Over the trailing three months, the Index gained 7.74%, ahead of the S&P 500's 4.19% as leadership shifted away from the narrow group of technology stocks that had led earlier in the year.

The Morningstar US Small-Mid Cap Moat Focus Index (the “SMID Moat Index”) rose 1.83% in July, outperforming the S&P MidCap 400’s 2.38% decline and the S&P SmallCap 600’s 1.90% decline in a month when smaller-cap benchmarks broadly fell. The Index drew its strongest contributions from health care and consumer holdings, with additional support from financials. Its quality focus and lighter technology exposure helped it hold up as chip-related names dragged on the small- and mid-cap market. Over the trailing three months, the SMID Moat Index gained 6.11%.

Rotation Away From Tech Lifts Moat Index in July

Source: Morningstar. Data as of 7/31/2026. Past performance is no guarantee of future results. Index performance is not representative of fund performance. It is not possible to invest directly in an index. Please see index definitions and other important disclosures at the end of this content. Fund performance current to the most recent month end is available by visiting vaneck.com or by calling 800.826.2333.

Moat Index Highlights: Financials and Health Care Offset a Semiconductor Selloff

July was a strong month for the Moat Index on a relative basis, as the market's largest technology names sold off and the Index's lower concentration in those stocks limited the damage. The Index's tilt toward financials and health care, two of the month's leading sectors, provided a tailwind. Both stock selection and sector allocation contributed to the relative gain, with selection the larger driver, though weakness among the Index's semiconductor holdings was a partial offset.

Financials holdings led the Index's contributors, as the sector benefited from a steepening yield curve and a wave of strong second-quarter earnings. LPL Financial Holdings Inc. (LPLA), a wealth-management platform serving independent advisors, advanced roughly 26% after reporting record quarterly results that topped expectations, announcing a new $2.5 billion share-repurchase authorization, and pointing to its strongest advisor-recruiting quarter in nearly two years. Morningstar assigns LPL Financial a wide moat, supported by switching costs that make it costly and disruptive for advisors to move their practices and by scale advantages in technology and service. Charles Schwab Corp. (SCHW), a brokerage and asset-management firm, also contributed, gaining approximately 14% amid healthy client asset growth and rising net interest revenue. Morningstar assigns Schwab a wide moat, reflecting the cost advantages and switching costs embedded in its vast client base and integrated platform.

Health care and some technology holdings also contributed meaningfully. Microsoft Corp. (MSFT), the software and cloud-computing giant, gained roughly 25% and stood out as one of the few large-cap technology names to advance during the month, helped by strong cloud results and continued momentum in its AI-related businesses. Morningstar assigns Microsoft a wide moat, underpinned by high switching costs across its software franchises and a network effect in its platform ecosystem. Among health care holdings, Veeva Systems Inc. (VEEV), a provider of cloud software for the life-sciences industry, rose approximately 15%, and Bristol-Myers Squibb Co. (BMY), a global pharmaceutical company, gained roughly 15%. Morningstar assigns Veeva a wide moat, reflecting the high switching costs and network effects of its industry-specific software, and Bristol-Myers a wide moat, supported by intangible assets tied to its patent-protected drug portfolio.

Companies detracting the most from Moat Index performance were concentrated in technology, and specifically among semiconductor holdings caught in the month's sharp selloff. After a powerful multi-month rally, chip-related names reversed as investors questioned stretched valuations and grew wary of signs that AI-related demand could be cooling. Applied Materials Inc. (AMAT), the largest supplier of wafer-fabrication equipment, was the largest detractor, declining roughly 30% amid the sector-wide rotation despite an intact demand outlook. Entegris Inc. (ENTG), which supplies purification solutions and specialty materials used in chip fabrication, fell approximately 34%. NXP Semiconductors N.V. (NXPI), a maker of automotive and industrial chips, and Amphenol Corp. (APH), a maker of connectors and sensors, also weighed on results, alongside Masco Corp. (MAS), a maker of home-improvement and building products.

Moat Index Top Contributors and Detractors - July 2026

Contributors

Detractors

Source: Morningstar. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

SMID Moat Index Highlights: Health Care and Consumer Names Drive Gains

The SMID Moat Index posted a solid gain in July even as small- and mid-cap benchmarks declined, with its strongest contributions coming from health care and consumer holdings. A mix of company-specific catalysts and the Index's lighter exposure to the semiconductor names that dragged on the broader small-cap market supported relative performance across several sectors.

Tenet Healthcare Corp. (THC), a hospital and ambulatory-care operator, was among the top contributors, advancing roughly 36% after reporting strong quarterly results and raising its full-year outlook on solid patient volumes and margin gains in its surgical-center business. Morningstar assigns Tenet a narrow moat, supported by cost advantages and the entrenched local-market positions of its ambulatory-surgery network. Lithia Motors Inc. (LAD), one of the largest U.S. auto retailers, also contributed strongly, gaining approximately 33% on better-than-expected earnings and continued progress in its financing and used-vehicle operations. Morningstar assigns Lithia a narrow moat, reflecting the scale and cost advantages it has built through acquisition-driven expansion.

IQVIA Holdings Inc. (IQV), a provider of clinical-research services and health care data and analytics, advanced roughly 22% after reporting solid bookings and reaffirming its growth outlook, easing investor concerns about biopharma research spending. Morningstar assigns IQVIA a narrow moat, supported by intangible assets in its proprietary health care data sets and switching costs across its research and analytics platforms. Lamb Weston Holdings Inc. (LW), a leading supplier of frozen potato products, gained approximately 22% as improving pricing and volume trends pointed to a recovery in its core business. Morningstar assigns Lamb Weston a narrow moat, reflecting cost advantages from its scale and processing efficiency.

Another notable contributor was Stifel Financial Corp. (SF), a diversified brokerage and investment bank, which gained roughly 19% on strong quarterly earnings and healthy capital-markets activity.

Companies detracting the most from the SMID Moat Index were a mix of health care, technology and industrial names. Ionis Pharmaceuticals Inc. (IONS), a developer of RNA-targeted therapies, was the largest detractor, falling roughly 35% after a disappointing update weighed on sentiment around its drug pipeline. Entegris Inc. (ENTG), a supplier of specialty materials used in chip fabrication, fell approximately 34% amid the broad semiconductor selloff. Watsco Inc. (WSO), a distributor of air-conditioning and heating equipment, declined roughly 25% on softer results, and Acuity Inc. (AYI), a lighting and building-management products company, and Masco Corp. (MAS), a maker of home-improvement and building products, also weighed on results as building-related names came under pressure.

SMID Moat Index Top Contributors and Detractors - July 2026

Contributors

Detractors

Source: Morningstar. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

Choose Your Moat Strategy

VanEck’s suite of moat investing strategies is powered by Morningstar’s equity research team, which seeks quality companies trading at attractive valuations. The below ETFs offer access to US moat companies:

VanEck Morningstar Wide Moat ETF (MOAT): companies with a wide moat rating, which means Morningstar believes the company is likely to sustain its competitive advantage for at least the next 20 years.

VanEck Morningstar SMID Moat ETF (SMOT): small and mid-cap moat companies.

VanEck Morningstar Wide Moat Value ETF (MVAL): wide moat companies within Morningstar’s value style category.

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