Historic IBM Slide Fails to Derail iShares MSCI World ETF as Cooler Inflation and Bank Profits Step In

Cooling U.S. inflation and record bank profits offset IBM's worst day since 1987, lifting the iShares MSCI World ETF and major indexes.

The iShares MSCI World ETF (URTH) closed at $203.69 on July 14, up 0.4% on the day, even as one of its heavyweight holdings suffered its worst session since 1987. IBM plunged as much as 25% after customers redirected budgets toward servers and storage, dragging European tech names like SAP and Capgemini in its wake. The resilience of the broader index, which tracks developed-market equities exclusively, underscored the diversification that earned the fund a gold rating from Morningstar just weeks earlier.

Cooling U.S. inflation provided the tailwind that kept the market in positive territory. The consumer price index rose just 3.5% year over year in June, down sharply from 4.2% in May, while on a monthly basis prices fell 0.4%—the steepest drop since April 2020 and well below the 0.1% decline analysts had forecast. Core inflation stagnated at 0.0% versus an expected 0.2% increase. The data sparked a swift repricing of Federal Reserve bets: the probability of a rate hike at the July 31 meeting slid from 35% to roughly 10%, while the odds of a pause climbed above 80%. Fed Chair Warsh reaffirmed the central bank’s 2% target and insisted there is “no tolerance for elevated inflation,” but the dollar index still slipped 0.33% to 100.94. The yield on the 10-year Treasury fell about two basis points to 4.587%, and gold rose 1.28% to $4,051.29 an ounce.

The earnings season delivered a second counterweight to IBM’s rout. JPMorgan posted a record quarterly profit, with earnings per share of $6.14 topping the $5.80 consensus on revenue of $57.3 billion. Bank of America beat with $1.21 versus $1.12 expected, and Citigroup delivered $3.15 against a $2.71 forecast. Goldman Sachs stood out most sharply, earning $20.98 per share compared with an analyst estimate of $14.10; the stock jumped 9% on the day. The bank rally helped push the S&P 500 up 0.44% to 7,549.54, the Dow Jones edged 0.1% higher to 52,567.20, and the Nasdaq surged 1% to 26,134.57. In Europe, the Stoxx 600 gained 0.2%, led by a 2.4% advance in the basic resources sector.

Geopolitical tensions in the Middle East added another layer of complexity, though they failed to knock the equity rally off course. Fresh strikes and the reimposition of a U.S. naval blockade against Iran sent oil prices higher: WTI crude rose 1.5% to $79.34 a barrel, and Brent climbed 1.7% to $84.73, later reaching $85.41. Iran reported attacks on U.S. positions in Jordan and claimed to have closed the Strait of Hormuz, while two oil tankers from the United Arab Emirates were reportedly hit by Iranian cruise missiles. Despite the spike in energy costs, stock markets held their ground, buoyed by the expectation that central banks may soften their stance as inflation recedes.

URTH itself is trading only 3.96% below its 52-week high of $212.08 set in early June. The fund has gained 9.21% year to date and 21.16% over the trailing 12 months. Its relative strength index stands at 54.7, signaling neutral-to-positive momentum, while annualized 30-day volatility sits at a modest 15.18% given the geopolitical backdrop. The 50-day moving average of $201.78 and the 200-day average of $189.75 both lie below the current price, confirming a technical uptrend.

Morningstar awarded URTH its gold rating at the end of June, citing the fund’s disciplined exposure to developed-market equities. Yet the very construction that has shielded it from emerging-market woes—India’s BSE Sensex has tumbled 8.9% this year, while China’s Shanghai Composite and Hong Kong’s Hang Seng have also slid—exposes it to concentration in U.S. technology stocks. The July selloff in IBM offered a reminder that a single-name blowup can rattle even a broad index, though on this occasion the damage was contained. The upcoming quarterly rebalance of the MSCI index will draw attention to how the fund’s weighting in tech and the absence of emerging markets could affect its risk profile.

Competition also looms in the form of the State Street SPDR Portfolio MSCI Global Stock Market ETF (SPGM), which covers developing and small-cap stocks at a much lower expense ratio of 0.09% versus URTH’s 0.24%. SPGM also offers a dividend yield that is 40 basis points higher. For now, however, URTH’s strong liquidity and developed-market focus have kept it near its highs, helped by a benign inflation print and a flush of bank earnings that offset everything from a historic IBM crash to a Middle Eastern oil shock.