The S&P 500 index declined 1.5% in July, putting a smile on the face of many a bear who have been wrong for so long. Still, the decline is too small to even qualify as a pullback. Global worries ranging from war in the Ukraine, Syria and Iraq to a possible recession in the European Union dominated headlines last month and weighed on the indexes. Even a solid jobs report in the U.S. could not push the markets higher in July. This resulted in a “risk off” month that impacted the model portfolios, but to different degrees. Still, despite all the negative headlines and the rotation out of small cap stocks, both the Shadow Stock Portfolio and the Model Fund Portfolio beat their benchmarks in July. The Model Fund Portfolio declined only slightly for the month, while the Model Shadow Stock Portfolio, which concentrates on small-cap stocks, dropped significantly. The Model Shadow Stock Portfolio can experience greater short-term volatilities because the portfolio is made up of stocks trading in the “shadows” of Wall Street and more likely to be mispriced. While there may be periodic negative periods in such a portfolio, over time the portfolio tends to significantly outperform the S&P 500. Short-term volatility is the price to be paid for higher long-term expected returns.