By Banu Simmons The S&P 500 Index (SPX) closed the month of July in negative territory with a 1.5% decline, compared to the end of the previous month. In the last week of July, the S&P 500 fell 2.7 percent to 1,925, in its worst weekly performance in two years. In July, there was intensifying geopolitical risks in the Middle East and Ukraine, a bond default in Argentina and increased volatility in the markets. On the economic front, the Federal Reserve, despite remaining dovish about the state of the economy, announced that it would scale back its purchases of mortgage and Treasury bonds to $25 billion a month and delivered a modestly positive assessment of the economy. The US economy expanded by 4% in the second quarter of 2014, which was above the expectations of most analysts. The strong GDP growth, coupled with more upbeat inflation expectations, increased the speculation that Fed may raise interest rates sooner than expected. The strong growth in the second quarter was no surprise. In my July monthly report, I predicted US economic growth would advance by 4% in the second quarter. Contrary to the market consensus that the Fed would not raise rates earlier than the second quarter of 2015, I had expressed the view the rates may rise sooner, perhaps as early as the first quarter of 2015. The July jobs report showed the economy added 209,000 jobs and there was no indication of wage pressures. The latest reading on inflation (1.6 percent) in June suggests there is no urgency by the Fed for a rate hike in the current year. In my opinion, the market's expectation of a rate increase will continue to put a damper on the housing-related stocks. The US housing sector has been already showing the early signs of cooling. I believe that in the coming months, the real estate sector can underperform the market further.