Risk finally received its comeuppance in July. Last month witnessed the broadest round of negative returns since January among the major asset classes. Stocks in developed markets (including the US) took it on the chin, although the modest gain in emerging-markets equities in July delivered a notable exception. Indeed, the MSCI EM Index posted a decent 1.9% rise last month while US stocks slipped 2.0% (Russell 3000)—the first negative monthly total return for American shares overall since January. Foreign stocks in developed markets (MSCI EAFE) had a setback as well, sliding 2.0% in July.

Not surprisingly, the retreat in markets weighed on the Global Market Index (GMI), an unmanaged benchmark that holds all the major asset classes in market-value weights. GMI slumped 1.4% last month- its first monthly loss since January. So far in 2014, however, GMI is still in the black with a 4.2% year-to-date total return through last month.

The return of red ink shouldn’t come as a shock. As discussed many times on these pages this year (see here, for instance), a long run of positive momentum left the impression that risky asset prices could defy gravity. But the crowd has been forced once again to sober up. The question now is whether this is a pause that refreshes or merely the opening act to a longer drama aka The Return of Mean Reversion.