Senior Investment Editor
Summary: July is for many a time to kick back, enjoy life with friends and family and push worries aside. That seems to be the chosen path for financial markets too. Stock performance across the board was positive for the month, seemingly taking a positive stance towards the potential of continued interest rate hikes from central banks.
Global equities climbed 3.3% in July and thus posted positive returns for the second month in a row. The positive performance is broadly based as all regions ended the summer month in green.
US 3.1%
The US stock market, here visualized by the S&P 500 index, increased more than 3%. The performance comes on the back of a US stock market where lower inflation and sturdy economic growth creates a good environment for equities, even though there’s still a lot of focus on what the Fed’s approach will be to interest rates. Especially after an unexpectedly hot US GDP figure.
Europe 1.9%
Europe comes in as the lowest performer, albeit still returning 1.9%. This indicates a holding position for the region, due to lower inflation and slower business activity, and a European Central Bank that turns to data to decide whether to hike interest rates further.
Asia 4.6%, Emerging Markets 5.8%
Asia and Emerging Markets returned more than four and five percent respectively. While there’s a variety of reasons for these moves, two highlights are a lower dollar, which is clear from the infographic further down on this page, and a combination of strong earnings and a hope for stimulus in China and Hong Kong.
Energy leads sectors in terms of July performance, increasing with 6.4%. One factor in this is the oil price rebounding (as clear further down on this page), which is caused by supply constraints as well as an improving economic outlook. Communication Services climbed a bit more than 6% as the second-best performing sector. This counts Facebook parent, Meta, among its most prominent companies, which posted strong earnings last weeks.
Global bond performance ended close to a push with sovereign bonds falling slightly and corporate bonds increasing 0.64%.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.