Senior Investment Editor
Summary: July's market performance reveals positive equity performance despite rate hikes and steep inflation. The results come on the back of a better-than-expected earnings season (so far) as well as positive European growth figures.
Global equities climbed more than 7% in July. The positive performance may seem surprising, seeing as the global economy is still dominated by uncertainty, inflation and supply chain issues. But other financial events such as the Q2 earnings season and European growth figures during the month have been more positive, pushing equities upwards. The FOMC meeting late in July, where the American central bank, the Federal Reserve, discusses (and adjusts) interest rates, also seemed to be viewed as positive by the markets.
The US was the strongest performing region: its equity index climbed by 9%. Europe followed with 7.5% whereas Asia’s performance was slightly positive. Emerging Markets fell 0.7% for the month.
The Dollar Index Spot strengthened more than a full percentage point over the course of July. The greenback shot up early in the month but fell pretty sharply after the surge mid-month, following the FOMC meeting and in the wake of the negative first estimate for Q2 US GDP growth.
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.
