Strong July for equities relies on soft landing Strong July for equities relies on soft landing Strong July for equities relies on soft landing

Strong July for equities relies on soft landing

Peter Garnry

Head of Saxo Strats

Summary:  US equities rose 9.3% in July as the market is increasingly betting on a soft landing in the economy as inflationary pressures are easing and financial conditions have eased considerably from a much tighter level in late June. We also take a look at the Q2 earnings season which has turned out to be a positive with earnings in the MSCI World Index bouncing back almost 13% from Q1. This week we will focus on earnings from Caterpillar, Alibaba, BMW and Adidas.

One of the best months for equities in 50 years

Last month turned out to be an incredible strong month for global financial assets with US equities rallying 9.3% as FOMC’s rate decisions and Powell’s comments during the press conference avoiding to put any forward guidance out saying the Fed was moving towards becoming data dependent in its policy trajectory. The market has so far taking that as a clue that the Fed will soon slow down on its tightening and the market is still pricing in rate cuts next year. It seems the market is betting that the economy will in fact make a soft landing as inflationary pressures are easing. This is a big bet given the uncertainty and many of the drivers behind higher inflation are still in place. The full effect on the consumer from last year’s inflation has still not played out so investors should still remain cautious.

The MSCI USA Net Total Return Index has its 16th best month since December 1969 and the main question is now whether momentum will continue or mean reversion effects will set in pulling equity indices lower. Mean reversion effects dominate in the short-term, so statistically we would expect equities roll over in the near term. The rally in July has also pushed equity valuations to 0.4 standard deviations on the MSCI World Index which is a bit excessive given the 3-month average Chicago Fed National Activity Index turned negative in June suggesting a significant slowdown this year.

Across our theme baskets crypto companies had a stellar month as cryptocurrencies are the purest expression of risk taking. Renewable energy and energy storage stock also did well amid the ongoing energy crisis in Europe increasing the need for new and fast solutions to Europe’s energy needs as the continent is pulling away from Russia’s supplies. The worst performing part of the market in July was Chinese technology and consumer stocks down 9.6% as the clampdown by Beijing continues to weigh down on growth and the financing access in US public markets is getting narrower as many Chinese companies could be delisted in the future.

Q2 earnings are bouncing back

Companies were hurting in Q1 from rising input costs lowering operating margins and the outlook was deteriorating due galloping commodity prices and the war in Ukraine. Aggressive cost cutting and raising prices have pulled companies back from the abyss with Q2 earnings up 12.9% q/q driven by an accelerating in revenue, driven by higher prices which is a function of inflation, and operating margins expanding across the board. When you look closer at revenue growth in Q2 it is almost flat for Nasdaq 100 companies while it is sharply higher for the MSCI World driven by substantial increase in tangible revenue compared to intangible revenue.

This week there are plenty of earnings to watch and we have listed the most important ones below. We are curious to see the outlook of German companies this week such as BMW, Adidas, Bayer, and Vonovia given the energy crisis in Europe. Tomorrow, Caterpillar is the most important earnings release as it is the ultimate barometer on global construction and thus the macroeconomic backdrop. Booking on Wednesday is also worth watching providing some forward-looking statements on the consumer and on Thursday Alibaba is the big one with China still being weak and the e-commerce giant added over the weekend on SEC’s list of foreign stocks that could be delisted.

Monday: Xinyi Solar, HSBC, Heineken, Activision Blizzard, Devon Energy, Mosaic

Tuesday: Kweichow Moutai, Generali, Mitsubishi UFJ, BP, Koninklijke DSM, AMD, Caterpillar, PayPal, Starbucks, Airbnb, Occidental Petroleum, Marriott International, Uber Technologies, Ferrari, Electronic Arts

Wednesday: Nutrien, Maersk, AXA, Societe Generale, Siemens Healthineers, BMW, Infineon Technologies, Vonovia, Nintendo, JDE Peet’s, CVS Health, Booking, Moderna, Regeneron Pharmaceuticals, Fortinet, Albemarle, eBay, MercadoLibre

Thursday: Novo Nordisk, Credit Agricole, Merck, Bayer, Adidas, Beiersdorf, Toyota, SoftBank, Glencore, ING Groep, Eli Lilly, Alibaba, Amgen, ConocoPhillips, EOG Resources, Air Products and Chemicals, Block, DoorDash, Twilio

Friday: Canadian Natural Resources, Suncor Energy, Allianz, Deutsche Post, Naturgy Energy Group


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.