Market Update: a month of positive momentum amid global developments
As we stepped into August, July proved to be a busy and up-beat month for global markets. While news headlines remained full of trade developments and political wrangling, investors largely looked on the bright side - and markets responded accordingly.
A Strong Month for Equities
Global stock markets delivered solid returns in July, especially for investors measuring gains in Sterling. Overall, global equities rose by around 5%, led by strong performances in the US (up 6%) and Emerging Markets (up 5%). Much of the boost in Emerging Markets came from China, which saw shares climb more than 8%, thanks to improving economic data and business activity. Closer to home, the UK market also rose a healthy 4%.
Europe, excluding the UK, lagged behind with a modest increase of less than 1%, partly due to lingering concerns around global trade.
Meanwhile, commodity prices made overall gains, with oil prices jumping 10%. Gold dipped slightly which is a rare occurrence as it is often seen as a safe haven.
Across stock markets, different styles of investing performed differently. For example:
- In the UK, value-focused shares outperformed growth-focused ones.
- In the US, the opposite was true - growth stocks led the way.
- Large companies generally outperformed smaller ones in most regions, though small-cap shares were a key driver in Europe and Japan.
Fixed Income: Mixed Results
Bond markets (or fixed income) were more mixed:
- High-yield bonds and emerging market debt performed well.
- However, government bonds lost ground.
- On the currency front, the pound strengthened by about 4% against the US dollar, slightly reducing overseas investment returns for Sterling-based investors.
Key Global Developments
Several trade-related announcements shaped market sentiment:
- New tariffs were agreed with countries such as Vietnam, Japan, and the EU. While these tariffs are higher than earlier in the year, they were still viewed positively compared to earlier, more aggressive proposals.
- However, concerns remain, especially in Europe, where export sectors like pharmaceuticals could still face pressure.
Interest Rates and Inflation
Central banks in the US, UK, Europe, and Japan all kept interest rates unchanged in July. Despite some political pressure (notably from the US), no cuts were made. However, markets expect rate cuts later in the year in the US, UK, and Europe as economic growth slows.
Inflation showed a mixed picture:
- In the US, inflation was slightly below expectations.
- Europe held steady at the 2% target.
- In the UK, core inflation (excluding food and energy) rose to 3.7%, pushed up by transport, clothing, and leisure costs.
Spotlight on Emerging Markets and AI
Emerging markets had a strong month, with particular momentum in China, where economic growth exceeded targets — a positive sign that stimulus efforts may be working.
Taiwanese markets also benefited from the AI boom, as strong earnings from key tech firms boosted investor confidence.
Corporate Earnings: The US Leads the Way
Second-quarter earnings in the US were better than expected. Roughly 80% of companies had reported by the end of July, and many surprised to the upside, especially on revenue growth.
Of note, the "Magnificent Seven" (Microsoft, Nvidia, Tesla, Amazon, Apple, Alphabet, and Meta) delivered standout earnings growth of 17%, far ahead of forecasts. Encouragingly, other sectors, including energy and materials, also showed signs of recovery.
Challenges in Europe and Japan
European stock markets were held back by ongoing trade concerns, despite otherwise positive economic data in manufacturing and services, and inflation sitting at target levels.
Japan, meanwhile, faced a political setback after the ruling party lost its upper house majority. This has raised questions about the government’s ability to implement new economic reforms, which in turn weighed on investor sentiment.
Looking Ahead
While markets remain sensitive to global headlines, particularly around trade and interest rates, July’s results show that investors are still willing to find optimism in a complex environment. As always, our focus remains on long-term planning, smart diversification, and keeping a steady hand amid short-term noise.
As ever, this article is intended to inform you of market movements and factors effecting the portfolio. We have already factored this in to our long term assumptions in your financial plans, however should you have any questions, please contact your adviser.
About
Aled Phillips
: Aled is a Fellow of the PFS, a Chartered Financial Planner, and a Chartered Fellow of the CISI.
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The contents of this article do not constitute financial advice in any way; if you have any concerns about your finances you should talk to your financial adviser. The value of your investments can go down as well as up.
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