Expect the unexpected

July turned out to be another good month for portfolio investors as markets rose across the board, leaving only commodities and property investors in the red for the year. For more details on the month’s returns picture, please refer to our July review in this week’s edition.

That positivity feels somewhat remarkable, given that not much changed in the underlying economic fundamentals and that companies (in aggregate) reported lower profits compared both to last quarter and also a year ago. Nevertheless, general investor sentiment improved as inflation – the biggest headwind of the last year – continued to decline. Meanwhile, market analysts cheered on the widespread ‘earnings beats’ from quarterly corporate earnings reports.

July review: optimism driven markets

While the British weather was dreary, July was all sunshine in capital markets. Global equities returned 2.4% in sterling terms and practically all major stock markets finished in the black. The recent bright spot has helped year-to-date returns too: the top equity indices we track are now all up from the start of 2023 in sterling terms, including previous laggards like emerging markets (EMs). Underlying this optimism has been the consistent slide in global inflation. Markets feel price pressures are much more manageable and, as such, expect central bankers can loosen their tight grips on financial conditions.

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