Market Update: July 2022

July was a good month for the financial markets. Stocks and bonds showed a positive comeback after a messy first 6 months of 2022.

That optimism is attributable to the good quarterly earnings of tech giants (such as Apple and Amazon). And the expectation that the Federal Reserve (Fed) of the United States will ensure fewer sudden interest rate hikes. 

Nevertheless, there are signs of possible impediments to the current growth. Particularly due to delays in the production chains in Asia. A bright spot? Despite the persistent high inflation, an inflation peak seems to be forming. Which could mean the worst is over.

Due to the high inflation and noise about the (possible) recession, it is extra important in the coming period to reason with solid macroeconomic data - instead of speculation - what the coming months have in store for us. 

Best fund performance this month: Northern Trust World Custom ESG Equity Index Fund +10.8%

Good quarterly results and a less tense Fed prove a blessing for the market.

Stocks in developed countries had the best month of the year. Good quarterly figures from tech companies impressed. After the busiest week in the ‘reporting season’, investors are relieved that the results are better than feared. The Federal Reserve raised the interest rate to the expected 0.75%. And thanks to their optimistic tone about impending economic growth - and less persistent stance - stocks gained extra breathing room.

The S&P 500 recovered all losses from June and ended up ~9%. Stocks in Europe also had a good month and the Stoxx 600 index showed an increase of ~8% during the month. Stocks in emerging markets did slightly worse (2.3%). China took a knock. Due to a resurgence of, among other things, the coronavirus, the outlook clouded over, causing production activities to stall. This was fortunately compensated by good results in India, Taiwan, and Korea.

July was also a good month for returns on government bonds with a maturity of 10 years. The US and European 10-year interest rates cooled somewhat (US 0.33% and DE 0.55%) - to the level of April 2022. High-yield bonds and corporate bonds performed positively (7.4% and 4.9% respectively). With a reduced spread due to a more positive view of the (possible) recession.

The cost for the money market return in Europe has increased after the European Central Bank (ECB) announced an interest rate of 0.5%. The month closed at (-0.1%), but is expected to develop positively in the coming months.

What does August have in store for us? 

- Every peaceful solution to the war in Ukraine will be crucial to reducing market volatility.

- The Fed and ECB will meet in September. Until then, macroeconomic data will be crucial to determine what the market does in August. 

What does all this mean for my plans?

Do not let the turbulent market disrupt your long-term goals. Vive's investment strategies take the downward market into account. Ultimately, well-diversified portfolios are the key to long-term success. Consistent periodic investing during periods like this is crucial to profiting from falling markets.

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