July was a good month for the financial markets. Stocks and bonds showed a positive comeback after a sloppy 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 silver lining? Despite the persistent high inflation, an inflation peak seems to be forming. Which could mean that 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 - about what the coming months have in store for us.
Best fund performance this month: Northern Trust World Custom ESG Equity Index Fund +10.8%
Stocks in developed countries had the best month of the year. Good quarterly figures from tech companies impressed. After the busiest week of the ‘earnings 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 the upcoming economic growth - and less stubborn stance - stocks gained extra breathing room.
The S&P 500 recovered all losses in June and ended up by ~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 less well (2.3%). China took a hit. Due to a resurgence of, among other things, the coronavirus, the outlook was clouded, which caused 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 10-year government bonds. 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 reduced spread due to a more positive view of the (possible) recession.
The costs for the money market return in Europe went up 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.
- Every peaceful solution to the war in Ukraine will be crucial to reduce market volatility.
- The Fed and ECB will meet in September. Until then, macroeconomic data will be crucial in determining what the market does in August.
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 contributions in periods such as this are crucial to profit from falling markets.