July Market Update: Gains Continue, but Divergences Appear
Financial markets entered summer on firm footing, with June delivering generally positive returns for investors, despite notable geopolitical and economic crosscurrents. Equities advanced across most regions, buoyed by easing inflation and a pause in interest rate rises. However, geopolitical tensions and mixed economic indicators kept sentiment finely balanced.
Global Equities
US Stocks: US equity markets found renewed momentum in June. The S&P 500 rose around +5%, while the tech-heavy Nasdaq gained over +6.5%, driven by sustained enthusiasm for artificial intelligence and strong performance from major technology companies.
UK Market: In the UK, the FTSE 100 was broadly unchanged (+0.05%), while smaller UK stocks posted modest gains of around +0.5%. Strength in mining and defence sectors helped counterbalance concerns over muted consumer spending and lingering economic uncertainty.
Europe & Asia: Continental European indices paused after earlier robust gains, ending June close to flat. By contrast, Asia outperformed: Japan’s Nikkei advanced +6.6%, and China’s Shanghai Composite rose nearly +3%, supported by improving trade sentiment and a softer US dollar.
Year-to-date, UK and European equities remain ahead of US markets overall, marking a notable shift from trends of recent years.
Rates, Inflation & Bonds: Central Banks Step Back
A significant driver of market confidence in June was the decision by major central banks to hold rates steady:
The US Federal Reserve maintained its policy rate, balancing political pressures against persistent, though moderating, inflation data.
The Bank of England kept rates unchanged at 4.25%, while the European Central Bank implemented a modest cut as eurozone inflation eased.
UK annual inflation has moderated to 3.4%, while US inflation stands near 2.4% — developments welcomed by both consumers and markets. Bond yields remained stable or edged lower, contributing to modest positive returns in fixed income markets, with gains of approximately +1% over the month.
Geopolitics & Trade: Risks and Opportunities
Geopolitical tensions were a notable factor during June. Mid-month, hostilities between Iran and Israel escalated, prompting a brief surge in oil prices and market volatility amid concerns over potential disruption to global energy flows through the Strait of Hormuz. A ceasefire helped stabilise markets, though geopolitical risk remains a key watchpoint.
On trade, there were signs of tentative progress. The US and China agreed to a 90-day pause in new tariffs, with prospects for further trade agreements emerging. Meanwhile, the US dollar continued its gradual decline, down roughly 8% against the British pound year-to-date, enhancing the appeal of overseas investments for global investors.
Property: Market Still Under Pressure
The property sector remained subdued through June. UK house prices declined by around 0.4% between April and May, as higher interest rates and cautious sentiment continued to weigh on activity. Property equities also underperformed relative to broader equity indices during the month.
The Takeaway:
June delivered solid gains for investors, underpinned by hopes that interest rates have peaked and that global trade tensions might ease. Nonetheless, geopolitical risks and uneven economic signals suggest a degree of caution remains warranted. Diversification across regions and asset classes remains a prudent strategy in navigating an uncertain global landscape.
Disclaimer: This commentary is for general information purposes only and does not constitute investment advice. It is intended to provide you with a general overview of the economic and investment landscape. It is not an offer to purchase or sell any particular asset and it does not contain all of the information which an investor may require in order to make an investment decision. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
Past performance is not a reliable indicator of future results. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances. Your capital is at risk and the value of investments, as well as the income from them, can go down as well as up and you may not recover the amount of your original investment.