Market update: July 2022

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

That optimism can be attributed to good quarterly earnings from tech giants (such as Apple and Amazon). And the expectation that the United States Federal Reserve (Fed) will provide less sudden interest rate hikes. 

Nevertheless, there are signs of possible impediments to current growth. Particularly due to delays in production chains in Asia. A bright spot? Despite the hefty persistence of inflation, an inflation spike appears to be forming. Which may mean the worst is behind us.

Because of high inflation and noise about the (possible) recession, it is extra important in the coming period to reason -instead of speculation- with solid macro economic data 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 stressed Fed are proving to be a boon for the market.

Stocks in developed countries had the best month of the year. Good quarterly results from tech companies impressed. After the busiest week in the "figure season," investors were relieved that the results were better than feared. The Federal Reserve raised interest rates to the expected 0.75%. And thanks to their optimistic tone about upcoming economic growth -and less stubborn attitudes- stocks got extra breathing room.

The S&P 500 recovered from all the losses in June and finished up ~9%. Equities in Europe also had a good month and the Stoxx 600 index posted an ~8% gain during the month. Emerging market equities fared slightly less (2.3%). China was hit hard. A resurgence of the coronavirus, among others, clouded the outlook, causing production activities to stall. Fortunately, this was compensated by good results in India, Taiwan and Korea.

July was also a good month for 10-year government bond yields. US and European 10-year rates cooled a bit (US 0.33% and DE 0.55%) - to the April 2022 level. 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 cost of money market yields in Europe edged up after the European Central Bank (ECB) declared a 0.5% interest rate. The month ended with (-0.1%), but is expected to turn positive in the coming months.

What does August have in store for us? 

- Any peaceful resolution of the war in Ukraine will be crucial to reducing volatility in the markets.

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

What does all this mean for my plans?

Don't let the troubled market disrupt your long-term goals. Vive's investment strategies take the down market into account. Ultimately, well-diversified portfolios are the key to success in the long run. Consistent periodic investing during periods such as this is crucial to profiting from down markets.