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 can be attributed to the good quarterly revenues of tech giants (such as Apple and Amazon). And the expectation that the Federal Reserve (Fed) of the United States will cause fewer sudden interest rate increases. 

Nevertheless, there are signs of potential impediments to the current growth, particularly due to delays in production chains in Asia. A silver lining? Despite the persistent inflation, an inflation peak seems to be forming, which may mean that the worst is behind us.

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

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

Good quarterly results and a less tense Fed appear to be a boon for the market.

Stocks in developed countries had the best month of the year. Good quarterly figures from tech companies made an impression. After the busiest week in the 'earnings season', investors are relieved that the results are better than feared. The Federal Reserve raised interest rates to the expected 0.75%. And thanks to their optimistic tone about the upcoming economic growth - and less stubborn attitude - shares got extra breathing space.

The S&P 500 recovered from all losses in 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 hit. Due to a resurgence of, among other things, the coronavirus, the outlook became clouded, causing production activities to stall. Fortunately, this was compensated for with good results in India, Taiwan and Korea.

July was also a good month for yields on 10-year government bonds. The US and European 10-year interest rates cooled down 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 have 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? 

- 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, macroeconomic data is crucial to determining what the market will do in August. 

What does all this mean for my plans?

Don't let the turbulent market disrupt your long-term goals. Vive's investment strategies take the declining market into account. Ultimately, well-diversified portfolios are the key to long-term success. Consistent periodic investing in periods like these is crucial to take advantage of falling markets.