A look back at markets in July when greater clarity emerged on tariffs and strong earnings propelled equity markets to new all-time highs.
Stock markets around the world reached record highs in July, driven by strong earnings and progress in trade negotiations. While tariff risks remain elevated, the shift from threats to agreements lifted sentiment. Optimism was further supported by resilient corporate results for the quarter, though bond markets weakened as policymakers struck a cautious tone, leaving the timing and scale of future rate cuts uncertain.
UK
- The FTSE 100 index hit 9,000 for the first time, benefitting from sterling strength and relative trade stability given a deal with the US.
- UK inflation rose to 3.6%, the highest in 18 months, driven by energy, food, and travel, with some feed through from national insurance.
- UK GDP fell -0.1% m/m in May; labour market data pointed to cooling wage growth.
- Prime Minister Keir Starmer faced backlash after scaling back a major welfare reform by £5 billion to avoid internal Labour revolt.
- With the Autumn Budget due in October, Reeves faces increasing pressure as UK borrowing increased in June to £20.7 billion, more than forecast.
- The Purchasing Manager’ Index, measuring economic activity was contractionary for manufacturing and construction, although services grew.
Global
- The S&P 500 and Nasdaq hit multiple record highs, driven by strong corporate earnings, AI enthusiasm, and stable Fed policies.
- Nvidia became the first listed company to reach a valuation of $4 trillion (£3 trillion), the company’s shares have gained 22% in 2025.
- The US economy remained resilient, with the jobs market remaining strong in June and unemployment falling to 4.1%, defying expectations.
- US inflation rose to 2.7% and core inflation hit 2.9%, causing a split opinion amongst Fed Officials on the next interest rate cut.
- The eurozone hit the European Central Bank’s (ECB) 2% inflation target in the 12 months to June 2025.
- The EU narrowly avoided 30% tariffs by accepting a 15% tariff rate on most exports and agreeing to purchase large volumes of US energy.
- Japan agreed to lower tariffs to 15%, down from 25%, and pledged a $550 billion investment in US strategic sectors. The deal is yet to be finalised.
- Countries failing to strike deals – notably Canada and Brazil – were hit with steep tariffs ranging from 25% to 50%.
Fixed Interest
- The Federal Reserve decided not to change to interest rates, leading to higher bond yields across the curve. The 10y yield closed at 4.38%.
- The political retreat by Labour on welfare triggered a fall in UK government bonds. The 10y yield ended the month at 4.75%.
- High yield outperformed investment grade, helped by earnings strength and default rates staying low.
- Markets continue to price meaningful policy easing over the next 12 months, but timing remains uncertain.
Other
- Sterling firmed against the euro but weakened slightly versus the US dollar by month-end to 1 GBP = 1.35 USD.
- The US dollar made a recovery in July having trended down for the first six months of the year against a basket of global currencies.
- Bridgewater Associate’s founder Ray Dalio recommended that investors allocate 15% of their portfolios to BTC or gold, an increase from 1% to 2% in BTC in 2022.
- In the crypto market, ETH gained prominence as a treasury asset, with net inflows into spot ETFs signalling a shift in investor preference.
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This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
