Monthly market summary – Review of July 2024

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Our market summary

Global equities markets were broadly flat in July, but it was a month of two halves, with the first half seeing a succession of record highs. Fixed income also rallied as speculation mounted that the US Federal Reserve (the Fed) will cut interest rates in September, particularly after positive US inflation data was released. However, equities began to turn halfway through the month, and growth stocks were particularly weak, falling by 2.5%, as investors grew more sceptical about the potential for future returns from investment in artificial intelligence (AI). At the same time, investors became more optimistic about prospects for interest-rate sensitive small-cap companies.

US

US earnings season continued with four of the magnificent seven reporting results. Investors appeared underwhelmed by the releases and the tech sector came under pressure before a rebound into month end. Growing expectations for interest rate cuts and Trump moving ahead in the polls saw smaller companies perform better. In US dollar terms, US equities were up 1.3%, but the currency strength of the pound resulted in a loss of 0.3% for sterling investors.

Europe

European equities lagged their US and UK counterparts in July and returned 0.6% in euro terms. However, the strength of the pound again saw broadly flat returns for sterling investors. Disappointing economic data that indicated a slight calming of eurozone economic growth over the summer and uncertainties around the French election likely contributed to the weakness.

UK

UK equities were up 3.2% over the month. Robust service sector (e.g. hotels, restaurants, transport) data in July and stronger than expected economic growth for the second quarter pointed to improving economic momentum. The landslide Labour victory in the election did not materially impact UK markets as a Labour victory had already been assumed. However, with political instability in Europe and the US, investors welcomed the clear result.

Emerging markets

Emerging markets fell by 1.2% in July as they were dragged down by Chinese equities that saw losses of 2.8% over the month. The continued challenges in the real estate sector and the spillover effects on the broader economy contributed to these losses. In July, the Chinese authorities implemented various measures to provide liquidity support to the financial system with the aim to stimulate lending and support economic growth.

Fixed income

Heightened investor expectations for further central bank interest rate cuts in 2024 and 2025 saw fixed income markets deliver positive returns over the month with sterling corporate bonds and global bonds both returning 1.9%. UK gilts and US Treasuries were also both up over the quarter with returns of 1.9% and 2.2%, respectively.

Source: Quilter Investors as at 31 July 2024. Total return, percentage growth in pounds sterling except where shown, rounded to one decimal place. The performance shown for global equities is represented by the MSCI AC World Index; US equities by the MSCI USA Index; European equities by the MSCI Europe ex UK Index; UK equities by the MSCI United Kingdom All Cap Index; emerging markets by the MSCI Emerging Markets Index; China equities by the MSCI China Index; US Treasuries by the ICE BofA US Treasury (GBP Hedged) Index; UK gilts by the ICE BofA UK Gilt Index; global bonds by the Bloomberg Global Aggregate (GBP Hedged) Index; and sterling corporate bonds by the ICE BofA Sterling Corporate Index.

Important Information

Past performance is not a guide to future performance and may not be repeated. Investment involves risk. The value of investments may go down as well as up and investors may not get back the amount originally invested.

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Marcus Brookes

Chief Investment Officer & Managing Director

Marcus is chief investment officer and managing director of Quilter Investors. Marcus joined Quilter Investors in December 2021 from Schroders Personal Wealth, where he also held the role of chief investment officer. He has considerable investment management experience with a deep understanding of the multi-asset sector having managed multi-manager fund ranges for more than 20 years.

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