July brought on a mixed bag of steady economic growth, cautious political moves, and ongoing global tensions. Markets stayed pretty upbeat overall, but underneath it all, inflation, trade disputes, and central bank decisions continued to cause uncertainty and unrest.

Trade and politics

A new EU-US trade deal caused a stir in Europe, with France and Germany unhappy about some of the details. While US officials claimed that pharmaceuticals were excluded from the agreement, the written deal suggests otherwise - making for some less-than-happy EU negotiators. New Zealand's tariffs situation with the US remains unclear, and as often is the case, it may be a little while before the dust settles on our trade outlook. While the US-EU negotiations were ongoing, President Donald Trump suddenly announced a 25% tariff on goods from India, plus extra penalties relating to the fact that India purchases military equipment from Russia. Washington says doing so enables the war in Ukraine, thus justifying their actions.


Inflation and interest rates

On the economic front, US inflation (excluding food and energy) came in at 2.9%. Although seemingly healthy, this is still above the Federal Reserve’s 2% target which suggests US interest rates (the tool used to control inflation) may stay higher for longer. The current high rates are also pushing the US government’s cost to service their debt to record levels. In a move that suggests Washington will try to influence interest rates more heavily, there were reports that President Trump plans to replace Fed Chair Jerome Powell - something that temporarily spooked US markets.

Share markets: Technology leads the way

Tech and AI companies continued to outshine the rest, especially chipmakers and cloud computing firms which are both riding the artificial intelligence boom. In line with this trend, the “Magnificent 7” big tech companies all saw strong performance in July, with Nvidia taking the spot of standout performer. The US share market finished the month close to record highs, with the S&P 500 index up 2.2%. Global shares (represented by the MSCI World Index) were up an even more impressive 4% in July, while NZ and Australian shares were up 1.7% and 2.4% respectively. 


Bonds see some boost

Like the share market, bond markets had a fiarly good month in relative terms. The global and NZ bond indexes returned 0.9% and 0.75% respectively, which provided a nice boost for more conservative funds and investors.

Global growth outlook on the improve

The International Monetary Fund (IMF) lifted its forecast for global growth in 2025 to 3.0%, pointing to stronger activity and improved overall financial conditions being seen ahead of the impending new tariffs.

So, what to make of all this (cautiously) good news? Whatever the headlines - good, bad, or somewhere in between - our approach stays the same: a pragmatic, long-term view of investing. If you can, tune out the short-term noise and focus on your own goals. Let your investment timeframe, risk appetite, and values guide your decisions, rather than reacting to what markets are doing right now.

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