Market Pulse - July 2023

Key themes

In July, inflation surprised to the downside for the first time since the beginning of the year; this, together with robust economic activity data releases, increased the probability of a ‘soft landing’ for the global economy – an economic slowdown without a recession.
Global stock markets made further gains, with US stocks benefiting from a favourable economic backdrop.
Bond markets were mixed, as changes to yield curve control management by the Bank of Japan (BoJ) contributed to higher government bond yields, whereas corporate bonds rose on an improving growth outlook.

Markets snapshot

Global equities, as represented by the MSCI All Country World Index (ACWI) rose by 3.2% (2.6% in euros) over the month as stocks were supported by broadly resilient economic data and expectations of 2024 rate cuts amid falling inflation.
The MSCI USA rose by 3.4% (2.4% in euros) as hopes for a soft landing were in greater evidence than in other regions.
European ex UK equities were more muted, with a less supportive economic outlook; the asset class climbed by 1.3% (1.9% in euros).
Small-cap equities rose 4.3% (3.8% in euros), outperforming large caps, supported by the more resilient growth in the US and increasing hopes of a soft landing.
Emerging-market (EM) equities outperformed developed markets in July, rising by 5.4% (5.2% in euros). The asset class was boosted by a recovery in Chinese equities, which rose 10.1% as the authorities announced plans to introduce stimulus measures to support growth.
Fixed income markets were mixed. The ICE BofA 5+ Year Euro Government bond index fell -0.6%, with the German 10-year yield rising to 2.49%, following changes to yield curve control management by the Bank of Japan (BoJ). European investment-grade (IG) corporate bonds, however, rose by 1.1% in July, supported by expectations that central bank rate increases were close to peaking and growing hopes that a soft economic landing would be achieved and a recession would be avoided.

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