World markets had a muted July, despite enjoying support from strong corporate earnings in the US, as well as easing trade tensions, and better investment sentiment across regions. This still did not assuage concerns regarding uncertainty about the direction of trade policies as well as high margin US debt, which now exceeds US$1trillion. These concerns notwithstanding, growth globally remains resilient, with the IMF raising its growth projections from around 2.7% to 3.0%, on the back of stronger projections for the US, China, and Europe.

The S&P 500 hit new highs for six consecutive days in July, and despite losing ground around month end, it still ended higher by 2.2%. The Nasdaq closed the month higher by 3.7%, while the Dow was the US laggard, ending the month higher by 0.1%. On the economic front, US June headline inflation as measured by CPI, accelerated to 2.7% YoY vs the May print of 2.4%, while core CPI, which excludes food and energy, printed at 2.9%, up slightly from the 2.8% print in May.

The U.S. economy is expected to grow by 2.1% in 2025, led by strong consumer demand, solid labour markets, and elevated household savings. Key indicators such as services and manufacturing PMls, retail sales, and housing data point to broad-based expansion. Corporate earnings surprised to the upside, with margin resilience across sectors especially in tech and consumer discretionary. Credit growth is healthy, though moderating, as tighter bank lending is offset by capital markets activity for high-quality borrowers.

The Fed's dovish shift and ongoing fiscal support (via infrastructure and industrial policy) are aiding sentiment. An easing policy environment combined with macro stability creates a constructive, though late-cycle, environment for U.S. equities. U.S. equity valuations are elevated, with the S&P 500 trading at 22.0x forward earnings. A sharp disparity exists between the top 10 stocks and the rest of the index, as well as between growth (28.7x) and value (16.9x), highlighting growing concentration risks. The rally is technically sound, with new highs supported by improving breadth. However, investor positioning remains concentrated in mega-cap technology sector. Fund flows show some rotation into cyclicals and Al themes, while small caps and value remain under-owned.

European markets had a strong July, as trade tensions, mixed economic data, as well as geopolitical risks continued to weigh. The Dax rose 0.7% for the month, with the CAC up 1.7%. On the economics front, inflation in the Eurozone for June printed at 2.0% YoY, compared to the 1.9% YoY print in May, and in line with the ECB’s 2.0% inflation target. Core inflation for the period remained unchanged at 2.0%.

Eurozone growth remains weak and uneven, with modest stabilisation in 2025 driven by real wage gains, lower energy costs, and improving tourism in Southern Europe. However, structural challenges, tepid consumer demand, and poor external demand continue to weigh on the outlook. Europe is seeing net negative earnings revisions while credit growth remains subdued amid tighter financial conditions, weak capital expenditure, and cautious corporate investment behaviour, signalling a mid-to-late cycle environment. The ECB delivered a rate cut but signalled caution ahead. Fiscal policy support is constrained by the reimposition of EU budget rules, limiting flexibility despite growing needs for green and defence spending. The lack of bold policy stimulus curbs upside potential.

While European equities are relatively cheap (13 - 14x forward P/E vs. 21.5x in the U.S.), lower ROE, sector composition, and under representation in growth areas diminish their appeal. Europe is underperforming on a relative basis with deteriorating technicals, negative earnings momentum, and lacklustre fund flows. Investor positioning remains neutral to underweight, with global allocators back to favouring U.S. and Japanese equities over Europe.

In the UK, the FTSE 100 rose by 4.2% for the month, as UK inflation accelerated to a higher than expected 3.6% YoY compared to the 3.4% YoY printed in May, with core inflation rising 3.7% YoY vs the 3.5% YoY May reading.

Asian markets trended higher as US/Sino trading tensions eased, supporting broader investor confidence. In China, the Shanghai Composite Index climbed by 3.7%, with the Hang Seng up by 2.9%. This was driven largely by China’s stimulus efforts, and greater infrastructure spend. On the economic front, Chinese GDP jumped 5.2% YoY for the second quarter of 2025, printing slightly ahead of market expectations.

FY2025 emerging market (EM) earnings per share growth is expected at +15-16% YoY, led by EM Asia at ~19% (India, Korea, Taiwan, Indonesia), EMEA at ~11% (Saudi, UAE, Poland), and LatAm at ~5% (moderate due to foreign exchange volatility and trade policy impacts). Positive earnings revisions continue, with Tech, Financials, and Commodities leading improvements. EM equities continue to trade at ~11.9x forward P/E, maintaining a ~30% discount to developed market peers (S&P 500 ~22x, Europe ~14.0x). This persistent valuation gap highlights long-term opportunity for patient investors while recognising near-term volatility. Positive flows into Asia EM ETFs and funds continue, with $11.2B net inflows YTD (as of June 30), led by India, Korea, Taiwan, and Indonesia. LATAM flows remain flat to mildly positive, with investor re-engagement tied to policy easing.

The Japanese market ended higher by 1.4% for the month, with headline inflation declining to 3.3% YoY compared to the May print of 3.5% YoY, in line with expectations, and still above the BoJ’s 2% target.

Japan's 2025 real GDP growth is projected at 0.8%, slightly lower due to soft exports and subdued capital expenditure amid global trade uncertainty. Nonetheless, domestic demand remains resilient, underpinned by 5.3% base wage increases, stable employment, and easing financial conditions. The yen has stabilised, and equity market performance is increasingly driven by underlying earnings strength rather than currency moves. EPS growth is expected to hold at 5.5 - 6.0%, with robust contributions from financials, insurance, and IT services balancing ongoing weakness in autos and machinery. The equity market is shifting toward domestically oriented drivers, supported by strong wage gains, solid household finances, and rising consumption in durables, housing, and services. Valuations remain compelling, with the market trading at ~14x forward earnings, below its historical average and at a 30% discount to the US and 10-15% to Europe. Shareholder returns exceed 3.5%, supported by rising buybacks and dividends, reflecting stronger capital discipline and profitability. Structural reforms continue to gain traction, with improvements in return on equity, reductions in cross-shareholdings, and enhanced governance practices. The market is now earnings-led, with positive revision trends and rising domestic and foreign investor interest. Low foreign ownership highlights ongoing re-rating potential within global allocations.

South Africa

On the local market, the JSE All Share Index breached the 100 000 level on July 23rd for the first time, closing the day at 100 179.84. The bourse retraced those gains to close the month at 98 519.51, ending up 2.2% for the month. Resources were the leading light, up 5.1% for the month, followed by property, up 4.4% for the month, financials up 1.4% and industrials up 1.1%. The best performing shares for July were Adcock Ingram, up almost 37% on the back of a takeover announcement by India’s Naco Pharma, Sasol up 19%, Sibanye Stillwater up 18.9%, British American Tobacco up 15.8%, Telkom up 10.1%, Emira up 9.9%, Thungela up 9.7% and Northam up 9.4%.