01-08-2022
George Lucas, Raiz Group CEO
Looking at equities there has been some positive news, with the S&P 500 index rising 9.1% in July, its biggest monthly gain since November 2020. The tech-heavy Nasdaq Composite index has fared even better, with its monthly gain of 12.3% the most since April 2020.
Looking at equities there has been some positive news, with the S&P 500 index rising 9.1% in July, its biggest monthly gain since November 2020. The tech-heavy Nasdaq Composite index has fared even better, with its monthly gain of 12.3% the most since April 2020.
We also saw Amazon, Microsoft, Apple and Google parent Alphabet all issue more upbeat outlooks than investors had expected, lifting the US tech sector. In the energy sector, ExxonMobil and Chevron reported record profits – no surprise given high oil and gas prices.
There was also US equity funds tracked by EPFR, which recorded their largest inflow in six weeks this week, picking up $9.5bn of net new investments, according to Bank of America.
Additionally, the FTSE All-World index of developed and emerging market shares rose 6.9% this month, while Europe’s Stoxx 600 gained about 8% and the ASX200 rose 5.7%.
Stocks lift on tech, energy company earnings
It appears US stocks rebounded mostly due to upbeat earnings from big tech and energy firms, and an easing of expectations for interest rate rises. Gloomy US economic data is making investors’ think the US Federal Reserve may slow its aggressive monetary tightening.
Another contributor was data out last week showing the US economy contracted for a second consecutive quarter. This helped fuel expectations that interest rates will rise slower and not as high as previously thought.
On the US economy, despite two consecutive quarters of negative GDP growth, the National Bureau of Economic Research is unlikely to consider this a recession given the economy added around 2.5m jobs in the first half of 2022, and other indicators of economic strength.
Growth picks up in eurozone
In Europe, a data release showed eurozone GDP lifted by a higher than expected 0.7% quarter-on-quarter in Q2. I think US tourist inflow has a lot to do with that.
On that point, big increases in Italy and Spain GDP are in line with the theory that tourists are returning to the region, while Germany recorded zero GDP growth.
Unfortunately, while growth was stronger, eurozone inflation rose from 8.6% in June to 8.9% in July, and the core rate increased from 3.7% to 4.0%.
In Australia, there was also inflation data released, which showed a 1.8% quarter-on-quarter rise in consumer prices in Q2, taking the annual rate to a 21-year high of 6.1%.
Finally, I think because of the inflation numbers it’s likely that the Reserve Bank of Australia will hike interest rates by 50 basis points (bp) on Tuesday – some market participants think it may be 75bp.
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