Globally, equity markets were mixed in July. In the US, the S&P 500 rose +1.1%, the Nasdaq declined -0.8%, whilst in the UK, the FTSE rose +2.5%. In Australia, the All Ordinaries Accumulation Index outperformed its global peers, rising +3.8%. The top performing sectors on the ASX were retail (boosted by investors positioning for improved consumer spending) and gold, which was assisted by expectations of falling bond yields.

In the US economy, cooling inflation and a weakening labour saw expectations of interest rate cuts increase. In US equities, this saw a rotation out of some of the large cap tech stocks that have performed extremely well in the last 12 months into small caps, with the logic being that interest rate cuts will result in improved economic growth and a wider range of companies outperforming.

In bond markets, the US 10-year bond rate fell -17 basis points (bp) to close at 4.14%, whilst its Australian counterpart fell -19 bp to 4.12%. The driver of lower bond rates was expectations that the Federal Reserve (US central bank) is getting closer to cutting interest rates. In currencies, the A$/US$ fell -1.3 cents to close at US$0.65. August will be a very busy month given the vast majority of the companies in the fund will report their full year results.