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RiverPeak Wealth Monthly Update For July 2023

Global Market Overview – July 2023


July has been a pretty busy month. The world experienced the hottest month on record, Alcaraz won his first Wimbledon title, ‘Barbenheimer’’ box office sales soared, Twitter lost its wings, and back at home, we have seen a ‘Farage vs. Banks’ battle brewing.


The financial markets have also been dealing with lots of events this month, so let’s take a closer look:


Sticking to the inflation fight

In line with market expectations, central banks continued their fights against rising inflation. Across the pond, the Fed hiked rates by 25bps to a 22-year high after a “break” in June. In the Eurozone, the ECB is determined to return inflation to its 2% medium-term target, also raising rates as a result. The Bank of Japan also joined the tightening wave after decades of monetary stimulus, which surprised the market a little, sending Japanese yields to a nine-year high.


In the midst of rate hikes, global equity markets have been buoyant:

With everyone piling into stocks, the S&P 500 and Nasdaq continue to lead the party. The long streak of monthly gains shows the market remains bullish following stronger-than-expected growth data, corporate earnings, and cooling inflation. The AI mania remains a driver of performance of US stocks. As the Q2 earnings start to come out in August, the mega-cap Magnificent Seven will have to show they’re worth the hype.


Positive economic rumbles in Beijing


China signalled more support for the real estate sector, which has been in a multi-year growth drag, and to boost domestic consumption. Hope is running high, as Chinese equities had their largest rally since January and the gains continue into August.

Core Views


Over the next twelve months, we think that the global economy will slow down - prompting bouts of volatility. In this environment, it is important to rely on a stable identity. Economic uncertainty creates fear and investor sentiment tends to overreact to economic turning points. Going forward, we believe that:


• Inflation will come down. Goods inflation is slowly normalising, and supply chain pressures are going.


• Central banks are getting close to the end of their hiking cycles, but there is still a bit more work to do.


• A mild US recession is highly likely. Most leading indicators point towards a recession, but the recession shouldn’t be too long or deep.


In such an environment, investors will start to worry about what’s next for financial markets. Economic data isn’t likely to stabilise until next year. Equity markets are unlikely to perform well in the medium term.


Source: 7IM


Summary


Investors should try to focus on the fact that investing in the stock market over the long term, is a powerful tool to preserve the purchasing power of their wealth and on ensuring that they have an appropriate asset allocation for the level of risk with which they feel comfortable. A disciplined approach to asset allocation and identifying good active managers who can navigate these conditions successfully remains of the utmost importance.


July 2023


With thanks to Seven Investment Management LLP for their views and market thoughts. RiverPeak Wealth Limited


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