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Market Insights

Market Insights - July '22

Anupam Kumar

The economic data provided for the month of July is again an indication of a slowing global economy. Inflation continued to soar to new highs, growth data disappointed and PMI surveys showed activities losing momentum.

The US Fed increased interest rates by 75 basis points for the 2nd consecutive meeting after headline inflation in July printed at 9.1% YoY, more than expected.

On the other hand, high inflation pushed the ECB to announce its first interest rate hike in more than a decade, taking the eurozone out of negative rates.

European recessionary risk was most apparent in currency markets where the euro briefly slipped below parity with the dollar before rallying slightly in response to the European Central Bank’s (ECB) move.

Global growth stocks benefited most, delivering 11.5% total return in July, recouping some of their heavy year-to-date losses.

Information technology and consumer stocks rose more than 10%. While every sector finished in positive numbers, defense, communication services, staples, and health care sectors were closed in red.

It was observed that in developed markets higher beta and volatile stocks outperformed. However, in emerging markets lower volatility stocks remained the favorites among investors.

  • The S&P 500 was up 9.11% in July, bringing its YTD return to -13.34%.
  • The Dow Jones Industrial Average gained 6.73% for the month and was still down 9.61% YTD.
  • US high yield delivered 6.0% total return in July.
  • In emerging markets strong performance from Indian and South Korean markets was counteracted by Chinese real estate weakness.
  • In total, developed markets surged more than 7%, nearly recovering from June’s sharp losses whereas, emerging markets fell 0.4%, surrendering their excess return over developed markets for the year.
  • Fearing Russian Supply shock, European gas prices and commodities in general delivered 4.3% total return over the month.
  • Recessionary fears weighed on oil prices, which reached close to pre-Ukraine invasion levels.
  • Energy prices fell by 1.3% led by crude, which went down by -10%. However, European natural gas gained more than 50%.
  • Non-energy commodities fell 8.9%. Agricultural prices went down by 7.4% and food dropped 8.5%, led by grains (-8.3%) and oils/meals (-13.1%).
  • Metals declined 13.4% whereas, precious metals dropped 6.6%.

In the month of August, US Government is expected to release series of economic reports and data which will be useful for the fed meeting scheduled in late Sep’22. Historically, August has been green for the Equity market and across the globe, markets are waiting for some positive news and favorable data for a positive and bullish trend in the remaining month of this tough year, 2022!

Anupam Kumar

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