Monthly Market News July 2024 – Market Trends

Alexandre Gauthy - Economist

July was marked by a significant performance gap between the different segments of the equity market. Bonds performed well amid slowing U.S. inflation and weak economic data during the month. Our expert, Alexandre Gauthy, analyses the trends in the markets in July 2024.

Equity markets: the laggards finally shine

Behind the modest performance of the equity markets in July lie significant disparities by sector and investment style. While the S&P 500 index rose only by 1% on the month due to the high weight of technology, the same index that equals the index's constituents gained 4.4%. Smaller U.S. companies were the big winner of the month.

The second important topic of the month was the publication of corporate results. Two major trends have emerged. The first is the profit warning of some companies active in the consumer sector). The second trend that has emerged is the continued investment spending by major U.S. tech companies on the infrastructure that enables artificial intelligence to operate.

Overall, 41% of S&P 500 companies have reported their results for the second quarter of 2024 to date. Of these companies, 78% reported earnings per share above estimates.

Bond markets: good performance

Yields on risk-free government bonds (Germany, United States) fell sharply during the month following better news on the US inflation front and the slowdown in economic indicators. US inflation fell 0.1% on the month, bringing the annual figure down to 3%. Core inflation in June was also below expectations, at just 0.1%. Over the last 3 months, core inflation has only increased by 2.1% annualized, a figure not far from the Fed's inflation target. On the economic front, while the data showed that the US economy grew by 2.8% annualized in the 2nd quarter, other more recent data has been quite disappointing. U.S. consumer confidence fell in July; Indicators of business confidence active in the manufacturing sector fell and initial and continuing jobless claims rose more than expected. During the month, euro-denominated bonds rose close to 2%.

Central banks: ECB’s status quo. The Fed waits until September

Although the Fed kept rates unchanged in late July, the central bank's statement and Powell's press conference strongly suggested that the first-rate cut would likely come at the next meeting in September. In the statement, the Fed's concerns are no longer focused on higher inflation, but on equal attention to inflation and employment risks. On several occasions, Powell readily admitted that a September rate cut was "on the table," although he pushed back on the idea that they were considering a 50 basis point cut for that meeting.

As for the ECB, the decision to leave interest rates unchanged and not to give clear signals on the future path of interest rates was in line with expectations. A decline in September still seems more likely than not, but it will depend on the easing of domestic price pressures.

Currencies: The yen appreciates

The yen appreciated by nearly 6% against the euro in July amid signs of an economic slowdown in the United States, lower long-term interest rates in the developed world and a surprise rate hike by the Central Bank of Japan.

Commodities: Cyclical commodities lose ground

Cyclical commodities (oil, industrial commodities) were negatively impacted by signs of a slightly more pronounced slowdown in economic growth in the United States, by the disappointment of confidence indicators in the eurozone and by the weakness of Chinese economic indicators. The price of gold benefited from the downward movement in long-term interest rates and the prospect of Fed rate cuts.

Share the article

More about: