Monthly market summary – Review of July 2025

US equities were up by 5.9% over the month, led by technology stocks, with the Magnificent Seven companies such as Meta, Microsoft, and Alphabet reporting strong Q2 results, driven by high demand for cloud computing and renewed enthusiasm around artificial intelligence (AI). Defensive sectors including healthcare and consumer staples lagged. Meanwhile, the passing of the ′Big Beautiful Bill′ added fiscal stimulus, providing support for cyclical and growth stocks.  

European equities posted mixed results resulting in a 0.1% loss in local currency terms. However, the weakness of the pound versus the euro in July saw this equate to a 1.0% gain for sterling-based investors. The tariff settlement with the US was generally seen as a capitulation, but there was a sense of relief as the threat of even higher tariffs was averted. Strong earnings in healthcare and financials supported returns, but technology stocks underperformed due to the negative impact of US trade policy. Elsewhere, real estate and utilities struggled due to their interest rate sensitivity, with the European Central Bank (ECB) having signalled it is nearing the end of its rate cutting cycle.  

UK equities delivered positive returns ending the month up by 3.8%. This was led by energy, consumer staples, telecoms, and healthcare – which was supported by strong earnings updates from some large pharmaceutical companies. Real estate and technology were the laggards over the month. Elsewhere, government borrowing exceeded expectations amid rising debt costs, and political developments, including welfare concessions, raised concerns over fiscal discipline.  

Emerging markets were up 5.6% in July, driven by strength in Taiwan, China, Korea, and Thailand. AI optimism and trade progress supported sentiment. China showed economic resilience, with better-than-expected growth and industrial output, and Korea benefited from a favourable US trade deal. Meanwhile India and Brazil posted losses as they were impacted by US tariff-related risks. They face US tariffs of 25% and 50%, respectively.  

Fixed income markets faced headwinds from rising yields and fiscal concerns. US Treasury yields climbed (meaning prices fell) due to the combination of inflation concerns, better than expected economic data, and deficit worries. The US Federal Reserve held rates in the US, but political pressure is mounting. Eurozone yields rose as the ECB maintained rates and signalled limited appetite for future cuts. UK gilts saw a sell-off after higher-than-expected inflation numbers.