Monthly Market Summary: July 2022

Investment Insights Team, Investment Strategist Team, Wealth Management

Summary: Gains for stocks and bonds

Capital markets rebounded modestly in July: global equities rose by 7.0% (US dollar terms), after touching a year-to-date low last month. Global government bonds also rose by 1.9% (US dollar terms, unhedged). Key themes included:

  • The Fed continued – and the ECB started – its tightening cycle;
  • Growth momentum slowed and headline inflation rates touched new highs;
  • Chinese stocks underperformed, as property market distress resurfaced.

Despite ongoing global growth and inflation concerns, volatility – particularly for stocks – eased in July. US equities rose by over 9%, driven by a big surge in ‘growth’ technology-like stocks. Geopolitical concerns persisted: a promising grain export deal was overshadowed by a Russian port attack; while reduced gas supplies through Nord Stream 1 were curtailed even further (European natural gas prices jumped to fresh highs). In other commodity markets, Brent Crude still fell by 4.2% to $110/bl in July, while some industrial metals continued to struggle: copper was down 3.9%. Gold only fell by 2.3%, but briefly dipped below $1700/oz.

US: Recession risks; inflation surprise; Fed hikes by 75bps again

The US economy entered a technical (though modest) recession during the second quarter, as real GDP fell by 0.2% (non-annualised). Growth concerns pushed the benchmark 10-year Treasury yield lower to 2.65%: the gap with the 2-year yield inverted (again) to its lowest reading since 2000. The Fed continued its hiking cycle, raising its main policy rate by another 75bps to 2.25%-2.5%, after the headline inflation rate reached another multi-decade high of 9.1% (y/y) in June. On Capitol Hill, the Inflation Reduction Act of 2022 – focusing on tax, energy and climate change – appears to have gained momentum, ahead of November’s midterm elections. Earnings season commenced, with three quarters of companies ahead of EPS expectations (as of 29 July).

Europe: Growth continues; ECB exits negative rates; Draghi resigns

The euro area’s economy expanded by 0.7% in the previous quarter, though the timelier Composite PMI fell into contraction territory in July. Inflation continued to hit fresh highs in the eurozone (8.9%), UK (9.4%) and Switzerland (3.4%). The ECB raised its deposit rate by a larger-than-expected 50bps to 0%, its first hike since 2011. It also unveiled its ‘Transmission Protection Instrument’ (TPI) designed to prevent peripheral borrowing costs from widening. The euro briefly fell below parity against the US dollar – before partially reversing – and the 10-year Italian-German government bond (BTP-bund) spread touched 240bps, almost surpassing its June high. Mario Draghi resigned as Italian PM (early election in late September), while mounting political pressure forced Boris Johnson to announce his departure as UK PM (from early September).

ROW: China risks; PBoC intervenes; Abe tragedy

Chinese equities underperformed this month: the CSI 300 and Hang Seng were down by 6.3% and 7.3%, respectively. Housing market fears were back in focus, amid mortgage protests and property developer default concerns. In response, Beijing announced it would mobilise $148bn of loans for stalled property developments: banks will use loans from the PBoC to refinance real estate projects. Covid cases also rose to their highest level since May. In Japan, former Prime Minister Shinzo Abe was tragically assassinated.

Performance figures (as of 29/07/2022 in local currency)

Fixed Income Yield 1 M % YTD %
US 10 Yr 2.65% 3.1% -8.0%
UK 10 Yr 1.86% 3.2% -5.5%
Swiss 10 Yr 0.44% 4.8% -3.2%
German 10 Yr 0.81% 5.0% -7.0%
Global IG (hdg $) 3.89% 3.4% -10.0%
Global HY (hdg $) 8.53% 4.5% -11.4%
Equity Index Level 1 M % YTD %
MSCI World($) 332 7.0% -14.6%
S&P 500 4,130 9.2% -12.6%
MSCI UK 13,575 3.5% 5.3%
SMI 11,146 3.8% -11.1%
Eurostoxx 50 3,708 7.5% -11.2%
DAX 13,484 5.5% -15.1%
CAC 6,449 9.0% -7.4%
Hang Seng 20,157 -7.3% -11.8%
MSCI EM ($) 500 -0.2% -17.8%
Currencies (trade-weighted, nominal) 1 M % YTD %
US Dollar 0.6% 6.3%
Euro -0.8% -2.8%
Yen 2.9% -9.9%
Pound Sterling 1.7% -2.1%
Swiss Franc 1.6% 4.1%
Chinese Yuan 0.2% 1.4%
Commodities Level 1 M % YTD %
Gold ($/oz) 1,766 -2.3% -3.5%
Brent ($/bl) 110.01 -4.2% 41.4%
Copper ($/t) 7,931 -3.9% -18.6%

Source: Bloomberg, Rothschild & Co.

Stock market indices (YTD total returns, local currency, Jan '22 base)

Source: Bloomberg, Rothschild & Co., 01.01.2022 – 29.07.2022

Read more articles

  • The next mood shift

    Market Perspective

    Despite geopolitical tensions and shifting expectations of interest rate cuts, financial markets have been remarkably resilient. In this Market Perspective, we discuss the 'higher for longer' monetary policy and assess the importance of mounting US government debt.

  • Understanding sustainability risks and opportunities


    Investing is not just about choosing companies that we expect to achieve success in the short term. It’s important to find businesses which can adapt to a changing world and are part of shaping the future. In this article we explore the risks and opportunities they face.

  • Should I form a trust?


    Trusts can be an effective way to provide for your family while retaining control, but you must balance the advantages against the administrative and financial costs. In this article we examine the pros and cons of setting up a trust, and potential pitfalls to avoid.

  • The defence debate

    Strategy Blog

    The events of the last couple of years have dramatically increased the geopolitical temperature, shifting the political discourse in favour of security. In this blog we examine the evolving nature of defence and military equipment, and what it could mean for investors.

  • The last mile

    Perspectives podcast

    The Swiss National Bank's decision to reduce interest rates came as a surprise to the market. Join our Global Investment Strategists to decode central banks' moves, unravel oil market dynamics, and track gold and bitcoin prices.

  • A rebound in corporate earnings?

    Strategy Blog

    Earnings growth is rising in the United States, suggesting the market could have passed a turning point. Ahead of the release of first quarter earnings figures, we consider what this means for investors and examine how earnings expectations can be fallible.

Back to top