MONTHLY MARKET UPDATE
1 August, 2025
Author: Jesmar Halliday, CFA
Equity trading turned choppy later in July as trade tensions re-emerged and weighed on sentiment. Nonetheless, major US technology stocks, including Microsoft and Meta, posted strong quarterly results driven by AI-led growth, helping to propel the S&P 500’s total return to 2.24 per cent. While global markets advanced as well, the MSCI World rose just 1.31 per cent lagging the US benchmark with European indexes like the Euro Stoxx 50 and Germany’s DAX recording modest gains of around 0.5 per cent and 0.7 per cent respectively. Diverging macroeconomic strength and sector leadership in the US, particularly across the tech space, underscored the performance gap. In contrast, political developments such as US pressure on pharmaceutical pricing and mortgage institution reform for Freddie Mac and Fannie Mae added complexity to investor outlooks, while the US dollar surged on the back of robust earnings and constructive economic data.
US credit markets maintained a cautiously positive outlook during the month, with stable macro conditions supporting spread tightening in high-yield debt and solid performance in investment-grade issuance, thanks to strong demand and muted issuance. The Federal Reserve’s decision to keep rates on hold further underlined a measured approach, even as rising inflation prompted officials to remain cautious. Emerging price date in the US put long dated US treasuries under pressure. Divergence within Federal Open Market Committee voices highlighted internal debate yet demand for US dollar-denominated debt remained steady, buoyed by attractive yields and relative economic resilience. European credit markets took a more defensive stance, with investment-grade spreads stable and high-yield tightening by around 45 basis points, all amid sluggish growth and policy inertia from the ECB.
July’s FOMC meeting resulted in another hold of the federal funds target band at 4.25–4.50 per cent, despite external pressure to ease rates. Notably, two Trump appointed governors dissenting argued for an immediate rate cut given weakening labour data and moderating inflation. Chair Powell reiterated the Fed’s "data-dependent" philosophy, reinforcing that the current stance, while modestly restrictive, is appropriate for maintaining price stability. In the US, Q2 growth surprised to the upside at an annualised rate of 3.0 per cent yet much of that was driven by reduced imports rather than domestic bullishness. Labour conditions cooled in July, with job creation slowing dramatically and unemployment ticking up to 4.2 per cent.
Over in Europe, Eurozone GDP grew 0.1 per cent in Q2, though Germany contracted as trade disruptions took a toll. Inflation in Germany eased to 1.8 per cent, but core price pressures remained sticky at around 2.7 per cent, prompting the ECB to hold rates at 2.0 per cent. Additionally, a new transatlantic agreement between Europe and the United States introducing a blanket 15 per cent tariff across various imports, coupled with a proposed €600 billion investment package, contributed to heightened macro uncertainty and questions over the durability of future growth.
Commodities delivered a mixed outcome for July. While energy prices rallied led by WTI and Brent crude rising by around 9 per cent amid OPEC+ production signals and geopolitical coordination; industrial metals faltered sharply. Copper plunged 6.65 per cent, pressured by tariff policy shifts, a firmer dollar, and weaker Chinese demand. The composite commodity index declined roughly 0.8 per cent. Meanwhile, precious metals remained flat, as gold sustained its appeal as an inflation hedge, though without meaningful support from fresh safe-haven flows.
The US dollar logged its strongest monthly gain of 2025 in July, rising about 3 per cent, buoyed by solid economic data and tariff-related uncertainty. The Fed’s hawkish pause, persistent inflation trends, and safe-haven rotations further strengthened the greenback. In contrast, sterling underperformed, falling against most major currencies amid weak UK macro data, mounting expectations for rate cuts, and fiscal concerns, with the pound’s performance notably subdued throughout the month.
Important Information:
This article was prepared by Jesmar Halliday, CFA, Portfolio Manager at MZ Investments and is intended solely for information purposes. The contents of this article should not be construed as investment, legal or tax advice, or as a recommendation to buy, sell, or hold any securities, investment strategy or market sector. The information contained in this article was obtained from sources believed to be reliable and has not been verified independently. MZ Investments, its directors and employees give no warranties of any kind, expressed or implied, with regard to the accuracy, correctness or completeness of this article and accepts no responsibility or liability for any loss or damages arising out of the use of all or any part of this article. MZ Investments is under no obligation to update or keep current the information contained therein. All investments involve risk. The value of investments may go down as well as up and investors may not get back the amount originally invested. Investors are urged to seek professional advice before making investment decisions.
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