Global markets had a strong month in July, as safe-haven and risk assets staged a simultaneous rally. Growth stocks (MSCI World Growth) returned +11.5%, outperforming Value stocks’ (MSCI World Value) +4.6%, as risk appetite increased. Emerging Market Equities (MSCI Emerging) (-0.2%) lagged Developed Markets (MSCI World) (+8.0%), owing to a drawdown in Chinese markets, while global bond yields declined, boosting bond performance (Barclays Global Aggregate) (+2.1%) over the month.

Key economic data points, released in July, pointed to a slowdown in U.S. economic activity. Most notably, the U.S. Producers Manufacturing Index (PMI) fell below the neutral 50 level, indicating a contraction. U.S. Gross Domestic Product (GDP) fell by -0.9% y/y in the second quarter, following a decline of -1.6% in Q1. While two consecutive quarters of negative GDP growth is informally called a technical recession, the National Bureau of Economic Research (NBER), which considers a range of indicators beyond GDP, ultimately declares recessions and expansions. However, the decision from the NBER only usually comes several months later. The U.S. labour market remains resilient, with June’s unemployment rate at 3.6%, just above the 50-year low, although jobless claims have started to rise.

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The U.S. Federal Reserve hiked its policy rate by another 75-basis-points, as expected, after July headline inflation accelerated 9.1% y/y – beating estimates. Jerome Powell, Fed Chair, said that the Fed would be more data-dependent going forward, given that interest rates are now broadly in line with their estimates of neutral levels. Investors are now expecting that the deteriorating economic outlook may lead Fed officials to adopt a more dovish stance in the coming months to avoid a significant economic downturn.

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Around 56% of the constituents of the S&P 500 Index have reported Q2 earnings, with 75% of firms beating estimates. Sales have risen about 12.3% compared with the same quarter a year ago. Better-than-feared earnings from tech giants was the biggest positive surprise however many companies signalled willingness to slow down hiring.

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In Europe, the European Central Bank raised its benchmark rate by 50 basis points, delivering its first-rate hike in over a decade. Euro-zone inflation hit a fresh high, coming in at 8.9% in July. Despite raging inflation in the area, the eurozone economy expanded by 0.7% in the second quarter, more than three times the amount economists expected. In the U.K., Prime Minister Boris Johnson announced his resignation after he lost the support of his parliamentary party. The new prime minster is expected to be announced on 5 September.

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The JSE (JSE All-Share Index) increased by +4.09% this month, in line with global peers. Miners managed to end the month in the green despite pressure on commodity prices (iron ore -8% MoM) and weaker than expected results from Anglo Platinum and Kumba Iron Ore. Big movers over the month include Thungela (+26% m/m), which benefitted from higher coal prices, and Telkom (+19% m/m), which moved on the news that competitor MTN was considering acquiring it.

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SA also received positive news on the electricity front after South African President Cyril Ramaphosa embraced the private sector and announced that companies would be allowed to build power plants of any size without a license to meet their own needs. South Africa’s annual inflation rate reached 7.4% in June, from 6.5% in May, the highest level since the global financial crisis. The South African Reserve Bank (SARB) hiked its repurchase rate by 75 basis points – the steepest hike since September 2002, in an attempt to reign in surging inflation.