Equity pessimism took a breather in July as investors shifted focus from trade wars to the start of this quarter’s highly anticipated earnings season. With 53% of the companies in the S&P 500 reporting, over 80% had positive earnings-per-share surprises and almost 80% reported a positive sales surprise.
The Fed, led by Chairman Powell, will very likely resist any effort by the White House to pressure it into halting rate hikes.
John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com
In July, US Treasury (UST) yields rose. US-China trade tensions continued to persist. The risk of a trade war between the US and Europe tempered after the two countries announced they will cut trade barriers.
Recent moves by the Chinese government to further liberalize its fund management industry have generated a lot of interest with some observers projecting that China will overtake the UK to be the second-largest asset management market.
Spain is worth paying attention to - it is the second most visited country in the world (in terms of international tourists), behind France, and also generates the second highest tourist receipts globally behind the USA.
The S&P/ASX 200 Accumulation Index rose 1.4% during the month. The Australian equities market underperformed global equity markets in July led by a fall in resources. Developed markets outperformed emerging markets for the fourth consecutive month.
The Australian bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index) was up 0.16% over the month. The yield curve flattened as the spread between long-term and short-term bond yields narrowed. 3-year government bond yields ended the month up 3 basis points (bps) while 10-year government bond yields also rose, up 2 bps to 2.65%.
Global equity markets rallied throughout 2017 without any major setbacks. With volatility at extreme lows, it could be said that 2017 was an unusually fortunate year for market participants in terms of risk and reward.
Financial markets continue to come to terms with a more protectionist and less globalised world. The surprise perhaps is not that tariffs have finally been imposed by the US on its trading partners, but that it took so long for a key campaign promise to become reality in spite of Republican control of the House, the Senate and the White House since November 2016.
In the past few years, Turkey has faced some of the most monumental challenges in its recent history.