In this month’s investment summary, our Chief Investment Officer, Jeff Brummette, reflects on a July shaped by significant developments in global trade policy, central bank manoeuvring, and shifting investor sentiment. Markets responded positively to President Trump’s partial de-escalation of trade tensions, with key equity indices posting solid gains and major trade deals concluded with several U.S. allies. Yet beneath the surface, signs of economic strain are beginning to emerge, particularly in the U.S. labour market, raising questions about the sustainability of the current growth trajectory. As geopolitical dynamics continue to evolve and central banks weigh their next moves, we examine what these shifts mean for global asset allocation and portfolio positioning.
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July marked another strong month for global equity markets. President Trump broadly eased trade tension by lowering tariff levels. He also extended the deadline for trade deals to be agreed from 9th July until 1st August, which he subsequently postponed further to 7th August.
Trade agreements were agreed with Japan, the European Union, and South Korea, with tariffs set at 15% on nearly all their exports. There were no retaliatory measures from these trade partners. Overall, financial markets reacted positively, with the general opinion being that the outcome could have been a lot worse. Negotiations remain ongoing with China, Canada and Mexico.
Looking at the performance for the month, all major equity markets posted positive returns, whilst fixed income remain largely unchanged.
Equity Markets
Source: Bloomberg
Fixed Income Markets
Source: Bloomberg
Alternative Investments Markets
Source: Bloomberg
The U.S. was led once again by the big tech names, who continue to deliver strong earnings and channel these into increasingly large investments in Artificial Intelligence (AI) capex.
Magnificent Seven (excluding Tesla) – July 2025
Source: Bloomberg Finance L.P.
These companies’ AI budgets now surpass the defence budgets of many European countries.
Major European Defence Spenders
Source: NATO
2024 NATO estimates for the seven allies with the largest defence budget in Europe (excluding Turkey)
Tech Giants Capital Expenditure of Microsoft, Meta, Alphabet and Amazon
Source: Bloomberg
Despite the dollar’s rise during the month, non-U.S. markets continue to be the best performers year-to-date for pound sterling-based investors. Oil and many other commodities enjoyed a strong month, which helped propel the UK market higher, given its heavy weighting towards the energy and mining sectors.
Markets have been wrestling all year with how President Trump’s tariffs would impact economic activity and inflation. The expectation has been for higher inflation and potentially slower economic growth, though there has been little evidence of this until now.
U.S. inflation data for June showed many goods prices rising, following years of generally declining goods prices. This is likely a consequence of the tariffs.
Price Changes for Selected CPI Goods Categories
Source: BLS, J.P. Morgan
The latest U.S. employment numbers show a marked slowdown in the pace of new job creation.
U.S. Labour Market Slowed Sharply Over Past Three Months
Source: Bureau of Labour Statistics via Bloomberg
The figures for May and June were revised down by a combined total of 258,000 jobs.
When the U.S. Bureau of Labour Statistics (BLS) produces these figures, it often has to estimate portions of the data. Since the Covid-19 pandemic, firms have been slower to respond to BLS surveys, prompting the Bureau to make assumptions about job creation based on historical patterns. As more complete data becomes available, the BLS subsequently revises its estimates.
There is a growing belief that the closure of the U.S. southern border has curtailed the flow of migrants to such a degree that employers are struggling to find workers to hire. Nevertheless, other elements of the payroll data showed some strength: wages rose at an annual rate of 3.9% and average weekly hours worked also increased. The unemployment rate ticked up only slightly to 4.2%. None of this suggests a rapidly deteriorating labour market.
However, markets are not always adept at processing nuance and rapidly priced in a greater likelihood of a U.S. Federal Reserve (Fed) rate cut in September. In response, the yield on the U.S. Treasury two-year note fell nearly 30 basis points on the day.
US Two-Year Treasury Yield
Source: Bloomberg Finance L.P.
If the next labour market report, released on 5th September, resembles the most recent one, then the Fed may very well reduce rates at its September meeting. Such a move could not come soon enough for President Trump, who was already tweeting before the figures were even released.
President Donald J. Trump’s Tweet on Jerome Powell
Source: X (Twitter) – @realDonaldTrump
These figures proved so alarming that President Trump fired the Head of the Bureau of Labour Statistics, the department responsible for producing the data, claiming the figures had been manipulated for political purposes. Markets tend to react poorly to any perception of government interference in economic data. Depending on whom he installs to lead the Bureau, there could be lasting damage if doubts arise about the reliability of U.S. economic data.
The sudden resignation of Federal Reserve Governor Kugler, whose term was due to run until January 2026, offers Trump the opportunity to appoint an “easy money” devotee to the Federal Reserve Board of Governors sooner than he expected.
This sort of behaviour continues to support our positioning away from U.S. markets and the dollar. With tariff rates looking to settle around 18%, a level not seen since the 1930s, it is likely that the U.S. economy will show further signs of weakness as consumers and businesses struggle to cope with higher prices. We have seen several prominent U.S. businesses such as General Motors, Ford, Chipotle and Proctor & Gamble, to name a few, citing tariffs as a source of pressure on their earnings, as well as a driver of changes in consumer behaviour.
We do not wish to overstate the risks posed by President Trump’s tariffs, but they warrant close monitoring.
We continue to favour European equities, particularly within the financial sector where the steady steepening of the euro yield curve is proving supportive. We also maintain our weighting in industrials, notably defence, and utilities. While the imposition of 15% tariffs on European exports will undoubtedly create some headwinds, these are likely to be offset by a significant increase in German government spending on infrastructure and defence.
The Bank of England is expected to reduce rates at its meeting on 7th August, despite inflation remaining over 3%, though it will emphasise that any further rate cuts will be implemented very gradually and contingent upon inflation returning towards its 2% target.
Apart from Japan, we see little risk of rate hikes by any major central bank; rather, more cuts are likely if inflation remains subdued, while fiscal spending remains in an expansionary mode globally.
We believe we are well positioned, with our equity emphasis outside of the U.S. and our interest rate exposure concentrated in the short to intermediate segments of the yield curve.
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Hear more from the Oakglen experts
Our investment team continue to provide interesting and informative content to help keep you in the loop on recent global news and market trends. See below for some key highlights from around the world which some of the investment management team have recently covered:
Read more:
- US Tariffs: Here to stay?
Jeff Brummette, Chief Investment Officer
- H1 2025: Discretionary Investment Management Service Update
Myles Renouf, Senior Investment Manager
- July 2025 Investment Summary
Jeff Brummette, Chief Investment Officer
You can read other articles from the team on our News & Insights page.
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