Covering July Market
July was another strong month for stocks during which several major indexes hit new all-time highs.
Robust economic data, the completion of several major trade deals, better-than-expected corporate earnings, and a broadening out of the bull market rally were among the drivers of the gains.
The best-performing sectors for the month were Technology and Utilities, both of which benefitted from the artificial intelligence theme. Healthcare and Consumer Staples, which are defensive in nature, were the biggest underperformers.
AI continued to be a dominant theme in July, with stocks such as Nvidia, Palantir, Broadcom, and Taiwan Semiconductor Manufacturing Company (TSMC) all hitting new all-time highs during the month. Shares in Nvidia received a boost after the US government said that the company can resume selling its H20 chips in China. This could potentially add billions to the tech company’s revenue, and the news pushed the company’s market cap into $4 trillion territory. The reversal of the China chip ban was also good news for AMD, which rose more than 20% during the period.
The July rally wasn't exclusively driven by AI stocks though; many other sectors also saw significant gains. Industrials rallied, benefitting from economic resilience, reshoring optimism, and renewing the need to build data centres and semiconductor manufacturing plants in the US and globally. Utilities also did well as investors focused on the substantial power requirements of data centres. Energy stocks had a good month on the back of rising oil prices, which hit $70 per barrel at one point. Meanwhile, travel stocks delivered gains as data showed that consumers continue to spend a significant amount of money on hotels, flights, and cruises.
In the second half of the month, corporate earnings were in focus and in most cases, results were better than expected. Google and YouTube owner Alphabet got things rolling for the mega-cap tech stocks, delivering an excellent Q2 report in which revenue was up 14% year-on-year to $96.4 billion. The highlight of its results was its cloud computing division, where sales were up 32% year-on-year, but it was also very encouraging to see that ChatGPT is not having a major impact on its digital advertising revenues. Microsoft then followed up with its own excellent results, helped by a phenomenal performance in its cloud division, where revenue was up 39% year-on-year. On the back of this performance, the company’s market cap rose above the $4 trillion mark. Out of all the Magnificent 7 companies, however, the best earnings report came from Meta Platforms. It delivered a huge profit beat on the back of strong digital advertising revenues and returns from its investments in AI. Note that before Meta’s earnings, CEO Mark Zuckerberg published a letter outlining his vision for “personal superintelligence,” giving investors a glimpse into his AI strategy ahead.
It’s worth pointing out that not all companies produced strong reports for Q2. Tesla’s results were quite poor, with revenue sliding 12 % year-on-year and earnings per share (EPS) plummeting 23%. Looking ahead, CEO Elon Musk warned of a few “rough quarters” as US electric vehicle (EV) incentives fade. GLP-1 weight-loss drug maker Novo Nordisk also produced a weak report, reducing its guidance for the year due to weaker-than-expected Wegovy sales. This resulted in the stock falling to levels last seen in 2022.
Away from earnings, there was some notable capital markets activity during the month.
In the biggest M&A deal of the year, rail operator Union Pacific announced its intention to acquire Norfolk Southern for $85 billion in cash and stock. If the deal goes through, it will create America’s first transcontinental railroad company capable of carrying goods from the Pacific to the Atlantic coast.
In the IPO space, tech company Figma (which Adobe tried to buy in 2022) came to the market late in the month and soared 250% on its first day of trading.
On the economic front
The Federal Reserve left interest rates unchanged at 4.25–4.50%, despite pressure from US President Donald Trump to reduce rates. Trump has said that he wants the Fed to lower interest rates by as much as three percentage points to spur economic growth. Yet, Fed officials signalled no easing until at least the autumn, citing a still-tight labour market and core inflation running at around 2.7%–2.9%.
In Europe, the European Central Bank (ECB) also left interest rates unchanged at 2%. The ECB has cut its policy rate eight times since June 2024 due to the threat of economic weakness, however, at its July meeting, the central bank offered a modestly upbeat assessment of the euro zone economy, raising doubts among investors about further policy easing.
It was a big month for US trade deals
With both Japan and the EU completing deals during this period. Japan’s deal saw auto tariffs reduced from 25% to 15%, which led to strong gains for Japanese automakers such as Toyota and Honda as well as the Nikkei 225 index. Zooming in on the EU deal, this imposed a 15% import tariff on most EU goods (avoiding the 30% tariffs that Donald Trump had previously threatened). In exchange, Europe is set to invest $600 billion in the US and purchase $750 billion worth of oil, liquefied natural gas (LNG), and nuclear energy products. Late in the month, the International Monetary Fund (IMF) raised its forecast slightly for global growth in 2025 and 2026. Growth forecasts for both the US and China were upgraded due to the belief that Trump’s trade war will do less damage to the global economy than previously estimated.
Turning to commodities
Oil performed well in July, rising about 5%. It benefitted from the US-EU trade deal as well as President Trump's stricter deadline for a ceasefire in the Russia-Ukraine conflict. As for precious metals, gold ended the month flat while silver climbed a few percentage points (it reached the highest level since 2011 during the month). Late in July, copper prices fell by more than 22% – the biggest one-day fall ever – after Trump announced a 50% tariff on copper imports. Tariffs on Brazil also impacted coffee and meat markets.
Finally, it was a strong month for crypto with Bitcoin hitting new all-time highs.
During the month, the US passed the GENIUS Act, the first federal law regulating stablecoins. This opens the door for banks and fintech firms to issue stablecoins, and crypto markets rallied on the news, with the total market cap surpassing $4 trillion. It’s worth noting that Ethereum – the second-largest cryptoasset by market cap – outperformed Bitcoin by a wide margin. Its rise reflects growing belief in its role powering future finance and tokenised ecosystems.
