July Monthly Market Review
- Anthony Walters
- Aug 11
- 4 min read
Markets regained momentum in July 2025, buoyed by a wave of optimism surrounding global trade developments and diverging central bank policies. A landmark US–EU trade agreement helped ease investor concerns, introducing a baseline tariff structure that brought clarity to an otherwise volatile landscape. As inflationary pressures persisted and interest rate decisions varied across regions, equity markets rallied, led by standout performances in Asia and emerging economies. This month’s developments underscore the importance of diversification and sector agility in navigating an increasingly complex macroeconomic environment.
Markets Find Their Footing Amid Trade Clarity and Sector
· Central Banks diverge, with the Bank of England cutting rates
· Global Equity Rally
· Denmark hard hit in European equities
The Balanced portfolio Index gained 2.07% in July amid greater certainty around world trade and just how far US tariffs will go (at least for now). Investor sentiment improved following a US–EU trade agreement that introduced a baseline 15% tariff rate, reducing uncertainty around future trade policy.
While the IMF warned that global trade uncertainty remains elevated due to new US tariffs on copper and Brazilian goods, markets appeared increasingly desensitised to tariff shifts, with muted reactions to policy announcements.
Inflation and Interest Rates.
UK.
In July 2025, the Bank of England cut interest rates by 0.25% to 4.00%, marking its lowest level since March 2023. The decision, described as "finely balanced," reflects concerns over slowing pay growth and economic uncertainty. Meanwhile, inflation rose unexpectedly, driven by surging food prices — particularly meat and tea — with annual CPI inflation reaching 3.60% in June and projected to peak at 4.00% in September.
U.S. Federal Reserve.
The Federal Reserve held interest rates steady at 4.25–4.50% in July, resisting political pressure amid rising inflation concerns. While some policymakers pushed for a cut, the majority opted to wait for clearer data. Inflation remains elevated, with core CPI at 3.30%, driven by persistent price pressures in services and shelter. Economists expect core inflation to average 2.50% in 2025.
European Central Bank (ECB).
The European Central Bank paused its rate-cutting cycle, holding rates at 2.00% after eight cuts since June 2024. Analysts now expect no further easing this year.
Inflation held steady at the ECB’s 2.00% target, with core inflation at 2.30%, supporting the case for a prolonged hold.
Market performance.
MSCI Hong Kong led the gains with an impressive +8.52%, buoyed by a rebound in property and tech sectors. Austria (+8.00%) and the USA (+5.90%) also posted strong returns, supported by resilient earnings and optimism around rate cuts. Conversely, Denmark (-13.40%) was the worst performer, dragged down by biotech and healthcare stocks. Netherlands (-2.69%) and Israel (-1.75%) also declined amid sector-specific pressures.
In emerging markets, the standout performer was Thailand (+18.40%), driven by a surge in tourism and consumer spending. Egypt (+15.70%) and UAE (+13.60%) benefited from rising energy prices and foreign investment inflows. Meanwhile, Brazil (-3.56%) and India (-1.73%) lagged, weighed down by political uncertainty and profit-taking in tech and financials.
Sector performance.
In July 2025, sector performance was led by Financials (+8.53%) and Technology (+7.57%), driven by strong earnings and investor optimism around AI and fintech innovation. The China/Greater China sector also rebounded (+7.19%), supported by stimulus measures and improving trade sentiment. North America and North American Smaller Companies posted solid gains of 6.62% and 6.23%, respectively, reflecting broad-based strength in U.S. equities.
On the downside, UK-focused sectors struggled. UK Index Linked Gilts (-1.15%) and UK Gilts (-0.56%) declined amid rising inflation expectations. UK Smaller Companies (-0.09%) and UK Direct Property (-0.22%) were flat to negative, reflecting domestic economic uncertainty.
Summary.
Markets advanced in July 2025, supported by easing trade tensions and a clearer outlook on US tariffs following a new baseline agreement with the EU. While the IMF flagged ongoing risks, investor sentiment improved, lifting diversified portfolios.
Central banks diverged: the Bank of England cut rates, the Fed held steady, and the ECB paused its easing cycle. Equity markets rallied globally, with Hong Kong and Thailand leading gains, and Financials and Technology sectors outperforming.
Despite inflationary pressures and mixed macro signals, the month underscored the value of global diversification and sector rotation in navigating policy uncertainty.
While the outlook contains uncertainty, investors can rely on several trade related issues having been resolved already, with the US market now overtaking the European Index for the first time this year. Has the status quo resumed?
Sources.
The ‘Balanced portfolio benchmark’ is the UT Mixed Investment 20-60% Shares Sector.
Bank lowers UK interest rates but warns ‘uncertainty’ about future cuts by Anna Wise, Yahoo Finance/ Independent, 8th August 2025.
Meat and tea prices fuel sixth straight month of rising food inflation by Yahoo Finance, 29th July 2025.
BOE Is Probably About to Cut Rates Despite a Spike in Inflation, by Tom Rees and Craig Stirling, Yahoo Finance/Bloomberg, 3rd August 2025.
US Fed independence under threat, say economists, but no one expects a July rate cut- Reuters poll, by Indradip Ghosh, Yahoo Finance/Reuters, 23rd July 2025.
ECB leaves rates steady after a year of easing, by Allie Canal, Yahoo Finance/Reuters, 24th July 2025
MSCI Equity Indexes August 2025 Index Review, by Yahoo Finance/Business Wire, 7th August 2025
Wall Street bull calls for 11% rally in S&P 500 to end 2025 as trade 'uncertainty' subsides, by Josh Schafer, Yahoo Finance, 28/07/2025
IMF says new US tariffs keep trade uncertainty running high, by Andrea Shalal, Yahoo Finance/Reuters
