Financial markets maintained momentum and continued to advance through July with all major asset classes higher.
Financial markets maintained momentum and continued to advance through July with all major asset classes higher. The ongoing rally was supported by a sharp downward move in bond yields over the month. The decline in bond yields reflected a number of factors from the ongoing moderation in global inflationary expectations to slowing global growth alongside an increase in the unemployment rates across several major economies. Given this backdrop investors took the view that the next leg in the interest rate cycle would be lower, providing support for many cyclical and interest rate sensitive parts of the market that have struggled on the back of higher cash rates.
This supported the broad-based rally, with markets now looking to the US Fed to begin reducing cash rates at its September FOMC meeting. Overall, while markets enjoyed a solid period of investment performance, there continues to be several ongoing challenges that is likely to see increased near term market volatility. In addition, the changing political landscape also has the ability to increase market instability in the near term. Accordingly, the need to maintain a flexible investment and asset allocation framework remains an important construct given the current financial, macro and geopolitical backdrop.
