Overview
  1. Executive Summary
    Global equity markets advanced again in July, supported by easing trade tensions, resilient
    economic data, and optimism heading into corporate earnings season. U.S. and global
    indices reached or approached record highs, while Australian equities gained ahead of the
    local reporting period. Sector performance was broad-based, with a rotation towards
    defensive and quality names. Commodity prices strengthened, led by oil and iron ore.
    Central banks largely maintained policy rates, although markets continue to anticipate
    further easing before year-end. We maintain a cautiously constructive outlook, favouring
    non-U.S. equities, high-quality fixed income, and selective alternatives.
  2. Asset Class Monthly Performance
  • MSCI World (Net Return, AUD): +3.10% – Global equities posted another strong
    month, buoyed by improved macro sentiment and robust inflows to non-U.S. markets.
  • S&P 500 (Price Return, USD): +2.17% – Third consecutive monthly gain; ten new alltime highs recorded in July.
  • Euro Stoxx 50 (Price Return, EUR): +0.7% – Modest gains as EU inflation matched
    expectations and tariff negotiations with the U.S. progressed.
  • Japan (Nikkei 225): +1.4% – Gains moderated after a strong June; auto sector buoyed
    by U.S. tariff deal.
  • ASX 200 Accumulation Index: +2.36% – Driven by Health Care (+8.8%), Energy
    (+5.4%), and Utilities (+5.1%), offset by weakness in Financials (-1.0%).
  • ASX Small Ordinaries Accumulation Index: +2.82% – Outperformance from small caps
    amid strong rotations into growth sectors.
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  • Emerging Markets (Net Return, AUD): +3.77% – Led by China (+3.5%) as GDP and
    industrial production exceeded forecasts.
  • Australian REITs (S&P/ASX 300 A-REIT Accumulation): +3.38% – Supported by falling
    inflation and stable interest rate outlook.
  • Global REITs (FTSE EPRA/NAREIT Developed NR, AUD Hedged): -0.22% – Weakness
    concentrated in U.S. and European property names.
  • Global Bonds (Bloomberg Global Aggregate TR, AUD Hedged): -0.15% – Modest
    declines amid slightly higher global yields.
  • Australian Government Bonds (Bloomberg AusBond Composite 0+ YR): -0.04% –
    Yields fell late in the month on soft CPI and jobs data.
  • International Listed Infrastructure (S&P Global Infrastructure TR, AUD Hedged):
    +1.3% – Gains supported by demand for defensives and yield stability.
  1. Global Macroeconomic Overview
    Trade & Geopolitics: The U.S. paused extreme tariffs on Chinese goods, signalling progress
    in negotiations with China, India, and South Korea. European Union discussions yielded
    agreement on a 15% tariff cap with the U.S.
    U.S. Economy: Inflation rose to 2.7% in June (from 2.4%), while retail sales beat forecasts
    (+0.6% vs. +0.1% expected). ISM manufacturing and services PMI remained below 50,
    indicating contraction.
    Europe: Inflation steady at 2.0%; DAX +0.7%, FTSE 100 +4.2%.
    Asia: Japan’s growth moderated; tariffs on exports agreed at 15%. China posted 5.3% YoY
    GDP growth in H1, exceeding the 5.0% target; industrial production rose 6.8% in June.
    Emerging markets benefited from easing trade uncertainty and mixed USD performance.
  2. Central Bank Interest Rate Policy
    Federal Reserve (U.S.): Held rates at 4.25%–4.50% for the fifth straight meeting; two
    members dissented in favour of a cut.
    European Central Bank: Maintained policy stance after June’s rate cut, signalling the
    easing cycle may be nearing its end.
    Bank of Japan: Held rates at 0.50%, the highest since 2008; 10-year JGB yield rose to
    1.55%.
    Reserve Bank of Australia: Kept the cash rate at 3.85% in July, surprising markets.
    However, benign inflation data led the RBA to cut rates in August by 0.25% lowering the
    official cash rate to 3.6%. The Governor reiterated a path to easing. Markets still
    anticipate two to three cuts by year-end.
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  3. Australian Economic Overview
    Growth & Labour: Unemployment rose to 4.3% in June, the highest since Nov 2021, with
    +33,600 more unemployed and similar increases in job seekers.
    Inflation: CPI rose 1.9% in June, below the 2.1% consensus and at the lowest pace since
    Mar 2021; within the RBA’s 2–3% target range.
    Sector Trends: Health Care, Energy, and Utilities led July gains; Financials lagged as
    investors rotated towards resources.
    Housing: Capital city home values rose 0.6% in July; Darwin (+2.2%) led, Hobart (+0.1%)
    lagged.
  4. Currency & Commodities
    AUD/USD: Flat to modestly weaker (-0.2%) over the month despite RBA hold; supported
    by commodity strength.
    Iron Ore: +10.6% in June, +2.7% YoY; supported by stronger steel production.
    Oil: +6.4% in July on ongoing Middle East tensions.
    Gold: -0.4% in July; still +34.4% YoY.
    Copper: Not specifically reported for July; global industrial metals prices broadly higher
    on improved demand outlook.
  5. Outlook
    We maintain a cautiously positive view on growth assets into the second half of 2025.
    Easing trade tensions, resilient earnings, and likely central bank easing support risk
    sentiment and growth assets generally. However, U.S. equity valuations remain elevated
    and could be vulnerable to earnings downgrades. In Australia, softer inflation and weaker
    jobs data increase the likelihood of further RBA cuts, which may support equities and
    property but could reflect slowing economic momentum. We continue to recommend
    balanced portfolios with selective equity exposure, overweight to quality fixed income,
    and allocations to alternatives.
  6. Portfolio Strategy & Asset Allocation