Market Matters 14 July

Continued volatility amid all-time highs!

Author: Ash Weston, Head of MPS, 8AM Global

Market overview

In the past week, global trade tensions resurfaced following Trump’s announcement, increasing his baseline tariffs on trade partners from 10% to a range of 15% to 20%. Additionally, specific tariffs of 35% have been imposed on key imports from Canada. These developments sparked renewed fears of a potential broader trade war, leading to a significant repricing of risk assets later in the week.

This was all set against a slightly counterintuitive backdrop of markets hitting new all-time highs, creating a ‘mixed bag’ of final score cards across global equity markets at the close on Friday.

European and UK equities followed the US softly downwards towards the end of the week – but from a far more positive earlier position, netting solid positive gains (in sterling terms) for the week of +2.08% (Eurostoxx 50) and +1.34% (FTSE 100) respectively.

Context is key and its worth remembering; whilst the US has hit all-time highs, it has done so after a period of dollar weakness and for sterling investors, US equities have just about crawled back to their starting point of 2025.

US

US equities entered the week with strong momentum. On July 9^th, we saw new record highs for the S&P 500 and Nasdaq, fuelled by a wave of better-than-expected earnings and resilient economic data. However, these gains were quickly softened following Trump’s tariff announcement. The market reaction was immediate with cyclical sectors, such as industrials, healthcare and consumer discretionary, bearing the initial brunt.

Goldman Sachs issued a note during the week suggesting that the effects of the existing tariff policies could begin showing up in July earnings reports, particularly among multinationals with global supply chains. The Levi Strauss CFO also remarked on the impact of tariffs on their production costs, further emphasising how policy uncertainty is beginning to affect corporate fundamentals.

Despite the volatility, some sectors provided relative outperformance. Technology stocks remained resilient, aided by robust earnings and investor faith in secular growth trends. In this context, we absolutely have to mention the resurgent rise of Nvidia as part of this latest move, which is emblematic of the broader AI-driven investment narrative. Nvidia’s share price has surged over 74% from its recent low point on ‘Liberation Day’, cementing its position as the third-largest company in the world by market capitalisation. Demand for Nvidia’s H100 and upcoming Blackwell chips continues to outstrip supply, with hyperscalers, sovereign AI initiatives, and enterprise adopters vying for allocation. Importantly, the company’s earnings trajectory has not only justified but accelerated analyst expectations: Q2 revenues rose 260% year-on-year, and gross margins expanded well above 75%, reflecting both pricing power and operating leverage.

Investors who have remained patient and invested in the medium-term story behind Nvidia have been rewarded. Putting to one side the something-like 1500% growth in the stock since 2020… investors buying at the previous high in November last year are now sitting on +20% gains which again has investors (and me) asking; what is fair value for a business which could define the shape of the world economy over the next decade?

Europe

European equities mirrored the risk-off sentiment seen in US markets towards the end of the week but held onto some gains accrued as a direct result of continued positive inflows to European stocks, amidst the positive reception of the extended window to 1^st August to get trade deals with the US in place. Speculation is that many European nations are vying to simply get “something” drafted as a way of placating The White House and avoiding Trumps direct vitriol over the shorter term, kicking the can down the road and hoping that market forces convince the US to back down, to the original baseline 10% tariff…

European equity funds attracted some $5.21 billion last week, the highest inflow figure since late May, indicating continued investor optimism and momentum.

European automakers, under pressure from weakening Chinese demand, saw some sensible single-digit gains, but this is against a backdrop of broad decline over the last 12 months. ECB policymakers continue to emphasise patience and flexibility, with no immediate policy changes expected, the tepid trend remains.

Moreover, political risk in France and Italy remains a more subtle background concern, with populist parties gaining further traction and calling into question the long-term fiscal cohesion of the Eurozone. Investors don’t seem to care though – and Europe (and the UK) still appear to be the beneficiaries of continued reallocation of international investors away from the US.

*Late addition –  4pm Sunday afternoon – The White House announced a 30% base tariff for the European Union coming into effect 1^st August. Whilst unlikely to change the overarching picture, this is likely to have an initial negative effect for European equities at the open.

UK

UK equities posted a strong showing last week, with the FTSE 100 index reaching a record high of 8,975.66 on Wednesday. This was underpinned by strength in cyclical and resource-linked stocks, which outperformed amid a broader investor pivot toward undervalued sectors. Mining giants such as Glencore, Rio Tinto, and Anglo American led the charge, buoyed by rising commodity prices and renewed demand from industrial sectors. Equipment rental firm Ashtead also contributed materially to index gains, reflecting resilient capital expenditure in infrastructure and logistics.

This positive momentum occurred despite lingering concerns over US trade tensions, suggesting the UK market benefited from relative undervaluation, a favourable dividend yield profile and the fact we have “some kind” of deal in place (at least optically). The Bank of England’s continued dovish approach also lent support, as did a modest rebound in the pound, which helped ease import cost pressures without undermining export competitiveness – a rare thing.

While political uncertainty remains a factor (no I’m not going to write about Rachel Reeves policies or the 0.01% GDP contraction, market optics are more relevant here than the economy and/or UK politics) the UK’s stock market has shown considerable resilience. Investors appear to view the UK as being slightly ahead of the curve when it comes to the negotiation table with the US and our relative value appears to make us a prudent place to allocate capital – for now.

Asia

Big early gains in indices such as the Hang Seng and the KOSPI gave way to limited losses as the week progressed. The renewed focus on global trade tensions placed downward pressure on regions proportionate to their dependence on exports.

China’s market remains especially sensitive, but, despite following the same pattern as many other global markets was still able to finish the week higher. Domestic policy support continues in the form of liquidity injections and fiscal easing which continue to create positive tailwinds for a market that still sits some way off its 2018 highs.

In contrast, India’s equity market experienced a downturn, with the Nifty50 index declining by 1.2%. This relatively small move was attributed to the overarching global economic uncertainties and local investors engaging in profit taking.

Whilst it was (to use our earlier phrasing) a ‘mixed bag’ in Asia, many regions still finished the week higher despite the negative trend later in the week, reflecting an overarching constructive tone and continuation of the theory that many Asian nations and exporters will be able to expand trade arrangements and broker new deals to create a (net) positive outcome for trade in each region, working around likely US friction.

Japan

The Nikkei 225 index experienced very modest falls, closing at 39,569.68 on Friday, slightly down for the week from a 39,821.28 high on Wednesday. A weakening yen provided support to exporter earnings expectations, partially offsetting concerns over the slight escalation to its currently slated US tariff, due to come into effect 1^st August, now announced at 25% (up from 24% previously).

The threat of escalating trade barriers remained the key driver of narrative in the second half of the week. The Japanese government issued a cautious statement urging dialogue and de-escalation of trade disputes. The Bank of Japan maintained its monetary policy stance, keeping the policy rate at 0.5% and signalling a pause in rate hikes amid continuing global economic uncertainties.

Japan remains a confusing sector for UK-based investors, with interest in the region at a nadir due to the optics of disproportionate potential fallout from tariffs and lack of clear catalyst for growth, not that its climbed back up to its 1990’s peak again. Anecdotally, this is the one region that we don’t see any tactical positive allocation to in our peer consensus data – providers are in lock step when it comes to reducing exposure to the US, but positive allocation for equity seems to go everywhere barring Japan.

Emerging Markets

Emerging market equities didn’t offer any particular insight during the week, with some regional shifts but nothing noteworthy outside of the broader narrative on trade policy fallout.

As with Asian markets, the opportunity presented to Emerging Market economies to strike up new trade arrangements and bolster their exports in light of US policy remains as central to the global economic story as anything else. The story for clients here is really contextualised by the year-to-date performance of Emerging Markets versus the S&P (these prices don’t include the drops at the end of the week).

In a market like this – you would expect quality active managers and processes to be able to extract value fairly easily – and you’d be correct. I’ve added one of our key Emerging Markets positions to the chart below to highlight the difference over a relatively short two quarter period.

This Week…

This week’s economic data and corporate earnings reports will be pivotal in assessing the health of the global economy and guiding investment positioning – there are a load of big corporate names reporting that clients will recognise from ‘top ten holdings’ in some of their underlying funds. I’ve listed them all and what the data will likely tell investors.

Key Economic Events

Tuesday, July 15:

• US Consumer Price Index (CPI) for June: Expected to show a 0.2% month-over-month increase, with core CPI (excluding food and energy) anticipated to rise by 0.3%. Year-over-year inflation is projected at 2.4%, slightly above the Federal Reserve’s 2% target.
• China Q2 GDP and June Economic Data: China will release its second-quarter GDP figures, along with June’s industrial production, retail sales, and fixed asset investment data.

Wednesday, July 16:

• US Producer Price Index (PPI) for June: This measure of wholesale inflation will offer additional perspective on price pressures within the economy.

Thursday, July 17:

• US Retail Sales for June: This report will shed light on consumer spending trends, a key driver of economic growth.

Major Earnings Reports (it’s a big week)

Tuesday, July 15:

• JPMorgan Chase: Investors will look for updates on net interest income and the impact of interest rates on the bank’s profitability.
• Citigroup: Focus will be on trading revenues and any commentary on global economic conditions.
• Wells Fargo: Analysts will watch for insights into loan growth and credit quality.
• BlackRock: As a leading asset manager, BlackRock’s earnings will provide perspective on investment flows and market sentiment.
• Bank of New York Mellon: Attention will be on custody and asset servicing revenues.
• American Express: Earnings will offer a view into consumer spending trends and credit card usage.

Wednesday, July 16:

• ASML Holding: As a key supplier to the semiconductor industry, ASML’s results will be indicative of tech sector health.
• Bank of America: Investors will examine loan growth and net interest margins.
• Johnson & Johnson: Earnings will provide insights into pharmaceutical and consumer health segments.
• Goldman Sachs: Focus will be on investment banking revenues and trading performance.
• Morgan Stanley: Analysts will look for updates on wealth management and trading divisions.
• United Airlines: Results will indicate the state of the travel and airline industry.

Thursday, July 17:

• Novartis: Investors will watch for pharmaceutical sales and pipeline developments.
• PepsiCo: Results will reflect consumer demand in the food and beverage sector.
• General Electric: Focus will be on industrial segments and energy-related businesses.
• Netflix: Investors will look for subscriber growth and content spending updates.
• Taiwan Semiconductor Manufacturing Company: As a major chipmaker, TSMC’s earnings will be indicative of global tech demand.

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