July 2025 monthly investment news

Despite facing increased tensions in the Middle East and a complex backdrop of economic uncertainty, changing tariff policies, and growing geopolitical risks, markets remained  steady, with North American stocks leading the way and outperforming their international peers. However, currency movements reduced the returns for euro based investors.

Trade policy continued to drive market movements, with uncertainty around enforcement and the risk of new tariffs adding to volatility. Geopolitical risks grew, particularly after the Iran-Israel conflict escalated in mid-June, prompting many investors to seek safer assets.

Despite these headwinds, equity markets posted solid gains. Positive progress in trade talks, strong corporate earnings, and renewed optimism about AI-driven growth in the technology sector all helped support this positive performance.

Market activity and performance

There were no significant changes to our active asset allocation in June. Our current stance is slightly underweight in equities across multi-asset funds, with a geographical underweight in US equities relative to the global market. Within equities, we continue to favour growth stocks, including the technology and industrials sectors, while maintaining an underweight position in energy and consumer staples.

In our bond portfolio, we remain overweight but have recently shortened duration to reduce exposure to changing interest rate expectations. We also continue to hold a strong allocation to alternatives, including a tactical position in gold, which has contributed positively to returns so far this year.

Equity markets

US equity markets maintained strong momentum in June, with major indices showing positive returns despite ongoing uncertainty around trade policy and fiscal matters. Growth stocks stood out, especially semiconductor companies, as rising expectations for AI applications boosted investor interest, reviving demand for several of the “Magnificent 7” stocks. However, 8 out of 11 sectors ended the month lower, while technology and communication services led the way with gains of 5.4% and 3.3%, respectively.

Consumer staples was the weakest sector, declining by 5.4%. Although US equities narrowed their performance gap with European markets in June, European stocks remained resilient, supported by robust economic data, the enduring expectation of fiscal expansion, and continued inflows from investors seeking greater diversification.

Bonds and interest rates

Treasury yields declined in June following unrest in the Middle East, though the drop was less pronounced than typically seen after comparable geopolitical events. Short-term yields, which closely follow Federal Reserve policy, remained steady as the Fed maintained its “wait and see” stance on rate cuts.

In contrast, long-term US Treasury yields fell to new cycle lows, with the 10-year yield reaching 4.23%. While the Fed’s preferred inflation measure indicated mild upward pressure during the month, markets increasingly anticipated potential rate cuts in the latter half of 2025.

In Europe, inflation remained subdued compared to other developed markets. The European Central Bank cut rates by 25 basis points in June, bringing the key Deposit rate down to 2%.

Commodities and currencies

In June, military tensions between Israel and Iran initially pushed oil prices above $78 per barrel, raising investor concerns about stagflation. Relief came with a diplomatic breakthrough and ceasefire, which helped oil prices fall and eased market anxiety. Gold moved within a narrow range for the month, returning just 0.4%. Unlike silver and copper, which gained 9.5% and 5.3% respectively, gold did not attract significant safe haven demand during the conflict, reflecting recent buyer fatigue. The US dollar remained weak, with the euro rising to 1.176 USD by month-end, up from 1.135 the previous month.