July saw a new Prime Minister move into No 10 as Boris Johnson comfortably won the Conservative leadership election. With a firm stance on Brexit concluding by the 31st October 2019, his chosen Cabinet reflects his desire to meet the deadline. By keeping a no-deal outcome on the table, Boris Johnson hopes to have a stronger seat at the negotiating table, but how this will affect the stock markets and the economy after the deadline remains to be seen.
In the US, the Federal Reserve (US Central Bank) reduced interest rates for the first time since 2008, with the aim of keeping economic growth on track. Cutting interest rates is designed to boost the economy by making the cost of borrowing cheaper, therefore encouraging people and businesses to spend more than they save. In normal circumstances, interest rate cuts are used when economies slow down, but in this case, some might suggest it was driven by market pressure, and the US President loudly voicing his concerns that interest rates are too high.
In Europe, Germany’s ZEW Survey, a key measure of expectations for economic growth, has deteriorated to a 9-year low. The health of the German economy is a useful barometer for that of the wider European economy.
Following a strong performance in June, the regions we invest in continued to generate positive returns in July. The UK’s FTSE 100, representing the largest companies in the UK, was one of the better performers finishing the month up by 2.23%. The key driver of this is the fall in value of the Pound across major global currencies. Many of the large companies that make up the FTSE 100 operate globally, so they’ll see an increase in overseas earnings as the value of the Pound goes down.
US shares also ended the month positive (1.44%) with companies including Apple, Google, Facebook and Microsoft releasing their second-quarter results and beating the analysts’ estimates. As these companies make up a large part of the US Shares, the better than expected results helped drive their growth during July, even with the ongoing trade tensions between the US and China.
Other regions saw mixed results, including Japan (+1.16%), Europe (+0.34%), Asia (-0.76%) and Emerging Markets (-1.15%).
In company news, the popular UK high street chain Next had a very good month (+9.74%) as it improves its warehousing and distribution channels to benefit from the megatrend of retail sales shifting from stores to online.
The Pound tumbled at the end of the month as the probability of a no deal Brexit increases. It declined against US Dollar (-4.42%) and Japanese Yen (-3.52%) and saw similar declines to last month against the Euro (-1.69%).
Investment type performance breakdown
Performance among the investment types in your Plan this month was broadly positive, with global property (+5.61%), shares (+2.42), bonds (+0.69%) and commodities (-0.13%).
Summary with Plan details
Due to the overall strong performance of the different investment types, all of our Plans produced positive results. Higher risk investments, namely property, in our Adventurous, Ambitious and Confident Plans performed the best, but our other lower risk investment styles also produced positive returns, albeit slightly lower.
As always, our Investment Team remain focused on keeping your Investment Plans on track and are ready to act as opportunities arise.
The figures shown are based on a medium-risk (Confident) investment Plan.
Please remember the value of your investments can go down as well as up, and you could get back less than invested. Past performance is not a reliable indicator of future returns.