July Market Commentary 2023

15 Aug 2023 | Investment Updates
July Market Commentary 2023

July was a relatively quiet month for markets, although gains were extended for the fifth consecutive month as we continue to see a rally from the low of October 2022. There continues to be mixed data on the US labour market, but headline inflation numbers were cause for positivity. UK inflation started to head in the right direction but remains a massive challenge. The ECB raised rates, the Bank of Japan signalled a policy shift, China faces economic struggles as it looks to rebound from the pandemic, and oil prices rallied on production cuts from key OPEC+ members.


The US

Unexpectedly amidst the environment of rising interest rates, the US has seen the creation of over 1.5 million jobs in the first five months of the year. Unemployment durations have shortened compared to previous years, while resignation rates have surged, reflecting strong confidence from employees in securing new jobs. Unemployment benefits claims also hit two-month lows in July, underscoring a resilient labour market. June only saw 209,000 job additions, the lowest in over two years, showing some slowdown but resulting in mixed data overall. Analysts increasingly see the possibility of a ‘soft landing’ becoming more likely, although challenges remain for the Fed to continue slowing down demand.

On the inflation front, US CPI for June receded to 3%, marking the lowest price rise for more than two years. Falls in energy and food prices contributed, alongside an unexpected decline in services inflation. Despite this, the Fed proceeded with a 0.25% interest rate hike, reaching a range of 5.25% to 5.5%. Recent inflation data might temper expectations for further hikes, although the tight labour market may yet see another cut this year. Fed Chair Jay Powell emphasised the need for economic deceleration and a weaker job market to achieve the Fed’s 2% inflation target, ruling out rate cuts this year. Markets anticipated the rate hike and displayed minimal reaction, as the impact of interest rate rises has largely already been priced in.

Markets extended their fifth consecutive month of gains, with the end of the month seeing a focus on earnings reports for the second quarter. 80% of companies beat analysts’ expectations, highlighting resilience despite the inflationary headwinds.


The UK and Europe

UK CPI dipped to 7.9% in June from May’s 8.7%, coming in lower than the 8.2% forecast. This represents the lowest reading in over a year, although it remains considerably higher than most developed economies. House prices fell at their quickest annual rate since 2011, which could signal a return to normalcy after last year’s record highs, which came in the summer after the government introduced a temporary stamp duty cut.
The European Central Bank (ECB) raised rates by another 0.25%, bringing them to 3.75%. While Germany emerged from a mild recession, weaknesses persist in its manufacturing and services sectors.



China’s producer prices plummeted by 5.4% YoY in June, the largest drop since December 2015. Consumer inflation stood at 0%, a two-year low, prompting concerns about deflation and waning demand. Pan Gongsheng’s appointment as the governor of the People’s Bank of China is intriguing as he is not seen as a devout Xi Jinping loyalist. This might introduce economy-aligned policies beyond party ideologies. China’s post-Covid economic rebound remains challenging, with promises of more support from the government, albeit lacking specifics.

US Treasury Secretary Janet Yellen visited Beijing, emphasising the need for fair competition and open communication between the world’s two largest economies. However, tensions persist, exemplified by China’s export curbs on key semiconductor materials gallium and germanium, which has been seen as a retaliation to Western sanctions on Chinese technology.



The Bank of Japan adopted a more flexible stance on its yield curve control program due to high inflation (CPI hit 3% in July) and improved wage growth. This change indicates a potential shift away from ultra-loose monetary policy, possibly towards tightening, leading to a rally in the Japanese yen.



Russia and Saudi Arabia reduced oil production in order to elevate prices and raise funds needed for state projects. Russia announced a 500,000 barrels per day cut in August, while Saudi Arabia extended its 1,000,000 per day cut from July to August. Brent crude surpassed $80 per barrel for the first time since April.


  • BlackRock Investment Institute
  • atomos, via VAM Funds
  • Fidelity International
  • Canaccord Genuity Wealth Management
  • RBC Brewin Dolphin, via Guinness Asset Management
  • BBC