Global Markets Newsletter – July 2019
In the USA July was a volatile month due to the trade war game with China and also due to the uncertainty concerning the increase in interest rates. President Trump managed to put pressure to the Fed and rates decreased marginally by 0.25%. Federal reserve bank president Gerome Powel tried to persuade investors that this decrease is not the beginning of a slowdown, nor the increases in rates will stop. On a macro-level, growth remained at similar levels (GDP is at 2.1%), inflation is at 1.4% and unemployment decreased at a new record low of 50 years at 3.7%.
In Europe, markets moved indiferrently in July and rather negatively. New were not substantial with the exception of the substitution of key persons withn the European Union and the United Kingdom. Christine Laguarde was elected head of ECB, Ursula Von der Lyen replaces Junker for Commission and in the UK Boris Johnson was elected Prime Minister. On a macro level, fundamentals remain rather neutral for growth and Mario Draghi mentioned that ECB is willing to continue for a QE as investments are unsufficient to create growth.
The EUR/USD besides its volatility, had a clear trend and strengthen the USD towards 1.10. The small decline in US rates was necessary to motivate investments and this gave buying interest to the relevant currency which is expected to continue further in the next quarter.
Our preference remains the american equities versus european stocks where we hold no position. US equities hold 80% of the total portfolio which the technological sector holding 60%. Europe finds difficulty for a healthy and substantial growth and in the US bonds have moved more than enough and we xpect a correction. Cash remains crucial as corrections are buying opportunities often.
US Employment (Source: Bloomberg)
Euro-Area Inflation (Source: Bloomberg)
EUR/USD (Source: Bloomberg)
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