Market review July

June Market Review: July – AI Faces the Profitability Test July marked a period of consolidation following a first half of the year that favoured risky assets. Some equity markets ended the month down, with a sharp correction in US technology stocks. The Nasdaq recorded the sharpest fall amongst the major developed market indices. The Japanese and Chinese markets also saw profit-taking, against a backdrop of rising bond yields.

Investors continued to navigate conflicting signals. On the one hand, the US economy remains resilient and corporate earnings remain broadly robust. On the other hand, concerns about inflation and the prospect of persistently high interest rates have weighed on assets that are most sensitive to bond yields.

Earnings reports have also highlighted a significant shift in attitudes towards artificial intelligence. Several companies have announced ever-increasing expenditure to fund their AI infrastructure, raising questions about their future profitability. Against this backdrop, some companies have seen their share prices fall despite solid financial results. Bond markets have also operated in a more challenging environment. Rising US government bond yields have kept pressure on long-dated bonds. After several months of weakness, cryptocurrencies, meanwhile, have bounced back.