July Monthly Global Financial Update

The new financial year is upon us, and the rumblings in the US continue as geopolitical issues dominate the headlines. While instability lingers across the global market, economic signs remain encouraging, and the most recent data support a cautiously optimistic approach to investing.

In this article, I summarise the latest global financial information and probabilities and provide a link to our comprehensive monthly summary.

The US economy is signaling resilience. The job market is healthy, and openings rose 7.39 million in May, exceeding expectations. Some sectors did soften; however, the rise indicates that the US economy isn’t stalling.

The inflation figure is trending in the right direction. Core CPI rose 2.8% in May, slightly below forecasts. This result may give the Federal Reserve more flexibility to cut interest rates later this year, which is good news for markets and borrowers.

It is not good news. Continuing uncertainty on U.S. trade tariffs weighs on business and consumer sentiment. U.S. retail sales and services data disappointed in May, and housing starts fell almost 10%, reminding us that interest rates still create heartburn for the property sector.

In Europe, the ECB has reduced its deposit rate to 2%. This move stimulates economic activity and equates to eight rate cuts in a little over one year. This indicates that the ECB is committed to getting growth back on track.

China’s retail sales climbed 6.4% in May. This is highly encouraging as demand has been slow for an extended period. The spike may prove that the government’s stimulus is starting to make headway. For Australia, that’s particularly promising given our trade ties with China.

Overall, global markets have remained relatively resilient, partly due to liquidity injections and the expectation that central banks will remain proactive.

Our analysis forecasts moderate global growth with persistent, but manageable inflation backed by cautious central bank support. This outlook supports our current positioning: tilted toward growth assets, with an eye on inflation-sensitive investments like precious metals.

We maintain flexibility in our portfolios and keep some cash on hand to take advantage of potential opportunities during volatility. While risks remain, particularly if U.S. tariffs escalate or global liquidity tightens unexpectedly, we see more positives than negatives in the medium term.

Our investment team predicts a slight chance—less than a 15% probability—that strong corporate earnings and technological advances, especially AI, could boost productivity and profitability. Combined with government spending and subdued inflation, this would set the stage for a powerful rally in growth assets. Should this scenario play out, we’d likely rotate further into cyclical sectors to capture that upside.

On the downside, inflation may rebound if growth stalls and tariffs stick, forcing central banks into tough choices. A resurgence in banking or credit stress could tighten financial conditions just as consumer confidence weakens. If this comes into play, we’re prepared to pivot to a more defensive stance, move away from equities, and increase cash and exposure to sectors like healthcare and utilities.

Our base case remains positive, supported by global stimulus, firm earnings, and the expectation of central bank flexibility. We’re staying nimble and watchful, ready to shift gears as needed, but confident in the long-term outlook.

As always, if you have questions or want to review your strategy,  I’m here to help.

GET THE FULL REPORT HERE