July was a significant month for markets, as the all-time highs we've seen throughout 2024 came to an end. Markets processed a weaker-than-expected US Consumer price index reading early in the month, combined with weaker US labour market data and political developments. As a result, bond investors were reassured that the US Federal Reserve  will begin cutting interest rates in the near term. The US earnings season continued with four of the 'magnificent seven' reporting underwhelming results for the previous quarter, resulting in the tech sector coming under pressure for most of July, but it rebounded towards the end of the month.

New Zealand share markets had a strong month, rising 5.9% after struggling for much of the year. Positive returns were influenced by recent inflation figures, which came in at 3.3% year-on-year. This is closer to the Reserve Bank's target inflation range, giving the market optimism that interest rate cuts are just around the corner. Australian shares were also strong performers, with the ASX200 index up 4.2% in AUD terms.

The Reserve Bank of New Zealand signalled optimism that falling inflation would allow them to reduce interest rates, which sparked a rally in domestic bonds, leading to the Bloomberg NZ Bond Composite Index delivering a 2.3% return for the month.

As inflation pressures continue to show signs of easing, markets began to more aggressively price in a potential cut in interest rates, which led to the US dollar declining against other major currencies for the month. This month marked a turnaround for the Japanese Yen in currency markets, which had been on an aggressive decline throughout most of 2024.

Significant developments for July:

• The Bank of Japan raised its policy rate by 15 basis points to 0.25% in July, the highest level since 2008. The bank stated that it will reduce the pace of Japanese Government Bond (JGB) purchases by 400 billion yen per quarter starting in August.
• Former President Donald Trump survived an assassination attempt during a campaign rally in Butler, Pennsylvania. A man fired multiple shots towards the stage, resulting in the death of one attendee and critical injuries to two others.
• Joe Biden made the decision to end his presidential re-election campaign and endorsed Vice President Kamala Harris as his preferred candidate to replace him, highlighting her experience and leadership qualities. This announcement reshaped the political landscape and generated significant speculation about the future of the Democratic Party and the upcoming presidential election.