Welcome to the July edition of our Stock Market Trends and Updates. As we examine the most recent happenings in the financial realm, we discover that we operate in a market climate influenced by an intricate combination of critical elements.

Amid the July 2024 stock market updates, we witness a landscape of shifting dynamics and heightened fluctuations in investor sentiment. The ongoing economic uncertainties, driven by concerns over rising interest rates, slowing economic growth, and persistent high inflation, underscore the unpredictable nature of today’s global financial landscape. This unpredictability calls for our insights and understanding as we navigate the markets.

Whether you’re an experienced investor or just starting your financial journey, our goal is to provide valuable insights and a thorough understanding of the current global stock markets. Join us as we explore the complexities of the stock market, examining the latest trends, changes, and developments that have defined June.

S&P 500 resilience 

The S&P 500 has demonstrated remarkable resilience in 2024, buoyed by solid first-quarter earnings that have alleviated investor concerns about inflation and potential delays in the Federal Reserve’s interest rate cuts. In May, the S&P 500 surged by 4.2% despite ongoing worries about slowing economic growth, weakening U.S. consumer sentiment, and the looming threat of stagflation. The index is up 10% year-over-year reflecting investor optimism for lower inflation, accelerated earnings growth, and possible interest rate cuts in the latter half of the year.

The S&P 500’s strong performance can be attributed to better-than-expected earnings growth, with companies reporting an impressive 6% year-over-year increase. Certain sectors, such as communication services and utilities, have significantly outperformed, while others, like materials, healthcare, and energy, have faced challenges. Looking forward, analysts predict continued earnings growth, with an anticipated 9.3% increase for the second quarter and full-year earnings growth of 11.4% in 2024. This positive outlook has buoyed investor sentiment and increased the market’s upward momentum.

Historically, the S&P 500 has performed well during the summer months of election years, with average gains of 1.3% in June since 1950. This trend has often continued through August before cooling off in September and October. The current year appears to follow a similar pattern, with investors hopeful that the market can maintain its bullish momentum.

Economic data and corporate earnings will continue to play a crucial role in shaping market trends. Investors are keenly watching for signs of lower inflation and sustained earnings growth, which could further bolster confidence in the stock market. While the future remains uncertain, the resilience of the S&P 500 amidst economic headwinds provides a measure of optimism for the months ahead.

The Federal Reserve’s monetary policy decisions have been a significant driver of market sentiment over the past year. The FOMC has maintained its target fed funds interest rate range at 5.25% to 5.5% since July 2023, the highest since 2001. Despite some speculation about potential rate hikes, Federal Reserve Chair Jerome Powell has indicated that the current policy will likely be maintained for an extended period. Powell acknowledged that recent inflation readings have been higher than anticipated, suggesting a need for patience in achieving the Fed’s long-term inflation target of 2%.

The consumer price index (CPI) rose 3.4% year-over-year in April, down from peak levels in 2022 but still above the Fed’s target. The Fed’s cautious approach to interest rate adjustments reflects its commitment to balancing inflation control with economic stability. Analysts believe that the current high interest rates are already exerting a cooling effect on the economy, particularly in areas such as consumer durable goods spending and multifamily residential investment.

Evaluating the potential for a U.S. recession and economic outlook

Economists and investors remain concerned about the potential for a U.S. recession. The U.S. Treasury yield curve has been inverted since mid-2022, a historically solid indicator of a potential slowdown. The New York Fed’s recession probability model suggests a 50% chance of a recession within the next 12 months. However, the U.S. labour market remains relatively strong, with the economy adding 175,000 jobs in April, though this figure fell short of economist estimates.

The interplay between high interest rates, inflation, and economic growth will be critical in determining whether the Fed can achieve a “soft landing” for the economy. A cooling labour market and slower economic growth could signal that inflation is trending lower, providing some relief to both the Fed and investors. Ultimately, the path forward will depend on a complex mix of economic indicators and policy decisions, with potential challenges and opportunities in the coming months

As July progresses, investors are advised to stay updated on market developments, including corporate earnings reports, economic indicators, and historical trends like the market’s past performance during economic downturns. Being prepared to adjust investment strategies in response to evolving market conditions can empower investors to navigate volatility and uncertainty effectively. 

Navigating geopolitical tensions

Historical evidence shows that geopolitical tensions consistently pose significant risks to the global financial environment. Ongoing conflicts, diplomatic disputes, and trade tensions create unpredictability, leading to market instability through trade barriers, supply chain interruptions, and currency value fluctuations.

The global stock market is significantly influenced by tensions between the United States and China, which impact investor sentiment and market stability. The ongoing competition and cooperation between these economic powerhouses have resulted in market volatility due to technology rivalries, trade disputes, and military posturing, particularly regarding Taiwan and the South China Sea. These tensions and the resulting market dynamics are crucial in shaping global market trends, influencing supply chains, and investor confidence​. 

The geopolitical tensions from Russia’s invasion of Ukraine have significantly impacted the stock market, creating a sense of urgency. The conflict has exacerbated global economic instability, mainly through disruptions in commodity markets. Russia, a significant exporter of oil, natural gas, and essential metals, faced sweeping sanctions from Western nations, including the EU and the U.S. These sanctions led to elevated oil and gas prices, pushing them to historical highs. The resulting energy crisis, particularly in Europe, and disruptions in wheat supply due to Ukraine’s crucial role in global agriculture have increased inflation and slowed global economic growth. The stock markets have been volatile, with sectors tied to energy and commodities experiencing substantial fluctuations. Financial sanctions on Russian banks and excluding Russian assets from global financial systems have further strained market stability. Investors have become wary of shifting trading patterns and asset allocations to navigate the uncertainties posed by the ongoing conflict, reflected in the performance of major indices and increased market volatility.

Similarly, geopolitical tensions in the Middle East and West Africa significantly impact the global stock market. In the Middle East, ongoing conflicts and power struggles, especially in countries like Syria and Yemen, and the complex dynamics involving Iran, Saudi Arabia, and Israel create investor uncertainty. This uncertainty leads to oil price volatility, affecting energy stocks and broader market indices. In West Africa, political instability, particularly in countries like Nigeria and Mali, disrupts economic activities and investor confidence. Issues such as coups, insurgencies, and governance challenges lead to fluctuations in commodity prices, especially oil and minerals, which are critical exports for these countries. Consequently, these geopolitical tensions are crucial factors that market participants monitor closely to assess risks and opportunities in the global financial landscape.

Final thoughts

In July, investors are grappling with increased uncertainties as they navigate the complexities of the global stock market. The dynamic nature of the markets, influenced by factors such as interest rates, economic growth, and inflation, suggests potentially turbulent times ahead.

Tesla’s stock has dropped due to delays in launching its Robotaxi service, an issue covered in depth on MarketWatch. Additionally, South Africa’s potential coalition government could significantly affect its economic policies and global diplomatic stance, and a detailed analysis is also available on MarketWatch. 

While the markets may experience sharp swings and uncertainties, it’s essential to remember that these dynamics are inherent to the investment landscape. Staying well-informed, maintaining a diversified portfolio, and adopting a long-term perspective can help investors weather the storm and seize opportunities that arise during these challenging times.

That’s where 4XSolutions comes in – as the industry’s leading technology provider for brokers and traders, we offer the tools and expertise you need to succeed. With a presence in the UK and the U.S., our global reach allows us to deliver high-quality services and support to forex traders worldwide. By leveraging our cutting-edge trading technology, you can copy and execute trades, manage risk, and increase profits – all while staying ahead of the curve in an unpredictable market.

So, if you’re looking to take your trading portfolio to the next level in 2024, get in touch with our expert team at 4XSolutions. We’re here to help you improve your trade and investment strategy, maximise returns, and confidently navigate market conditions.