Investing & Performance | 7 August 2025
Monthly update: Strong Momentum Amid Shifting Dynamics
Against a backdrop of strong corporate earnings and anticipated rate cuts, global equities remain attractive.
1. WHAT’S HAPPENING IN FINANCIAL MARKETS?
Global financial markets continued their upward trajectory in July, with major indices including the S&P 500, FTSE 100 and Japan’s Topix reaching record highs. This sustained momentum has been largely driven by investor enthusiasm around artificial intelligence (AI), which continues to support strong performance in the technology sector.
Robust earnings from leading companies have further reinforced market confidence, particularly in the US and Japan. Increased optimism around international trade has also played a role, with recent agreements easing some geopolitical tensions. However, the broader impact of tariffs remains a key area to watch, as their effects on corporate profitability may become more evident in the coming quarters.
While US employment data showed signs of softening — with July payrolls increasing by just 73,000 according to Bureau of Labor Statistics. The slowdown has strengthened expectations of interest rate cuts from the US Federal Reserve, with reductions anticipated in both September and December.
Despite signs of moderation, the US economy remains resilient. Unemployment stands near a historically low 4.2%, and consumer spending continues to underpin growth. Notably, leisure sectors such as cinema have seen strong performance, suggesting confidence among consumers remains intact.
Looking ahead, while markets remain buoyant, we are mindful of potential headwinds. Tariffs, slowing growth, and concentrated returns in tech and AI-related stocks warrant close attention. Our investment team continues to monitor these developments and adjust strategies accordingly to support long-term performance.
Lilian Chovin, Head of Asset Allocation at Coutts, commented: “Strong earnings and the transformative potential of AI continue to support market performance across sectors. While recent trade agreements have reduced some uncertainty, their full impact will take time to materialise. We remain focused on identifying opportunities and managing risks in this evolving environment.”
Past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can fall as well as rise and you may not get back what you put in. You should continue to hold cash for your short-term needs.
“Strong earnings and the transformative potential of AI continue to support market performance across sectors. ”
Lilian Chovin, Head of Asset Allocation, Coutts
2. WHAT DOES THIS MEAN FOR YOUR INVESTMENTS?
Against a backdrop of strong corporate earnings and anticipated rate cuts, global equities remain attractive. We continue to hold an overweight position in global equities, with a particular focus on the US and Japan, where earnings trends are notably robust.
The US dollar made a respectable recovery in July having trended down for the first six months of the year against a basket of global currencies. Given the overall dollar depreciation, global equity returns are reduced when converted into sterling. However, our portfolios have mitigated some of this impact through strategic currency hedging, enhancing performance relative to benchmarks.
In addition to our equity positioning, we maintain exposure to a liquid alternatives fund that has outperformed traditional bonds over the past year. With bonds and equities increasingly correlated, this allocation enhances diversification within our multi-asset portfolios.
As always, our approach remains guided by long-term fundamentals, active risk management, and a commitment to delivering consistent value for our clients.
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