The sun is shining (but not everywhere)

July saw continued strength in global share markets, helping deliver positive performance for the funds in the month and building on some solid year-long gains for high and low risk funds alike.

Global investors have been celebrating a heady mix of falling inflation, resilient growth (in the US) and optimism around an artificial intelligence (AI) led profitability boom for large technology companies. This backdrop has been delivering performance from our stock picks, as well as helping our corporate bond holdings to handily outperform government bonds.

We follow AI developments closely, and investments in Facebook owner Meta (up 11.0%) and chip maker Micron Technologies (up 13.3%) are expected to benefit from this trend. Some of our picks are also benefitting from the resiliency of consumer spending in the US. Wyndham Hotels (up 13.6%) and home improvement retailer Lowe’s (up 4.3%) have delivered good share price performance over the past few months.

Australian share markets were buoyed by the announcement of further Chinese stimulus measures. This news and strength in commodity prices helped Santos (up 5.9%) and mining services company Monadelphous Group (up 16.2%) last month. We also invested in clothing retailer Universal Store recently, and were rewarded with a 20.1% return last month.

Global government bond prices have remained under pressure from ongoing rate hikes and resilient growth, particularly in the US. But a more sanguine view on the prospect of recession saw corporate bonds perform well last month, in addition to strong performance from our lower risk bank, Aussie real estate, and global utility company holdings.

Interest rate rises don’t impact all economies equally. NZ, Australia and parts of Europe are already showing signs of lower growth (or even recession). Meanwhile, the US economy’s relative immunity to interest rates has allowed it to maintain solid economic growth. Inflation is falling but central banks remain vigilant and continue to hike rates. Different economies’ sensitivities to interest rates mean that the economic cycle will likely see further global divergences going forward. These divergences offer plenty of opportunities to express views across currencies and interest rate markets, in addition to our active stock picking in what continues to be a very dynamic investment backdrop.

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