With the often discussed ‘soft-landing’ scenario, which is when economic growth slows just enough to stop an economy from overheating and experiencing high inflation and without going into recession, becoming more of a possibility, investors may have found themselves in an unlikely bull market where asset prices are rising. Economic data out of the US supported the view that the end of interest rate hikes is near, with lessening inflation and indication from the US Federal Reserve (“Fed”).

US Technology mega-caps continued to dominate market movements, with hopes of a bumper earnings season and growing hope that Artificial Intelligence could provide a fresh generator of earnings growth for the sector. The S&P 500 finished the month up 3.1%, while the tech heavy NASDAQ jumped 4.1%. Comparatively, the NZX 50 had a quiet month returning 1.2%, as investors favoured overseas equities to the defensive nature of the domestic market.

Equity markets in New Zealand were positive, albeit slow in July, with Q2 inflation data providing support to a Reserve Bank of New Zealand pausing the interest rate increases. Though business and consumer confidence remain low, the S&P/NZX 50 managed to finish the month up 1.2%. Across the Tasman, the S&P/ASX 200 finished up 2.9%.

Listed Property markets, which include companies that develop and operate commercial, industrial and residential real estate, performed positively in July, even though the lending conditions were disadvantageous. Listed property, represented by the FTSE EPRA NAREIT Developed Index (NZD Hedged), was up 3.3% in July. Listed Infrastructure, which includes a diverse range of ‘hard’ assets critical to economic growth (such as toll roads, railways, airports, utilities and communications) also performed well in July, with the index up 1.1%.

The NZ dollar showed considerable strength through July, up 1.6% and 0.3% against the USD and AUD, respectively. It was down against Asian currencies, driven by the strength of the Japanese Yen (“JPY”) and Chinese Renminbi (“CNY”). Government policies supported the Renminbi in July, gaining 1.5% against the USD.

Significant developments for July included:

• The US Federal Reserve (“Fed”) opted to raise the federal funds rate to 5.25%-5.50%, its highest level in more than 22 years. Fed Chair Jerome Powell’s accompanying comments left the door open to both a pause in the cycle, or another hike at their September meeting by saying future decisions would be “data dependent”.
• Tech Giant Meta Platforms launched Threads, designed as a competitor to Twitter. Within a day of its launch, the website had 30 million users, and grew to over 100 million after 5 days. According to initial data, the app was downloaded more than 40 million times on its first day, making it the second fastest growing app ever.
• A US Judge denied the Federal Trade Commission (“FTC”) an injunction to block Microsoft’s $69 billion acquisition of Activision Blizzard. This has opened the door for Microsoft to close the deal in all territories outside of the UK. The UK Regulator, Competition and Markets Authority (“CMA”), had initially blocked the deal, though now look likely to allow the deal as well.