So far this year, market trends have been dominated by strengthening economic activity in Europe and Japan, continuing growth in the US and Asia, and subdued inflation. Amidst this backdrop, markets have generally been benign, characterised by strong equity performance and stable bond markets. These trends continued into July, with equity markets again producing the best returns, led by emerging markets, whilst bond markets progressed with credit and highyield bonds outperforming government bonds. Volatility remained extraordinarily low with the VIX index reaching all-time lows. Perhaps the most notable feature of the month was the further slide in US Dollar, down 2.9% on a trade-weighted basis during the month and 9.1% year-to-date, moving to levels of early 2015. Oil was also a major mover during the month, forming a sizeable recovery with Brent Crude up 9.9% during July, reducing its year to date fall to 7.3%. The partial recovery of Brent crude was triggered by Saudi pledges to cut exports together with the first signs that the shale oil boom in the US is slowing.

The changes in tone from central banks drove global financial markets in June. The Bank of England and the European Central Bank appear unlikely to follow the path of the Federal Reserve in hiking rates this year. Political uncertainties in the UK grew in June following the Conservative party failing to achieve a majority just weeks before the beginning of already uncertain Brexit negotiations. In addition, questions linger over US economic policy and the ability to implement legislation.

Economic prospects in the Euro Area appear to be improving with GDP growth up to 2% this year, although inflation remains below target. The US has continued to grow, with an annual GDP growth rate of around 2%, whilst the UK has outperformed post-Brexit expectations, albeit with signs of a slowdown ahead. Emerging markets have benefitted from loose global monetary policy conditions and accelerating growth. In turn this has benefitted corporate profits, with earnings rising above the stagnant conditions of the past 2 years, up over 10% year-to-date in the US, and beyond this in Europe and Japan.