Investment Update July 2026
- ABP Team
- 5 days ago
- 6 min read
Updated: 4 days ago
Key Highlights:
June was a stop-and-go month, shaped by the SpaceX stock market launch, the Iran conflict, lower oil and input prices, and rising underlying inflation pressures.
Shipping traffic through the Strait of Hormuz resumed, while oil and other key commodity prices moved steadily lower as the route slowly reopened.
The S&P 500 closed June near record highs around 7,499, up approximately 9.5% year-to-date, alongside an AI capex boom linked to large technology firms committing $723bn in 2026.
The Federal Reserve held rates at 3.50 to 3.75%, while officials projected at least one rate rise by year-end.
US economic activity remained in good shape, with services and manufacturing in expansion and manufacturers rebounding strongly.
The ECB raised all three key rates by 0.25%, while Eurozone inflation reached 3.2% and the 2026 growth forecast was cut to 0.8%.
The FTSE 100 cleared the 10,000-point milestone, supported by global energy, mining and financials, before fading into month-end.
Japanese equities delivered positive but volatile returns for a GBP-based investor, supported by technology and AI-related stocks, while the yen reached a 40-year low against the dollar.
China’s Shanghai Composite Index gained 0.63%, supported by stronger-than-expected economic data, demand for Chinese technology and renewed PBoC liquidity activity.
Emerging market equities were broadly resilient, with AI-related memory demand supporting hardware stocks across Asia, while South Korea’s KOSPI fell 9.99% in a single session.
Portfolio positioning remained risk-on, with short-duration fixed income, money market funds and absolute return strategies contributing to valuation support and volatility control.
June proved to be a stop‑and‑go month from a market perspective and marked the halfway point of the year. Headlines were dominated by what was billed as the largest stock market launch ever, in the guise of SpaceX. The Iran conflict moved closer to a resolution, although flare‑ups remain a regular occurrence. Oil and other key input prices fell back in a reassuring manner, but inflation readings pointed, more concerningly, to rising underlying pressures.
Kevin Warsh assumed his position as Federal Reserve Chair and delivered a statement signalling likely rate increases in the year ahead. Markets reacted accordingly, and share prices declined. As always, the key insights can be found in the detail that follows.
The chart shows resumption of shipping traffic through the Strait of Hormuz.
The S&P 500 closed June near record highs around 7,499, up approximately ~9.5% year-to-date, with the AI capex boom (large technology firms now committing $723bn in 2026 alone), acting as a private-sector fiscal stimulus across manufacturing, energy, and construction. The month's defining event was the Fed's first meeting under new Chair Kevin Warsh. Policy remained unchanged with rates held at 3.50–3.75%. Several officials projected at least one hike by year-end. Our disposition remains slightly more relaxed on the likelihood of interest rate rises in America, although the rate cuts previously forecast do not currently feature on our radar. April CPI inflation had already risen to 3.8% and core PCE (the Fed’s preferred measure) to 3.3%. The Iran war has certainly added inflationary pressure in the short term which we expect to abate – a watching brief is the sensible approach we are adopting.
Economic activity in America remains in good shape with both Services and Manufacturing sectors in expansion. Manufacturers in particular have rebounded strongly with the smaller company Russell 2000 index delivering excellent returns.
Forward Guidance and Dot-Plot interest rate forecasts came from former Fed Chair, Ben Bernanki’s era. This is being dropped in favour of a quieter more mysterious Fed under Mr Warsh. The central banks mandate remains in place for now (2% inflation and full employment). Although changes to the inflation measure are likely.
The ECB raised all three key rates by 0.25%, lifting the deposit facility rate to 2.25%, with the decision described as robust across a range of Iran conflict scenarios. We remain unconvinced the rate hike is justified whilst Europe’s economy suffers. Eurozone headline inflation hit 3.2% in May, and the ECB cut its 2026 growth forecast to just 0.8%, reflecting the pronounced impact of the energy shock on real incomes and confidence. European equities materially underperformed the S&P 500, although they posted 2-4% gains during June. Longer term, energy imports, higher rates, and weak industrial activity weigh on corporate earnings. The partial Hormuz re-opening offers the most meaningful near-term relief catalyst for the region, however energy dependency remains a notable Achilles heel.
The FTSE 100 in the UK cleared the historic 10,000-point milestone, supported by its heavy weighting in global energy, mining, and financials, though it faded into month-end around 10,487 as oil price volatility whipsawed the energy complex. The Bank of England held Bank Rate at 3.75% in June, citing real economy softness and uncertainty around the duration of the energy shock, but flagged explicit upside risks to inflation. Gilt yields had surged above 5% during May. We note the UK’s ongoing political turmoil with Prime Minister Starmer being effectively deposed after just 2 years. His probable successor Mr Andy Burnham has yet to set out his proposals and clear costings.
Japanese equities delivered positive but somewhat volatile returns for a GBP‑based investor in June 2026. The Nikkei 225 rose by roughly 4 to 5 percent in local currency terms over the month, which translated into a similar gain in GBP given limited yen-sterling movement, while the broader TOPIX increased by around 1 to 2 percent. Performance was supported by strength in technology and AI related stocks and improving global risk sentiment, though markets experienced a notable mid-month pullback driven by a semiconductor led selloff before recovering into quarter end. Overall, GBP investors saw solid gains, with Japan continuing to outperform on a year-to-date basis despite signs of rising short-term volatility. The Japanese Yen hit a 40-year low against the dollar. Good for exports, bad for inflation as energy typically (priced in USD) will cost more. The all-important carry trade is a concern – we will keep a watchful eye as this could spook markets if it (even temporarily) unwinds.
Meanwhile in China, the Shanghai Composite Index gained a modest 0.63% in June, supported by stronger-than-expected economic data. We note a strong pick-up in demand for Chinese technology. The People’s Bank of China (PBoC) introduced a new overnight reverse repo facility as part of broader monetary framework reforms while leaving loan prime rates unchanged for the thirteenth consecutive month. The PBoC is again inserting liquidity again and this is good for risk asset prices and commodities. The People's Bank of China is a key driver of global gold demand. China prohibits retail crypto currency investment but actively encourages private gold ownership, and the PBoC is itself a significant bullion buyer.
The chart shows a timely pick-up in the supply of liquidity from the People’s Bank of China.
Emerging market equities were broadly resilient, with AI‑related memory demand supporting hardware stocks across Asia and offering exposure to the theme at lower valuations than in the US, South Korea was the defining story of the month: the KOSPI plunged 9.99% in a single session on 23 June after the Financial Supervisory Service governor publicly acknowledged that the approval of single‑stock leveraged ETFs on Samsung and SK Hynix had been too hasty.
We note oil prices and other key commodity prices have moved steadily lower as the Strait of Hormuz slowly reopens to shipping. Strategic reserves of key commodities in countries such as America and China played a crucial buffer role whilst supplies have been restricted.
At the portfolio level, we have maintained a risk‑on position, which has clearly supported valuations. Our short duration fixed income positioning has proven prudent, and our preference for money market funds over traditional fixed income markets has been beneficial. Absolute return strategies have also helped to dampen volatility.
As we head into the summer, we remain in an optimistic mood, although certain risks are evident. We will reassess our risk positioning ahead of the mid‑term elections scheduled for November, unless earlier developments warrant action. At the halfway point of the year, we would like to thank clients and investors for their continued support, and we trust you are pleased with progress so far.
Written by the Alpha Beta Partners Investment Team.
All sources Bloomberg unless otherwise stated.
