Monthly Review and Outlook July 2025
Global markets made positive progress in July, helped by encouraging developments in trade talks and strong company earnings. Shares in emerging markets performed particularly well compared to developed markets. Meanwhile, returns from government bonds were held back by concerns around how some major economies are managing their finances.
Below is a review of key developments across global markets and our outlook for the months ahead, highlighting opportunities and potential risks.
Company shares
Global stock markets advanced in July, with emerging markets leading gains. Investor sentiment was lifted by easing trade tensions and enthusiasm around artificial intelligence (AI).
- United States: US shares rose, driven by technology stocks and optimism around AI. The approval of new tax and spending plans also supported markets. Semiconductor companies benefited from renewed access to the Chinese market. Defensive sectors such as healthcare and consumer staples underperformed.
- Europe: European shares gained, helped by relief over trade tariffs and strong earnings from banks and healthcare companies. Technology stocks lagged due to weaker earnings. Property and utilities also underperformed. A trade deal with the US helped avoid higher tariffs, supporting investor confidence.
- United Kingdom: UK shares delivered positive returns, with energy, healthcare, and telecommunications among the top performers. Real estate and technology sectors were weaker. Inflation edged higher, and government borrowing rose more than expected.
- Japan: Japanese equities rose, supported by a favourable trade deal with the US and strong demand for AI-related infrastructure. Exporters and technology firms led gains. Political uncertainty following elections had limited impact on markets.
- Emerging Markets: Emerging market shares outperformed, supported by strong performance in Taiwan, China, and Korea. AI enthusiasm and trade progress helped sentiment. Thailand, UAE, and Qatar also performed well. India and Brazil declined due to tariff concerns.
Bonds
Bond markets delivered mixed results in July. Returns varied across regions, with rising interest rates reflecting concerns about government spending and decisions made by central banks.
- US Bonds: Yields rose as markets reacted to new spending plans and trade developments. The Federal Reserve kept interest rates unchanged, but commentary was seen as relatively firm.
- UK Bonds: UK gilts experienced volatility amid political developments and questions over fiscal discipline. Inflation concerns also weighed on sentiment.
- European Bonds: Yields rose slightly as defence spending increased. The European Central Bank held rates steady, with a more cautious tone. A trade deal with the US helped ease tensions.
- Corporate Bonds: Corporate bonds outperformed government bonds, supported by strong earnings and improved sentiment. Investment grade and high yield bonds both delivered positive returns across regions.
Commodities
Commodity prices rose in July, led by energy and livestock. Precious metals were flat, while agriculture and industrial metals declined. Sugar and zinc were among the few gainers in their respective categories.
Outlook
Progress on trade negotiations and strong corporate earnings have helped reduce uncertainty and support investor confidence. We continue to see opportunities in global equities with the Europe, Emerging Markets and the US now presenting opportunities. Schroders remain underweight fixed income, via government bonds, with better opportunities in the other markets.
Asset overview
Our general view of assets in the coming months is summarised as follows. These are our in-house views as at the end of July 2025.
| Asset | RAG Status | Details |
|---|---|---|
Equities | Green | While economic uncertainty remains, we believe the potential for significant downside has reduced and the likelihood of a recession in 2025 has diminished. As a result, we continue to have a positive view on equities and have maintained broad exposure across the US, Europe, and Emerging Markets. We have increased our focus on US Healthcare companies, which we believe offer better prospects at this time, while reducing our exposure to US Consumer Staples. |
Government bonds | Red | We retain an underweight position on Government bonds. |
Corporate bonds | Amber | We maintain a neutral stance on corporate bonds. |
Commodities | Green | We retain a positive stance on gold which continues to serve as a diversifying hedge against inflation and geopolitical uncertainty. |
Source: Schroder Investment Management and Schroders Personal Wealth, 6 August 2025.
RAG Status legend
Green - Positive outlook
Red - Negative outlook
Amber - Neutral outlook
Important information
Forecasts of future performance are not a reliable guide to actual results, neither is past performance a
reliable indicator of future results. The value of investments and the income from them can fall as well as rise and are not guaranteed, and the investor might not get back their initial investment.
Any views expressed are our in-house views as at end-June 2025. Investment markets and conditions can change rapidly, and the views expressed should not be taken as statements of fact nor relied upon when making investment decisions. This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.
Schroders Investment Management (SIM) provides investment management and advice services for Lloyds Wealth funds and portfolios respectively.
Lloyds Wealth (ACD) is a trading name of Lloyds Wealth Management (ACD) Limited. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales No. 11722973. Authorised and regulated by the Financial Conduct Authority number 834833.
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