Monthly Market Review - July 2024
In July, while most global markets sustained their upward momentum with the MSCI World Islamic Index rising, bringing its year-to-date gain to 5.3%, quite a few markets witnessed downward pressure. The Dow Jones Sukuk Index experienced a notable increase of 0.9% for the month, achieving a year-to-date return of 1.9% as longer-term yields eased and US Treasury spreads narrowed.
In the US, it seems the Fed finally seems close to reaching its goal with the US inflation now hovering near the Central Bank’s target, bringing some relief to the economic landscape. The US Consumer Price Index (CPI) dipped by 0.1% month-on-month, settling at 3.0% year-on-year and headline unemployment rate has increased to a two-year high of 4.1%. Despite continued tightening by the Fed, the US economy grew at an annualized rate of 2.8% in the second quarter, surpassing expectations and marking an increase from the first quarter’s 1.4% rate, reflecting continued consumer resilience. In response to lower inflationary trends and softer unemployment data, while the Federal Reserve has kept the current policy rate steady but is considering potential rate cuts in September. Markets are currently anticipating 2-3 rate cuts before the end of the year.
Technological disruptions and uncertain political events also influenced the markets in mixed patterns. US equity markets witnessed a rotation with the Tech heavy Nasdaq closing down for the month while large caps represented by Dow Jones, or even smaller companies with Russell 2000 up strongly for the month.
UK economy has shown resilience, with inflation at the 2% target for two consecutive months. Wage growth has eased, the labor market is loosening, and unemployment is slightly higher than anticipated. Additionally, the UK Manufacturing PMI has improved, moving to 51.8. With recent improvements, the likelihood of a rate cut at the Bank of England’s August meeting has risen. Eurozone inflation fell to 2.5% in June, down from 2.6% in May. However, the Eurozone manufacturing PMI has been declining for the past six months, reaching a six-month low at 45.6 this month.
China’s economic challenges continue with last week's official data revealed that the economy grew by 4.7% in the second quarter, falling short of 5.1% forecasts, while the property sector's metrics continue to deteriorate. The People’s Bank of China announced a 0.1% reduction in the one-year loan prime rate to 3.35 percent, marking the first cut since August last year. This move is part of China's ongoing efforts to combat a prolonged property slowdown and weak domestic consumption by lowering its main lending rates. Policymakers are under increasing pressure to boost investor and consumer confidence.
Looking forward, markets are expected to remain responsive to changes in central bank policies and geopolitical developments, emphasizing the importance of maintaining a diversified investment portfolio and being prepared for any potential market disruptions.
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As with any investment, a Wahed Invest Ltd investment puts your money at risk, as the value of your investment can go down as well as up. The tax treatment of your investment will depend on your individual circumstances and may change in the future. If you are unsure about whether investing is right for you, please seek expert financial advice.
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