A sense of déjà vu

For the month as a whole, the American S&P 500 Index rose by 1.4 per cent measured in USD, while the European Stoxx 600 Index grew by 0.3 per cent measured in EUR and the Nordic VINX Index fell by 0.2 per cent measured in NOK. In Norway, the Oslo Stock Exchange (OSEBX) climbed by 0.6 per cent. The second-quarter results season is well underway. The picture in the USA is relatively good, although based on much lower expectations. In Europe, the picture is also quite positive, but the reports are having widely varying effects on share prices.

The trade war and Brexit

Following a brief meeting between Donald Trump and his Chinese counterpart Xi Jinping in Osaka a month ago, the parties met for new negotiations in Shanghai on Tuesday, 30 July. A speedy solution still appears rather unlikely and the rhetoric remains crass. However, the Chinese economy seems to be coping well with the trade war. The US economy also continues to do well, with relatively robust macro figures and a still strong US dollar.

In the UK, fears of a hard Brexit have increased since Boris Johnson took over as prime minister in July. Johnson has started off by rejecting talks with EU leaders unless they are willing to negotiate a new divorce agreement. The market has responded by sharply reducing the value of the British pound.

Increased expectations of central bank actions

Last month otherwise brought increased expectations of interest-rate cuts and stimulus measures from the European and US central banks. This led to further falls in the long-term interest rates, especially in Europe. There are also still high expectations of stimulus measures in China.
Last day in July, the US central bank met expectations, with a 0.25 percent interest rate cut.

In July, it was also announced that the head of the International Monetary Fund (IMF), Frenchwoman Christine Lagarde, was to take over from Mario Draghi as president of the European Central Bank (ECB) on 1 November. She will inherit an almost empty ammunition box to use in the fight against low growth and low inflation. Nonetheless, the bank is expected to implement both interest-rate cuts and so-called quantitative easing (QE) measures.

The road ahead …

The companies' continuing growth in earnings, combined with low interest rates and the lack of real investment alternatives, means that shares are still an advantageous investment.

"My chances of being PM are about as good as the chances of finding Elvis on Mars, or my being reincarnated as an olive"
Boris Johnson