Rate Pauses, Tariff Drama and Market Resilience: July in Review

After eight consecutive rate cuts, the European Central Bank has paused its easing cycle. The main refinancing rate holds at 2.15%, with the deposit rate at 2.00% and marginal lending at 2.40%. 

With inflation stabilising at the ECB’s 2% target and domestic pressures like wage growth easing, policymakers opted for caution. The Bank reiterated its data-dependent, meeting-by-meeting approach, avoiding any forward guidance. 

Uncertainty – driven largely by unresolved US-EU trade tensions and looming tariff threats – was key to the pause. While fiscal stimulus and defence spending may support the eurozone, risks remain elevated. 

Markets responded calmly: the euro dipped slightly, but equities and bond yields held steady, reflecting approval of the ECB’s prudence. 

Looking ahead, the ECB expects resilient growth in 2025 but will adjust course based on inflation trends and trade developments. Like the Fed, it is in no rush to cut further, keeping policy flexible and responsive. 

For now, borrowing costs remain stable, with inflation under control – offering some relief to consumers and businesses. But the path forward depends on how global risks evolve. 

President Trump has been on the march, as news emerged that he has signed an executive order imposing tariffs on imports from dozens of countries, hours before his 1 August deadline. Most have been delayed at the last minute and will begin on 7 August. 

Notably, he has hit Brazil with a 50% – an act commentators believe is more one of “political revenge” than trade. 

Other markedly high tariffs include 41% on Syria, 40% on Laos and Myanmar, 39% on Switzerland, 35% on Canada, Serbia and Iraq, and 30% on China, Algeria, Bosnia and Herzegovina, Libya and South Africa. 

He has also extended the deadline for a tariff deal with Mexico by another 90 days. Until then, goods will continue to be taxed at 25%, unless they abide by the U.S.-Mexico-Canada trade deal Trump signed under his first term. 

Wall Street opened lower on Friday as a result, with all three main indexes down. 

Tariffs have been the big story for much of the month of July, with sensationalist headlines creating short-term market uncertainty. 

But despite the hype and noise, global equities showed resilience throughout the month, extending gains from the first half of the year. 

The MSCI All Country World Index hit new record highs, reflecting broad investor optimism despite persistent geopolitical and trade risks. 

European equities led global gains, driven by improving economic fundamentals, fiscal stimulus, and increased defence spending. Investors also rotated away from U.S. assets amid trade policy concerns. 

U.S. stocks remained near record highs, with the S&P 500 and Nasdaq reaching fresh peaks in late July, supported by strong tech and AI sectors, easing trade tensions, and expectations of steady Fed policy. However, overall U.S. performance lagged behind Europe. 

Emerging markets posted mixed results. A weaker U.S. dollar and higher commodity prices boosted regions like India and parts of Latin America, while tariffs and geopolitical headwinds weighed on some Asian economies. 

Recent U.S. tariff actions, including new 25% duties on Indian goods, stirred volatility and drew criticism over their inflationary impact and potential to disrupt global supply chains.

Global bond markets also performed well in July, offering attractive income supported by high starting yields, steady central bank policies, and investor demand for safer assets amid stock market volatility. 

The U.S. Federal Reserve and European Central Bank kept rates unchanged, adopting a wait-and-see approach. This caution helped stabilise bond prices and maintain appealing yields. 

U.S. Treasury yields remained stable, while credit spreads narrowed, signalling renewed investor confidence after earlier tariff-related concerns. 

European bonds benefited from the ECB’s patient stance and stable inflation, with markets pricing in a possible rate cut later this year. 

Emerging market bonds performed strongly, particularly in regions with high real yields. Local currencies found support from a weaker U.S. dollar and easing energy prices, with opportunities in parts of Asia and Central/Eastern Europe where policy conditions are favourable. 

Fixed income remains a valuable diversifier and source of reliable income in a complex, data-driven macro environment. 

Since 2018, Bitcoin has delivered strong average annual returns of around 30%, outperforming traditional assets like stocks, bonds, and gold. However, it remains highly volatile, with intra-year drops often exceeding 50%. 

This volatility stems from market maturation, regulatory shifts, and sensitivity to global events. While sharp price dips can offer buying opportunities, they also require resilience and a long-term mindset. 

Key Considerations Before Investing: 

• Assess your risk tolerance – Bitcoin’s price swings can be extreme. 

• A longer holding period can help smooth out short-term volatility. 

• It’s best held as part of a diversified portfolio due to its unique risk profile. 

Demand for Bitcoin remains strong from both institutional and retail investors, partly driven by geopolitical uncertainty and a desire for decentralised assets. Still, prices remain sensitive to headlines, regulation and sentiment. 

It offers compelling long-term growth potential, but only suits investors prepared for substantial short-term volatility. Align your exposure with your risk appetite and financial goals. 

When markets turn volatile and inflation dominates headlines, the instinct to retreat into cash can feel like the safe option. But history shows that not investing is often the riskier move over time. 

From the 1970s oil crisis and early 1980s recession to the 2008 crash and the post-pandemic inflation surge, inflation has repeatedly tested investors' resolve. And while inflation does erode the value of idle cash, long-term data tells a clear story: those who stayed invested not only preserved their purchasing power – they grew it. 

Time and again, markets have rewarded patience. While savings lost value, investments outpaced inflation and built real wealth. 

Volatility and inflation are part of the journey – but history favours investors who stay the course. At Hoxton Wealth, we can help you build a diversified, resilient portfolio designed to weather uncertainty and grow your wealth over time. 

Our client services team is here to support you – they can be reached by email at client.services@hoxtonwealth.com or on WhatsApp through our global client services WhatsApp number: +44 7384 100200   

In uncertain times, having a steady hand makes all the difference.