Monthly Comment - July 2025
English Summary: In July 2025, global equities reached new highs, led by tech stocks and expectations of Federal Reserve rate cuts. The Eurozone showed resilience despite global growth challenges, while geopolitical risks, particularly from the Israel-Iran conflict, remained elevated. The Swiss franc showed strength but faced tempered momentum due to SNB dovishness. Global Wealth Advisors recommended US tech, European industrials, and Swiss high-quality stocks, along with investment-grade bonds and strategic commodities like gold and uranium. The defense sector was highlighted as a beneficiary of increased geopolitical tensions.
Monthly Market Outlook - July 2025
The first half of 2025 closed with renewed investor optimism despite continued
macroeconomic and geopolitical turbulence.
Global equities reached new highs, led by the Nasdaq and the S&P 500, as optimism
around AI investments, easing inflationary pressures, and a weakening US dollar
supported risk appetite. A primary driver was the continued rally in tech stocks.
In parallel, expectations for Federal Reserve rate cuts—likely beginning in
September—contributed to dollar weakness and a broader risk-on sentiment.
Meanwhile, the Eurozone economy displayed resilience amid sluggish global growth.
Headwinds from US trade policy and cautious consumer spending weighed on
momentum, yet supportive fiscal measures, easing energy costs, and moderate
inflation kept the bloc on a soft-landing trajectory.
Geopolitical risk remains elevated, particularly following intensified conflict between
Israel and Iran. While markets absorbed initial volatility, the underlying threat of
supply disruptions and energy price shocks remains a key wildcard for the near term.
In Switzerland, the equity market remained comparatively defensive, supported by
strong dividend-paying sectors and a broadly stable macroeconomic backdrop.
The Swiss franc continued to show relative strength, though recent SNB dovishness
and easing expectations have tempered its upward momentum.
Outlook for July and Beyond
Macro & Policy Themes
We expect a continuation of the soft-landing narrative in the US and Europe.
The Federal Reserve is anticipated to deliver 100 bps in September, as job growth
slows and inflation stabilizes around 3.3–3.5%.
In the Eurozone, with inflation nearing the ECBs 2% target and fiscal support
ongoing—especially in Germany—we see further ECB easing with the deposit rate
likely falling to 1.75% by year-end.
The US dollar remains on a downward trajectory, driven by lower rates expectations
and persistent fiscal concerns. We maintain a EUR/USD target range of 1.15–1.20 in
the near term, with upside potential if macro uncertainty persists.
We remain constructive on global equities, particularly:
• US Tech: Despite elevated valuations, AI-driven productivity gains and cloud
monetization continue to support earnings.
• European Industrials & Defense: EU defense spending is on a structural
uptrend, with Germany targeting 3.5% of GDP by 2029.
Defense contractors and suppliers are set to benefit from both strategic
demand and political consensus.
• Swiss High-Quality Stocks: Defensive and dividend-yielding equities remain
attractive as volatility remains a feature of the macro landscape.
Fixed Income & Credit
Investment grade and high-grade corporate bonds continue to offer compelling yield
opportunities.In sovereigns, select exposure to 10-year Bunds and Gilts is preferred over long-dated
US Treasuries, which remain exposed to debt sustainability concerns.
In the credit space, US corporates still benefit from healthy fundamentals.
In Europe, credit remains attractive in the context of easing policy and supportive
fiscal dynamics.
FX & Rates
As the Fed moves to cut, USD weakness should persist, although gains for other
currencies may moderate from recent highs.
We favour the EUR, NOK, and AUD in the short term.
Further SNB easing may limit the upside CHF.
Commodities & Precious Metals
Gold remains a strategic hedge amid geopolitical tension, currency debasement, and
structural US fiscal stress.
We maintain a base case target of USD 3,500/oz, with upside potential to USD
3,800/oz if geopolitical conflict escalates.
Other commodities with strategic relevance include:
• Silver: Demand from solar energy and industrial electrification supports price
resilience. We have a target of USD 35–38/oz in the short term.
• Uranium: As nations recommit to nuclear energy for energy security and
decarbonization, spot prices remain elevated. Strategic inventories continue to
rise.
• Copper: Structural deficits tied to clean energy transition projects and grid
expansion maintain long-term bullish fundamentals.
Geopolitics & Defense Sector Focus
The Iran-Israel conflict remains a potential flashpoint for regional and market
volatility.
So far, market reaction has been restrained, in part due to assumptions that the
conflict will remain contained. However, a prolonged disruption to oil supply or a
broader escalation could change the outlook significantly.
In this context, the defense sector is one of the clearest beneficiaries.
US and European defense budgets are rising, with bipartisan political support.
We recommend overweight positions in quality defense names, particularly those
with cyber and aerospace exposur
