Content

• UK: A steadier month, with lower inflation, modest growth and stronger markets

• Europe: Growth picked up, although inflation edged higher and markets were quiet

• US: Growth remained resilient, but inflation and AI uncertainty weighed on markets

• Asia: A weaker month outside Japan, despite strong returns so far this year

• Looking ahead

At a glance

July was a quieter month for many investment markets, although the UK stood out with stronger returns. That does not change the broader picture, but it does show why a well-diversified portfolio matters. Different regions and sectors often take their turn to lead or lag, and this is a normal part of investing. Inflation, interest rates and global events continued to shape markets, but returns for the year so far remained positive in many areas.

Overview

Global markets had a more difficult month in July, although the UK performed well. One reason for this was its lower exposure to technology companies, which came under pressure in some other regions. Elsewhere, markets were broadly flat, while Asia excluding Japan and emerging markets saw sharper falls.

Economic growth was positive across the main regions, with Europe recovering after a fall in the first quarter of 2026. Inflation remained above the 2% target in most areas, although Asia continued to be an exception. Inflation fell in several regions after the earlier peace treaty between the US and Iran, although renewed tensions may still have an effect in the months ahead.

News headlines can move markets from one month to the next. But for long-term investors, the bigger drivers of returns usually build over years, not weeks.

UK: A steadier month, with lower inflation, modest growth and stronger markets

The UK had a relatively positive month. Inflation eased, the economy returned to modest growth after a small contraction, and UK markets were among the strongest performers globally in July.

UK inflation fell to 2.6% in the year to June, down from 2.8% in May. The largest downward contributions came from transport, food, and non-alcoholic drinks¹.

Despite easing inflation, the Bank of England kept the base rate unchanged at 3.75% at its latest meeting, as it remains above the 2% target. The Bank also warned that higher energy prices could push inflation up again in the coming months².

The full picture for UK economic growth in Q2 has yet to be determined, but the latest data shows the economy grew by 0.1% in May after a slight contraction in April³.

July also brought political change, with Andy Burnham becoming Prime Minister on 20 July. His early comments pointed to a greater focus on regional growth, public control of essential services, re-industrialisation and easing cost-of-living pressures. Markets are likely to watch closely for more detail on tax, spending and fiscal policy in the months ahead, particularly as the government develops its longer-term economic plan.

For investors, lower inflation and stronger growth are generally encouraging. Slower price rises can ease pressure on household finances and may make future interest rate cuts more likely. A growing economy can also support company earnings and business confidence.

Against this backdrop, the UK FTSE All-Share Index, which tracks around 900 of the UK’s largest listed companies, rose 3.7% over the month. This was ahead of many global peers and was helped by the UK market’s lower exposure to the technology sector. The index has risen by 11.2% so far this year.

It is worth noting that the wider UK market picture is not all one-way. The Alternative Investment Market, known as AIM, has continued to face pressure, with more companies leaving the market than joining it. This matters because AIM is home to many smaller UK-listed businesses. The London Stock Exchange is consulting on reforms intended to make the market more attractive, but investors are likely to watch whether this leads to a stronger pipeline of new listings over time.

Europe: Growth picked up, although inflation edged higher and markets were quiet

Europe saw inflation rise slightly in July, while the economy showed signs of renewed momentum. Markets, however, were broadly flat.

Eurozone inflation rose to 2.9% in July, up from 2.8% in June. The inflation data is more recent than that of other regions, and the increase was largely driven by a rise in energy prices following the resumption of hostilities between the US and Iran. Among the region’s largest economies, inflation increased in Germany, France, Spain, and the Netherlands, while easing slightly in Italy⁴.

Despite rising inflation, the eurozone economy showed renewed momentum, expanding by 0.4% in Q2 2026. If the preliminary estimates are correct, this was the bloc’s strongest quarterly expansion since Q1 2025⁵.

For investors, higher inflation can make the path for future interest rate cuts less certain. The European Central Bank left its key interest rates unchanged at its July meeting. Even so, stronger growth can provide some reassurance, as it may help support company performance and wider business confidence.

European equities were largely flat over the month. The MSCI Europe ex UK Index, which tracks large- and mid-cap companies across the region, gained 0.1%⁶.

US: Growth remained resilient, but inflation and AI uncertainty weighed on markets

In the US, inflation fell and the economy continued to grow, although markets dipped slightly as investors remained uncertain about the outlook for AI-related stocks.

Inflation fell to 3.5% in the year to June, down from 4.2% in May, marking its first fall in five months. The easing was largely attributed to an earlier ceasefire agreement between the US and Iran, though the economic impact of the renewed tensions has yet to be reflected in the data⁷.

Despite the fall in inflation, it remains well above the 2% target, so the Federal Reserve (Fed) kept interest rates unchanged at its July meeting following a divided vote⁸.

The US economy expanded by 1.5% in Q2 2026, slowing from 2.1% in Q1⁹.

For investors, the US remains important because of the size and influence of its stock market. Higher inflation makes the timing of any interest rate cuts less clear, but continued economic growth has helped support confidence.

The S&P 500, which tracks 500 of the largest listed companies in the US, fell by 0.1% over the month amid ongoing uncertainty around whether AI stocks will continue to deliver attractive long-term returns. Despite the decline, the index remains up 10.1% year to date¹⁰.

Asia: A weaker month outside Japan, despite strong returns so far this year

Asian and emerging markets had a more challenging month in July. Concerns about China’s advanced semiconductor technology – the high-powered computer chips used in areas such as artificial intelligence – contributed to sharp falls in some markets.

The MSCI Emerging Markets Index, which tracks companies across developing economies, fell 3%, while the MSCI Asia ex Japan Index, which tracks larger companies across Asia excluding Japan, declined 3.2%. Despite the recent weakness, both indices remain the strongest performers year to date, with gains of 20.3% and 22.3%, respectively.

Meanwhile, Japan’s TOPIX Index, which tracks a broad range of companies listed on the Tokyo Stock Exchange, edged up 0.2%¹¹.

Inflation remained relatively low across the region. In Japan, it rose to 1.7% in June from 1.5% in May, marking its highest level since December¹². China’s annual inflation eased to 1% in June, down from 1.2% in both April and May¹³.

For investors, low inflation can create a more supportive backdrop for economic growth and company earnings. The contrast between July’s weakness and the region’s strong returns so far this year is also a useful reminder not to judge long-term progress by one month’s movement.

Looking ahead

Geopolitical tensions and global events may continue to cause short-term ups and downs in markets over the months ahead.

Market movements can feel unsettling, particularly when the news is negative. Short-term volatility is, however, a normal part of investing. Over time, markets have tended to recover and grow, which is why it can help to stay focused on your wider financial plan rather than reacting to each headline as it comes.

If you have questions about your portfolio, or recent events have made you feel uncertain, your wealth planner can talk this through with you in the context of your long-term goals.

A simple glossary

Inflation is the rate at which prices rise over time. If inflation is 2%, something that cost £100 a year ago might cost around £102 today.

Low and high inflation both matter. Lower inflation can ease pressure on household spending and may give central banks more room to cut interest rates. Higher inflation can make everyday costs rise more quickly and may keep interest rates higher for longer.

Interest rates influence the cost of borrowing and the return on savings. When rates are higher, borrowing can become more expensive for households and businesses. When rates fall, it can sometimes support spending, investment and company confidence.

Index is a way of measuring how a group of investments has performed. For example, the FTSE All-Share follows a broad range of UK-listed companies, while the S&P 500 follows 500 of the largest listed companies in the US.

Equities are shares in companies. When you invest in equities, your return is linked to how those companies perform and how other investors value them.

Volatility means the ups and downs in investment values. It can feel uncomfortable, especially when markets fall, but it is a normal part of investing.

Emerging markets are economies that are still developing compared with larger, more established markets such as the US, UK or Europe. They can offer growth opportunities, but they may also experience sharper short-term market movements.

¹22.07.26 Consumer price inflation, UK: June 2026 ONS, ²30.07.26 Interest rates and Bank Rate: our latest decision Bank of England, ³16.07.26 UK economy returns to growth in May BBC, ⁴03.08.26 Euro Area Inflation Rate Trading , ⁵03.08.26 Euro Area Inflation Rate Trading Economics, ⁶03.08.26 Review of Markets over 2026 JP Morgan, ⁷03.08.26 United States Inflation Rate Trading Economics, ⁸29.07.26 Fed holds interest rates steady despite Trump’s renewed calls to lower them The , ⁹03.08.26 United States GDP Growth Rate Trading Economics, ¹⁰01.07.26 Review of Markets over 2026 JP Morgan, ¹¹01.07.26 Review of Markets over 2026 JP Morgan, ¹²02.07.26 Japan Inflation Rate Trading Economics, ¹³02.07.26 China Inflation Rate Trading Economics

Please note:

The content of this guide was accurate at the time of writing. Information may change after publication because of changes in circumstances, regulation, or legislation. This guide is for general information only and does not provide personal advice. It is intended for retail clients.

The value of your investment, and any income from it, can go down as well as up. You may not get back the full amount you invested.

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Lat updated August 2026 - EX2026-21