July 2025 Market Review: Market Resilience, US Policy Shifts and Emerging Market Opportunities

This was exemplified by Nvidia becoming the first publicly traded company to achieve a $4 trillion valuation. As a result, market breadth has once again narrowed with the performance of larger cap companies making new highs relative to the wider market and in the process has taken the valuation of large cap US stocks towards the upper end of their historic ranges.

Fortunately, less expensive opportunities exist outside of the US and, in common currency terms, have been outperforming US equities this year, favouring the more globally balanced equity allocations of the T. Bailey funds of funds.

A small offset to US fiscal spending is the US’s tariff policy which has been used for both fiscal and political ends and, in the process, has created uncertainty in global trade relations.

Globally, economic indicators released in July painted a varied picture. China exceeded expectations with substantial tax revenues of over 85 trillion yuan from 2021-2025, underpinned by robust private-sector growth. The US reported solid second-quarter GDP growth at an annualised rate of 3%, helped by lower import activity following earlier tariff-driven stockpiling. However, the Eurozone faced headwinds, registering modest economic expansion of just 0.1%.

UK economic conditions also presented notable challenges. Chancellor Rachel Reeves faced heightened fiscal pressure after backtracking on welfare reforms shortly ahead of a 1 July parliamentary vote, significantly narrowing the government's financial flexibility. Furthermore, unexpectedly high inflation, rising to 3.6%, coupled with a weakening labour market, has complicated monetary policy decisions. Nonetheless, UK equity markets demonstrated strength, with the FTSE 100 index surpassing 9,000 points for the first time.

In terms of portfolio activity, July provided an opportunity to strengthen our exposure to emerging markets through additional investment in the Merlin Fidelis Emerging Markets Fund. Our confidence in emerging economies stems from favourable valuations, robust growth prospects, and exposure to significant global trends like energy transition and artificial intelligence advancements.

Chrysalis Investments, another prominent holding within the fund of funds portfolios, reported strong quarterly performance. Its net asset value per share rose impressively by 13.7% over the quarter, driven by successful investments in innovative digital finance companies such as Starling Bank, Klarna, and Smart Pension.

As we look forward, the persistence of US tariff policies and global geopolitical risks will have an impact and requires continued vigilance. Our portfolios are well-positioned, emphasising diversification, risk management, and identifying compelling global investment opportunities. July's developments reaffirm our strategic approach of balancing thematic conviction with prudent risk management, aiming to deliver sustained long-term outcomes for our investors.