Latest investment update

July was a challenging month for investors as volatility returned to technology and chipmaker stocks. Emerging markets were hit particularly hard and, as our portfolios remain overweight in this area, the impact was more pronounced for us.

However, this was not a market-wide sell-off. Instead, investors moved money between different sectors of the market. As a result, the overall market appeared relatively stable, highlighting the benefit of holding a diversified portfolio rather than relying too heavily on any one area of the market.

Equity markets were mixed in July. Much of the weakness was centred on technology and chipmaker stocks.

Emerging markets were among the hardest hit, falling around 4.6% in sterling terms. South Korea fell around 17.6%.

While those numbers are eye-catching, context is important. Technology and chipmaker stocks had delivered exceptional returns earlier in the year. July's weakness appears to reflect position clearing following that strong rally.

This was more of a rotation within markets than a broad market decline. While technology and chipmaker stocks weakened, other areas performed relatively well, helping wider equity markets remain stable.

Sentiment improved towards month-end as earnings season began. Several large companies reported strong results, including banks and some major technology firms. These results helped reassure investors and supported a recovery towards the end of the month.

Bond markets faced a mixed backdrop during July.

US inflation data came in better than expected, suggesting price pressures are continuing to ease.

At the same time, geopolitical developments and significant swings in oil prices created uncertainty around the outlook for inflation and interest rates.

US Treasury yields moved higher during the month, with the 10-year Treasury yield ending July near 4.75%.

July was a challenging month for Emerging Markets, with weakness concentrated in South Korea.

The pullback appears to reflect position clearing following a substantial rally earlier in the year, particularly in technology and chipmaker stocks.

While performance was disappointing during the month, positive earnings momentum remains on track, so we continue to maintain conviction in emerging markets and their longer-term investment case.

One key development in July was our economic cycle indicator moving from expansion to slowdown.

That might sound worrying. However, it doesn't mean the economy is shrinking or that a recession is imminent.

Instead, it means growth is continuing, but at a more moderate pace.

A useful way to think about it is that the economy is still moving forward, just not as quickly as before.

For investors, moderating but positive growth can still provide a supportive backdrop for both equities and bonds.

This doesn't change our positive long-term view and the themes we discussed previously remain in place.

July was a reminder that markets don't move in a straight line.

Periods of volatility are normal. This is especially true after strong rallies in specific sectors or regions.

Staying diversified remains important. It can help smooth returns during uncertain periods.

By focusing on long-term goals, investors are better placed to navigate short-term market ups and downs.