Michaël Lok

July’s softer inflation leaves a September US Federal Reserve (Fed) rate hold as the most probable scenario.

July reinforced our convictions on companies positioned to benefit from artificial intelligence (AI), despite the marked underperformance of US technology stocks at the beginning of the month, as a result of investor concerns about the monetisation of AI-related investments.

US labour data softened, easing pressure on the Fed to hike its interest rates anytime soon.

The Fed left rates unchanged but gave little forward guidance, sending bond yields higher and weakening the dollar.

Escalating tensions in the Middle East sent oil prices surging and long-term US yields to their highest levels since early 2025 as inflation risks resurfaced and markets repriced the possibility of future rate hikes on both sides of the Atlantic.

US inflation surprised on the downside, tempering rate-hike expectations, whilst the renewal of hostilities in the Middle East sent oil prices surging.

The collapse of the ceasefire between the US and Iran has pushed oil prices higher.

In June, we highlighted a paradox: a demanding macroeconomic environment, yet markets buoyed by exceptional corporate earnings. The mid-year point validates that reading and brings with it a turning point. The recent agreements between the United States and Iran have drawn a line under the energy shock that dominated the first half of the year, and the landscape now opening up is a different one, calling for greater selectivity.

Cooling US employment and easing eurozone inflation are strengthening the case for an extended pause from both the Federal Reserve (Fed) and the European Central Bank (ECB) – a supportive backdrop for risk assets.