For the month as a whole, the U.S. S&P 500 fell 0,1 percent measured in USD, the European Stoxx 600 ended up 1,3 percent measured in EUR, and the Nordic VINX fell 2,3 percent measured in NOK. At home, the Oslo Stock Exchange rose 5,8 percent (OSEBX).
Hormuz back at the centre
The letter of intent from June broke down early in the month, and already on 8 July there were new attacks on merchant ships in the Strait of Hormuz. Daily shipping traffic quickly fell towards zero again, and the oil price recovered sharply from its June lows. Through the month, it moved from around 70 to 90 dollars per barrel, before settling at an average of around 85. The U.S. president continues to alternate between threats and promises of a lasting agreement, but the market now reacts less strongly to the rhetoric than before. Energy- and shipping-related stocks received a clear boost as freight rates soared. At the same time, a new topic is beginning to attract attention, namely how quickly U.S. inventories of advanced missiles and air-defence systems are depleted when expensive weapons are used against cheap drones.
The AI boom meets headwinds
July was a challenging month for last year's biggest winners, even though the earnings season continued to deliver strong figures. Through the month, there was a marked rotation away from technology- and semiconductor-related companies, driven by both valuation concerns and export restrictions. Large leveraged positions within the AI theme amplified the moves, and forced selling of some portfolios triggered significant price swings in both directions. Investors are increasingly looking further ahead and demanding clearer evidence of whether AI investments are actually sustainable. This resulted in energy and financials taking the lead in July, while technology was pushed lower. The moves were particularly clear in the Nordics, with technology as the weakest sector and energy as clearly the strongest.
Divided Fed and more hawkish rate tone
The U.S. central bank kept its policy rate unchanged at the end of the month, but three of twelve members voted for a hike. This is the largest explicit disagreement over interest-rate setting in ten years, and the signals within the committee differ clearly from the impression we have been accustomed to. The new central bank governor, Kevin Warsh, was also criticised for wavering forward-looking communication, which contributed to increased volatility in interest-rate markets. Long-term U.S. rates continued to rise through the month, and the market began to price in an increased probability of further tightening later this year. The European Central Bank also kept its rate unchanged, but several policymakers are said to have considered an immediate hike. The September meeting now appears to be a genuine 'hike or hold' decision, with an energy-driven inflation impulse forcing central banks to prioritise price stability.
The road ahead
July undoubtedly brought turbulence, with new attacks in the Strait of Hormuz, a sharp AI rotation and a more hawkish interest-rate environment. Several underlying forces nevertheless point in a constructive direction, and the earnings season is delivering more broadly than previously feared. The global economy is showing solid resilience, even though higher energy prices and tighter interest rates weigh on parts of the picture. The rotation creates short-term turbulence, but it also means that more sectors are now contributing to value creation. Equities therefore retain their role as one of the most attractive investments for long-term capital.