July brought further highs to the global equities markets. Despite some jitters in the second half of the month, the index MSCI All-Country World Equity still advanced more than 1,5%, extending its gain from the beginning of the year to 12% (in USD), and recording its eighth positive month out of the last nine. Gains broadened, with all asset classes advancing higher – equities were aided by data showing resilient economic growth and corporate earnings, while bonds were boosted by the improved prospects of interest rates reductions. Inflation continued its gradual fall in July, increasing the probability that the Federal Reserve (Fed) and other central banks will join the European Central Bank (ECB), Bank of England, and the Bank of Canada in their moves and start the rate cutting cycle. The heightened rate cut expectations spurred a significant rotation into small cap stocks and other interest-rate sensitive asset classes – value stocks considerably outperformed growth ones, and developed markets outperformed emerging economies. Large technology companies, particularly AI-related stocks, fell especially painfully, as initial AI enthusiasm began to cool, and investors started to worry about the monetization of the huge capital spending. Despite the abrupt pullback in the last few weeks, growth stocks (large American tech-giants, in particular), have still returned over 16% year to date. Asian stocks also gained in July, in unison with the overall market. Japanese stocks advanced strongly (more than 5% in USD) entirely due to the rally in the currency – the yen appreciated as the Bank of Japan surprisingly rose interest rates by 25 basis points (however, in yen the Japanese shares finished the month with a loss). The unwinding of carry trade between low-interest JPY borrowed funds invested in high-returning USD tech giants exacerbated the sell-off of growth stocks. Taiwanese shares, with their large semiconductor exposure, also sold off with the rotation out of technology. Chinese stocks fell as well on the back of poor consumer sentiment, despite ongoing stimulus efforts by the government, and uncertainty around the Communist Party Third Plenum. Europe was the strongest region in July that, with the help of a weakness in the US dollar, strongly overturned last month’s negative result. ECB chose to leave the rates unchanged despite inflation running above target. The impact of China’s slowdown is most tangibly felt in the luxury goods and auto industries (LVMH and BMW are the two stocks that have lost the most market capitalization since the beginning of the year among the EU50). Overall, the assets that did well in July were the ones investors usually flock to when panicked: gold, the Japanese yen, and the American treasury bonds. Government bonds yields fell (meaning that their prices rose) across most major markets, as reduced inflationary pressures indicated upcoming monetary policy loosening. Various bond asset classes continued to support balanced portfolios, returning 1%-2% during the month. 
         US shares generally gained through July, although there was a considerable rotation in leadership. . Investors moved out of growth companies (those with strong future growth potential) and instead preferred more reasonably valued companies. Smaller companies outperformed larger ones. Large technology companies, more specifically AI-related stocks, plunged as shareholders worried about the return on the huge capital expenditures. Notably, Nvidia slumped 30% at one point. Of the big three American equity indices, the tech-heavy NASDAQ was the only one to finish in negative territory, declining 0,8% in July. The broad S&P500 ended with a 1.1% gain despite the negative momentum snap at mid-month – posting its eighth positive month out of the past nine. The industrial Dow Jones outperformed vastly its peers with a 4,4% gain. Some favorable macroeconomic data fueled the recent market dynamic and added more fuel to the idea of a still-strong economy and gradually cooling inflation. According to the consumer price index (CPI), annual inflation was 3.0% in June (down from 3.3% in May). A separate measure of inflation, and the Fed’s preferred gauge, the personal consumption expenditures (PCE) index, declined to 2.5% year on year in June, that was its lowest reading in over three years. Down from 2.6% in May, the PCE is inching closer to the Fed’s 2% target. Consumer spending remained strong. However, the savings rate fell to its lowest level since 2022, suggesting that Americans are dipping into their savings to maintain spending levels. With the earnings season going well (average reported earnings grew by more than 10%, and over half of companies beat expectations) and strong economic growth (in Q2 GDP grew by 2.8% on an annualized basis, doubling the 1,4% rate from Q1), one surprising news was that the labor market slowed more than expected. The US economy added just 114 000 jobs in July, significantly below recent averages.  The unemployment rate rose for the fourth month in a row, climbing to 4.3% (from 4.1%). These numbers might indicate that America’s hot jobs market is finally beginning to cool off, easing the Fed’s path for rate cuts. Such optimism that the Fed might begin to cut interest rates drove a rally in banks, home builders, and other interest-rate sensitive stocks.  Thus, top gaining sectors for the month were real estate, utilities and financials. Technology and consumer discretionary fell the most. The potential start of the rate-cutting cycle reverberated through the fixed income markets. The Fed held interest rates unchanged, as expected, at 5.25%-5.50% at its last meeting at the very end of July. Now, with the supportive inflationary data, the case for a September rate cut becomes very strong, and US Treasuries rallied for the month – the yield on the benchmark 10-year US note fell in July from 4,41% to 4,03%. US corporate bonds performed in line with Treasuries, which means they lagged. On the political front, President Joe Biden withdrew from this year’s presidential race and endorsed Vice President Kamala Harris as the Democratic nominee instead. 
          European shares had a good rally – this was the best region globally in July. The pan-European STOXX600 index rose more than 1,3% for the month in own currency, EUR. The most gains went to the healthcare, utilities and real estate sectors. Some strong quarterly earnings and positive clinical results boosted stocks in the healthcare sector.  The largest negative returns were in the consumer discretionary and information technology sectors. Weak consumer demand weighed on the luxury goods and automotive stocks, two consumer discretionary industries that are very important for Europe. The technology sector was affected by the rotation out of growth stocks and fears that the US might try to impose more restrictions on what semiconductor equipment can be sold to China – the largest, and pretty much sole, semiconductor production equipment manufacturer is a European company. Data showed that the Eurozone’s GDP grew by 1% on annualised basis in 2Q, a sharp improvement over 1Q. The bad news was that the largest economy in the block, Germany, contracted again by whatever measure used. Meanwhile, with accelerating annual inflation for July at 2.6%, up from 2.5% in June, and above target core CPI at 2.9%, the ECB left interest rates unchanged, as expected.  The Bank of England, however, cut interest rates for the first time since March 2020, the start of the covid-19 pandemic. It reduced the base rate by a quarter of a percentage point, taking it to 5%. ECB is more cautious with rate reductions because prices of services are refusing to stop rising. In Germany, they rose by 3.9% in June, compared with a year earlier, and across the whole Eurozone services inflation was 4.1% in June. At the same time, fresh Eurozone PMI data indicated that the economy was near stagnation with a reading of 50,1 (down from 50,9 in June) – a reading below 50 indicates contraction. European government bond markets performed well across the board. French government bonds recovered much of their previous losses following the second round of elections which unexpectedly resulted in a hung parliament in which no political group achieved a definite majority. This reassured investors that extreme budgetary decisions might be blocked. UK gilts also participated in the month’s rally as investors eagerly awaited the Bank of England’s rate announcement.
        July brought positive returns for the Bulgarian stocks as well. All the Bulgarian Stock Exchange indices were colored green: the flagship SOFIX advanced by more than 2,3% and the small-cap index, beamX, was a winner for the second month in a row with a gain of almost 3%. The SOFIX's year-to-date performance is already over +13.3% at the end of July.   During the month, trading started in the securities of Shelly Group, which is the first company on the BSE's newest dual-listing segment, EuroBridge, created in cooperation with Deutsche Borse. This allows the company to have its shares traded simultaneously on both exchanges in Bulgaria and Germany, directly in euros. Towards the end of the month, trading also began with the first issue of warrants on the beam market issued by the private equity firm Impulse Growth AD. Through this issue, the company can raise additional capital of BGN 4.5 million in several tranches until the end of May 2025. Thus, for the month, among the Bulgarian companies of Sofix, the best performer was the commercial bank First Investment Bank AD, whose price rose by almost 12% in July, and the worst - the diversified holding company Doverie United Holding AD, whose share fell by almost 4%.