Citi Personal Wealth Management

A Jump in July

Monthly Market Snapshot: July 2018

Highlights

The U.S. equity market continues to recover from its February correction. In July, the S&P 500 climbed an impressive 3.6% to 2,816. If the index climbs an additional 2.0% or so it will match its all-time high reached back in January. Globally, the recovery has been a bit slower because of lingering trade tensions, but European shares did rally 4.0% during the month as the U.S. and Europe appeared to reach a “trade truce.” Emerging market shares also rallied in July as the U.S. dollar’s ascension versus other international currencies took a pause.

U.S. economic growth and corporate earnings growth remain strong. Real GDP accelerated to an annualized 4.1% in the second quarter and S&P 500 earnings-per-share growth is expected to rise by over 20% this year. Trade tensions remain relevant and may eventually start to weigh more heavily on investor sentiment, but growth seems to have the stronger pull on markets in the ongoing tug of war between growth and protectionism. At least for now.

Citi Private Bank’s Global Investment Committee (GIC) cuts its global equity allocation by 2.5% to a modest overweight of +1.5%. With trade tensions still elevated, the GIC decided to dial back a bit on risk with reductions being made to Canadian, Mexican, European, and Emerging Market shares. On the fixed income side, the GIC raised their allocation to short-term U.S. debt and inflation-linked debt (leaving the fixed income underweight at -1.5%).