Monthly Update | Shares shaken by Trump tweets

However, the direction of global trade continues to be a concern for investors. At the end of the month, President Trump took to Twitter to express dissatisfaction about the pace and direction of trade negotiations with China. Markets took the news very badly, with substantial falls across the world during the next day’s trading. The first days of August saw President Trump announce further tariffs against China, adding fuel to negative investor sentiment.

Central banks turn up the support as growth slows

If this was the month’s bad news, the good news came in the shape of supportive announcements by all the major central banks. This included the US Federal Reserve lowering interest rates for the first time since 2008. Their 0.25% cut came in response to the slowing growth and greater uncertainty over trade. The central bank has therefore made it cheaper for businesses to borrow to help boost their bottom line, and for consumers to spend rather than save to help energise the economy.

Meanwhile, the European Central Bank has indicated it could reignite its bond-buying programme – otherwise known as ‘quantitative easing’ – to pump money into the financial system and help stimulate growth.  And the Bank of Japan has said it would act to aid its own country’s economic recovery “without hesitation”. On 1 August, the Bank of England kept interest rates unchanged at 0.75% but cut its growth forecast for the UK to 1.3% for this year and next.

In light of all this, at Coutts we remain positive about equity markets, but cautiously so. Trade remains a concern, of course. We also see the gradual, global economic slowdown continuing, so have been positioning our portfolios more defensively this year. This has included reducing our allocation to equities, taking profit from shares that have performed well, and buying more bonds, although overall our positioning still shows a bias toward stocks.

You are what you earn

US earnings season got underway in July with the country’s largest companies reporting their second-quarter profits.

Overall, at the end of July, 75% of US companies had announced their financial results and 76% of them had beaten expectations, with 60% doing better than expected on their top line sales.

The actual profit numbers themselves were a little lower than previous quarters, but it’s worth remembering that any falls follow a massive boost in earnings last year powered by President Trump’s tax cuts.

The positive effects of those cuts now seem to have run their course, but we are still seeing some strong success stories. Tech firms like Microsoft and Alphabet, which owns Google, continue to thrive, for example.

Britain, Brexit and Boris

Boris Johnson’s appointment as Britain’s new Prime Minister meant new battle lines drawn around the Brexit negotiations. Mr Johnson’s government said the UK leaving the European Union without a deal – previously seen as unlikely – was now “a very real prospect”.

Markets were not moved significantly by Mr Johnson getting the top job in British politics as it had been expected since the start of the Conservative Party leadership contest. But investors remain nervous about the UK while Brexit-related uncertainty deepens.