July saw strong equity performance, with the S&P 500 up 3.2% and the tech-heavy Nasdaq up over 4.0%. Small caps outperformed large caps as energy and financials rebounded. Credit continued to perform well vs. less risky bonds, with high yield bonds and EM debt returning +1.4% and 3.0%, respectively. The US economy grew +2.4% in Q2, driven by strong business investment and consumer spending, but job growth was tepid after adding only 187k jobs which was less than expected.

Global equity markets posted another quarter of positive gains, continuing their impressive rally off the lows from last October. Reflecting on the first half of the year, one of the biggest surprises has been the strength and durability of the US economy.  However, the outlook for the global economy remains highly uncertain.

Equity returns for Q2 were solid, especially for US Large Caps and growth firms. The S&P 500 rose by almost +9%, with tech, telecom, and consumer discretionary sectors experiencing double-digit growth. The US dollar remains flat in 2023 compared to other currencies, however, as central banks continue to hike interest rates, we could see further USD weakness. The Fed left the Fed Funds rate unchanged at 5.25% but have indicated that rates are likely to move higher. Headline CPI cooled to 4.0%, and core inflation remained at 5.1% which is still being driven primarily by shelter costs. Consumer sentiment has risen, but the gap between current economic conditions and future expectations widened. Real GDP growth was revised higher to 2.0% QoQ, influenced by increased consumer spending. The US economy added 209k jobs in June, with a mix of high-paying and lower-paying jobs. Wages moved slightly higher than expected, and the labor force participation rate for key aged workers (24-55 years) reached its highest point since 2002.