Titan Wealth International Weekly Investment Update

The Nasdaq led all major indices with a 5.2% advance — its strongest weekly gain since April — though it remains approximately 1.5% below the historic peak reached in early June. The VIX fell to 14.9, its lowest level in seven months, reflecting a broad and sustained improvement in investor risk appetite.

The week’s rally was underpinned by exceptional corporate earnings, a sharp deterioration in US payrolls that reduced expectations for further Fed tightening, and lower oil prices that improved the near-term inflation outlook. European and Japanese equities also advanced, while higher mortgage rates continued to weigh on the US housing market.

Earnings Growth Drives the Rally

The earnings story continues to be the dominant driver of the rally. With the second-quarter reporting season entering its final stretch, blended S&P 500 earnings growth is now tracking at 50.4% — the strongest rate since Q2 2021 and more than double the 23.1% forecast at the end of June.

The surge reflects both the extraordinary AI-driven strength in technology and communication services, and a broadening of profit growth across the wider index.

Adjusting for the sizable mark-to-market investment gains recorded at Alphabet and Amazon — primarily from their Anthropic holdings — the underlying growth rate remains close to 29%, representing a second consecutive quarter above 20% and an acceleration from Q1.

Edward Jones notes that tech sector valuations, though elevated in absolute terms, remain below their five-year average relative to the broader S&P 500, suggesting the earnings-driven re-rating has further room to run if AI monetisation continues to improve.

Weak Payrolls Reduce Rate-Hike Expectations

The week’s most consequential single data point was Friday’s July payrolls report, which showed the economy losing 23,000 jobs — well below consensus expectations of around 90,000 — while the already-revised May and June figures were cut by a further combined 103,000.

The three-month average monthly gain has now fallen to just 20,000 — a sharp deceleration from the 214,000 recorded as recently as March. The unemployment rate dipped to 4.1%, though this reflected a fall in labour force participation rather than genuine underlying strength.

Bond markets reacted swiftly: the probability of a September Fed rate hike fell from 67% the prior week to approximately 42%, with the 10-year Treasury yield dropping to around 4.64% from 4.74% the week before.

Edward Jones’ view is that the labour market is cooling rather than collapsing — characterised by low hiring and low firing — and does not appear to be generating inflationary pressure, reducing the urgency for further Fed tightening.

Lower Oil Prices Improve the Inflation Outlook

Oil prices also retreated meaningfully, providing further relief on the inflation front. US crude fell to around $78 per barrel by Friday — down from nearly $85 the prior week and well below the $92 briefly reached on 23 July — as diplomatic efforts to ease Middle East tensions and restore shipping through the Strait of Hormuz continued, albeit in an on-again, off-again fashion.

The combination of lower energy costs and softer labour market data has significantly improved the near-term inflation outlook ahead of Wednesday’s July CPI release, which will show whether June’s encouraging 3.5% annual reading — down sharply from May’s 4.2% — extended into July.

European Markets Advance as Services Return to Growth

In Europe, the STOXX 600 gained 1.70% for the week, with Germany’s DAX rising 2.69%, France’s CAC 40 up 2.41%, and Italy’s FTSE MIB advancing 2.96%, as lower oil prices and a resilient corporate earnings backdrop lifted broad sentiment.

Eurozone services activity returned to expansion, with the composite PMI rising to its highest level in five months, while UK services PMI climbed to 52.1 from 48.8 — returning to growth after two months of contraction.

Housing continued to act as a headwind in the US, with the average 30-year mortgage rate rising for a fifth consecutive week to 6.69% — its highest level in just over a year — reflecting the lagged impact of higher bond yields on affordability and keeping a lid on any meaningful recovery in home sales.

Japan Gains as Bank of Japan Expectations Build

In Japan, the Nikkei gained 1.93% as financials benefited from rising JGB yields and growing expectations of a Bank of Japan rate hike as early as September.

The yen, which had surged nearly 5% following the historic coordinated US-Japan foreign exchange intervention the prior week, gave back some of those gains and softened past JPY 158 by Friday, though both governments reiterated their readiness to act again if needed.