The resilience of the US economy remained a feature of financial markets during July. Economic data generally exceeded expectations, supported by steady consumer spending, a healthy labour market and ongoing business investment.
The continued run of stronger-than-expected economic data has reinforced the view that the US economy remains more resilient than many anticipated at the beginning of the year
US Corporate earnings also continued to surprise positively. By the end of July, 60% of S&P 500 companies had reported, with 87% exceeding earnings forecasts. Overall earnings growth was running at approximately 27% year-on-year, materially above the 14% growth rate expected at the beginning of the year.
While questions remain regarding the ultimate return on the substantial capital being invested in artificial intelligence (AI), the latest earnings season provided some of the clearest evidence to date that AI-related investment is contributing to revenue growth, particularly through cloud computing and digital infrastructure. This helped reinforce investor confidence and supported market sentiment through much of the month.
Continued economic growth, healthy corporate profitability and ongoing investment in technology provide a supportive foundation for global sharemarkets. Nevertheless, rising bond yields and uncertainty around future interest rates may contribute to further market volatility.