JULY 2026 FUNDHOUSE MARKET REPORT
This article has been prepared by Fundhouse and is reproduced by LifeMap Financial Planning for general information. It reflects Fundhouse's views as at the date of publication and those views may change. It does not take account of your individual circumstances and should not be treated as personal financial advice or a personal recommendation.
Economic commentary
In July, we learned that UK consumer prices rose by 2.6% in the year to June, down from 2.8% in May. Against this backdrop, the Bank of England (BoE) have left interest rates unchanged (now since December 2025) at 3.75%, reflecting a cautious approach amid economic uncertainty. Whilst falling energy/fuel prices were actually a downward contributor to inflation in June, they remain volatile, and higher than before the Iran conflict. This presents an ongoing challenge for the BoE, who assess any future impact of energy prices on consumer inflation. On top of that, the BoE are worried that workers, who are still feeling the pinch at petrol pumps (consumer fuel prices often lag wholesale prices), may demand higher wages, in turn creating a spiralling inflation effect; the risk of this worsens the longer that geopolitical noise remains elevated. As a result, the BoE are in a difficult position, adopting a cautious 'wait-and-see' approach by keeping interest rates on hold – businesses and mortgage holders will no doubt watch UK policymakers and the ongoing situation in the Middle East with interest.
Similarly, US consumer price inflation fell to 3.5% in the year to June, down from 4.2% the month prior, with similar drivers. As in the UK, inflation remains above target, resulting in the Federal Reserve (the Fed) leaving interest rates unchanged, with mixed economic signals creating dissent amongst Fed voting members. Trade policy has returned to the forefront, with a revised US tariff framework introducing fresh uncertainty to governments and businesses around the world. While tariffs were intended to raise revenues, encourage domestic production, and support growth, they have produced a far more mixed outcome, with legal challenges, refunds, and unresolved negotiations widespread. This all serves as a reminder that economic outcomes are rarely as straightforward as officials intend. Meanwhile, renewed tensions in the Middle East unsettled markets before another last-minute ceasefire was agreed. This uncertainty was summed up by President Trump's comment that "we'll see what happens", a remark that reflected not only the unpredictable nature of geopolitical developments, but also the volatility of Trump's policymaking approach, further amplifying uncertainty for investors.
Market commentary
Global equity markets were volatile in July. Renewed swings between conflict and ceasefire in the Middle East pushed energy prices higher, supporting energy-related sectors for a time. Elsewhere, investors started to test the stretched valuations of technology and AI-related companies – despite strong corporate earnings at many companies, the stocks most exposed to these themes suffered badly. As we have been noting for some time, the substantial levels of investment being committed to AI today need to deliver such extraordinary profits to sustain current market valuation levels, and we saw some validation of this view in July. This dynamic led to a divergence in regional market performance, driven by differences in sector composition. The UK was among the strongest, benefiting from low exposure to technology and higher weighting to energy. In contrast, technology-heavy markets, such as the US, saw reality bite. Taiwan and South Korea were particularly weak due to their large semiconductor manufacturing exposure, where sentiment was further impacted by the emergence of a new advanced Chinese chipmaking tool, which heightened competitive concerns and contributed to a sell-off in several major semiconductor companies that had previously enjoyed monopolistic positions. The leading Korean chipmaker SK Hynix was badly affected, falling about 35% in the month, despite seeing 257% y-o-y revenue growth.
Global bond markets were negative over the month. With expectations that interest rates will remain higher for longer on the back of stubbornly high energy prices, investors demanded higher yields to hold bonds, causing bond prices to fall.
Outlook
July was a reminder that valuations ultimately matter. After a sustained period in which investor enthusiasm drove a few technology-related companies to increasingly demanding valuations, reality began to reassert itself. This resulted in a sharp sell-off across some of the market's most richly valued areas, despite excellent corporate results in many cases. While periods of market exuberance may persist, valuation discipline remains a critical driver of long-term investment outcomes; we continue to favour this approach, rather than relying on predicting unknowable macroeconomic and geopolitical outcomes. We believe that our disciplined, diversified, and valuation-centric approach is as relevant as ever.
Fundhouse is the trading name of Fundhouse Bespoke Limited. Fundhouse provides investment management services to professional clients and does not provide financial advice. Importantly, this note does not represent investment advice and any reader should always speak to their financial adviser before making any investment decisions. Please note that the value of any investment may go down as well as up and you may lose capital when investing and the value of your investments may not always increase. Please ensure that you are comfortable bearing financial losses and that you are comfortable taking a long-term investment view of five years or more.
