Graeme Evans details the main action across the markets in July.
The technology and property sectors led European markets higher last month amid sharply contrasting fortunes for growth versus value investing.
Analysis by UBS today showed that Europe's stock markets improved 1.78% in July, better than 0.7% for global equities but still lagging Wall Street by about half a percentage point.
European investors enjoyed positive performances across all styles with the exception of value, which finished the month down 3.6% to move into negative territory over the year.
In contrast, the high-growth technology sector rose 5.59% last month as inflation jitters eased and the 10-year US bond yield retreated to 1.23% from 1.47% at the end of June.
Tech stocks are particularly exposed to a rising bond yield as their high valuations are built on future strong cash flows.
They were at the forefront of the March sell-off, when US borrowing costs hit 1.8%, but since then there's been no “taper tantrum” as US policymakers have proved successful in getting the message across that current inflation pressures are transitory.
The Federal Reserve has so far declined to give specific guidance on when it will start tapering its pandemic support, which markets think won't begin until early next year.
For now, investors still appear bullishly positioned for growth in preference to hunting for bargains in the value sector.
Alongside the tech growth, the UBS analysis showed that the European materials sector rose 4.51% last month and real estate by 4.43%.
These performances masked some volatility during the month as renewed concerns over the surge of the Delta variant of Covid-19 sent markets sharply lower in the middle of the month and contributed to underperformance for the FTSE 100 index over the period.
A regulatory crackdown in China's technology and private education sectors also had some impact, causing the MSCI China to fall by 13.8% and also putting pressure on Alibaba (NYSE:BABA) and Tencent (SEHK:700) backer Scottish Mortgage (LSE:SMT) investment trust.
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But overall, the success of vaccines weakening the link between Covid-19 infections and deaths or hospitalisations has boosted confidence amid the reduced threat of further lockdowns.
In a separate note from its wealth management team, UBS said: “We believe the return to economic normalisation will continue, supporting growth and equities.”
On China, the bank thinks the move towards tighter regulation has further to go in parts of the new economy along with socially sensitive sectors such as property and healthcare.
UBS told its wealth management clients: “We hold a cautious stance towards these higher-risk sectors in the near term, but investors looking to switch their exposure can consider opportunities in greentech, consumer durables and services, energy and cybersecurity.”
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