Strong rebound in equity markets as well as fixed income markets during the month of July. On the equity side, the S&P 500 rose 9.11% during the period, its best performance since November 2020 and practically recovering half of the year's accumulated losses. Similarly, the Nasdaq technology companies stood out with a positive performance of 12.35%, in contrast to the Mexican Stock Exchange, which increased only 1.30% during the month. On the other hand, fixed income enjoyed a generalized recovery due to the movement of medium and long-term rates, with investment grade corporate bonds and speculative bonds yielding 3.24% and 5.90%, respectively.

Central banks' rate hike decisions have begun to have an impact on global economies. In the United States, leading manufacturing and construction indicators have been weakening since March. Likewise, the US economy's GDP has declined for the last two consecutive quarters, which some technically consider to be a recession. That argument, however, has been countered by the resilience of the labor market and better-than-expected 2Q corporate reports. The unemployment rate fell to 3.46%, the lowest level since 1969, while 75% of S&P 500 companies beat earnings expectations.

On the inflation side, long-term expectations were considerably reduced due to the continued decline in commodity prices, mainly oil, and the aforementioned economic slowdown. Taking into account the above, the FED decided to increase its benchmark rate by 75bp to a range of 2.25-2.50% at its July 26 meeting, and not by 100bp as some in the market had expected. Thus, the market interpreted that the Fed's tightening monetary policy cycle is nearing the end, which fueled the recovery seen during the month.

At Grupo Inversión we believe that the U.S. economy has not yet fallen into recession, and that although the conditions exist to observe one in the coming months, it will be moderate and accompanied by inflation gradually converging towards the Federal Reserve's 2% target.