July 2025 Market Outlook

The S&P 500 soared to a record high of 6,204.94, while the Nasdaq 100 surged to an unprecedented level at 20,679.01, with both indices setting new all-time highs. This market rally came despite a month dominated by escalating geopolitical turmoil in the Middle East. Tensions intensified on June 13, when Israel launched military operations against Iran, and further escalated on June 22, 2025, as the United States entered the conflict with precision strikes on three Iranian nuclear facilities. Yet, in the face of heightened uncertainty, markets responded positively to a ceasefire announcement by President Trump on June 23, triggering a decisive shift toward risk-on sentiment.

The 90-day pause on country-specific reciprocal tariffs is nearing its conclusion. On July 7, 2025, the Trump administration issued formal notices to several trading partners, outlining higher tariff rates set to take effect on August 1. Korea, Japan, and Malaysia were each hit with 26% tariffs on certain exports to the United States.

For China, the reciprocal tariff window remains open until August 12, 2025. The two nations have held two rounds of negotiations, with the most recent talks in London establishing the preliminary terms of a potential agreement. While sporadic negative headlines may still surface in the absence of a finalized deal, markets appear largely unfazed at this stage.

Meanwhile, the yield on the US 10-year Treasury note eased to 4.231%, down from 4.397% a month earlier. At the end of May, Goldman Sachs revised its interest rate forecast, now anticipating three U.S. rate cuts in 2025, scheduled for September, October, and December. This shift in expectations sparked a broad-based decline in bond yields across the curve, with longer-duration bonds benefiting the most due to their heightened sensitivity to interest rate movements.

Gold, which had performed strongly earlier in the year amid heightened geopolitical tensions and trade war fears, experienced a shift in momentum. The recent ceasefire between Israel and Iran, coupled with tangible progress in U.S. trade talks, helped ease market uncertainty and reduced demand for traditional safe havens.

Closer to home, on 9th July, BNM has slashed the over night policy rate (OPR) by 25 basis points to 2.75% from 3% previously following the conclusion of its monetary policy committee (MPC). This is the first time OPR has dropped under 3% since March 2023. This 25 basis point cut to the OPR benefits Malaysia’s property sector by lowering mortgage rates, thereby improving housing affordability, enhancing loan eligibility, especially for first-time buyers and investors to reducing financing costs for developers. Collectively, these factors stimulate demand and support lead to new property sales.

The lower interest rates helps to reduce REITs’ substantial financing costs, boosting net profits and enhancing distributions to shareholders. Much like banks, REITs are valued for their high dividend yields. In a declining rate environment, this income advantage becomes even more compelling.