Sabco® Investment's Monthly Market Report - June, 2024

Sabco® Investment's Monthly Market Report - June, 2024

Global equities rose by approximately 3% in June. Emerging markets and US equities both showed positive performances, each gaining around 5%. Conversely, European equities declined due to political uncertainties in the region. The S&P 500 Index and Nasdaq posted their second consecutive monthly gain and their fifth gain in the first six months of the year. Significant gains in the U.S. technology sector, particularly from Nvidia (+12.6%) and Apple (+9.6%), were key drivers of market performance. However, the broader market lagged, with the equal-weighted S&P 500 and smaller market caps ending the month down 1%, highlighting market concentration and high valuations in sectors like semiconductors and AI-related stocks.

In June, disinflation persisted in the United States, and macroeconomic data continued to support the outlook for a soft landing for the US economy. May's inflation figures were weaker than anticipated, with core inflation excluding housing reaching just 1.9% year-on-year, the lowest since March 2021.

Investors also focused on slowing economic growth, as indicators such as the ISM manufacturing index's weakness in May, stagnation in capital goods orders, and subdued housing market activity pointed to a slowdown compared to earlier in the year.

Yields on risk-free government bonds (Germany, US) fell following improved US inflation news and slower economic indicators. Spreads on French and Italian bonds widened due to political uncertainties in France. Euro-denominated corporate bonds returned 0.66%, compared to 0.37% for eurozone government bonds.

The European Central Bank cut its key interest rate by 0.25% in June, bringing the deposit rate to 3.75%. ECB President Lagarde indicated it was "very likely" the ECB had begun to reduce its restrictive monetary stance, emphasizing that any further rate cuts would depend on economic data. Meanwhile, the Fed maintained its key rate, with the median projection of Fed members now suggesting only one 25 basis point rate cut this year, down from three projected in March.

The dollar appreciated slightly against the euro in June due to political uncertainty in France and increased odds of D. Trump's election following J. Biden's poor performance in the presidential debate. The yen continued to depreciate against both the euro and the dollar, while the Swiss franc remained volatile. The euro appreciated by over 5% against Latin American currencies such as the Mexican peso and Brazilian real.

Early in the month, oil prices fell due to OPEC+'s surprise announcement of reducing its production cuts later in the year. However, oil prices rebounded in the second half of June, closing the month up nearly 6%. Gold prices remained broadly unchanged after their recent strong performance.