MACRO ENVIRONMENT
June was a month where elections were in the spotlight with the US, France, and the UK in the middle of debate season. The first Biden-Trump debate kicked off proceedings for the US November election, with President Biden wavering at times. In France, the far-right National Rally party looked likely to disrupt President Macron’s economic agenda but after a second round of voting it now looks as though there will be a coalition government, likely to unite France’s far left party and President Macron’s centrist party. Labour won the UK election by a landslide, with policies unlikely to cause too much concern for financial markets.
Inflation figures kept trending lower in the US, coming in closer towards the 2% target at 3.3%. Job growth was strong beating analysts’ estimates, although the unemployment number ticked up slightly to 4%. The market is now pricing in one rate cut before the end of the year from the Federal Reserve, as growth is less of a concern in the US than other developed countries.
The UK hit its target inflation rate of 2% in June and although this has been achieved, there is expectation it may tick up slightly during the second half of the year due to base effects from 2023. Interest rates were not cut by the Bank of England during June however as service inflation (which includes wages) are still higher than where the Central Bank would like to see them.
In Europe, the European Central Bank were the first major Central Bank to cut their interest rates from 4% to 3.75%. There are growth concerns across the more developed countries in Europe such as Germany and France, hence a need to cut rates sooner than for example the US to boost their economy.
EQUITIES
June was another interesting month for equity markets, with the S&P 500 again buoyed by the large technology stocks, up +3.59%. The S&P 500 equally weighted index however was slightly down at -0.45% on the month, displaying the influence the “magnificent 7” still holds across both US and global markets.
The UK market gave back some of its gains for the year with a -1.04% performance in June, now with a year-to-date performance of +7.79%.
FIXED INCOME
The 2-year yield curve ended June at 4.75% down from 4.93% at the start of the month, as inflation fell, and rate cuts become more likely. The 10-year yield curve was at 4.39% by the end of June, slightly down from 4.50%.
ALTERNATIVES & CURRENCIES
Gold price was relatively stable in June after a strong run in 2024, with the year-to-date increase due to Central Bank buying and some dollar weakness at the beginning of the year.
The pound weakened slightly on the dollar during June, ending the month at 1.265 vs 1.273 at the beginning of the month.
