Market Review – June 2024

The US indices, both S&P 500 and Nasdaq broke their latest records last week, with returns of 3.7% and 5.8% for the month.

Nvidia, being the artificial intelligence torchbearer, briefly took the spot as the world’s most valuable company as its market capital surpassed Microsoft’s. At the peak of its frenzy, it was more valuable than the entire stock market of France or that of the U.K., or the whole oil and gas industry. The shakeout that followed saw its stocks recoil about 20% from new records, probably owing much to profit-taking on its blistering rise.

European markets have displayed mixed sentiments post the French president’s call for a snap election with the first round of voting of to take place on 30 June. The pan-European STOXX 600 was down 0.97% for the month displaying a degree of caution ahead of this week’s release of US inflation data as well as French elections. 

The blue-chip FTSE 100 index was down 0.45%, echoing similar cautious sentiments ahead of the upcoming election that will take place in early July. A win for Labour is viewed as a near certainty, which alleviates some of the uncertainty typically associated with election time, with a change in government away from the Conservatives who have governed for the last 14 years. An element of uncertainty will remain as investors wait to see how Sir Keir Starmer will lead the country.

The European Central Bank (ECB) cut its interest rate by 0.25% to 3.75% in its June meeting, its first cut in nearly five years. The ECB however, remained vague about future reductions in interest rates, “not pre-committing to a particular rate path” with future decisions to be data dependent. While inflation in the region has come down from its peaks, the central bank cautioned that it expected inflation to remain above its 2% target until the final quarter of 2025. 

The Swiss National Bank cut rates by 0.25% to 1.25% last week for the second time, maintaining the central bank’s position as a frontrunner in the global policy easing cycle with another quarter point cut expected by yearend.

The Bank of England (BoE) has kept interest rates unchanged at 5.25%, although the inflation dropped to the BoE’s target of 2% in May, down from 2.3% in April as core inflation rates remain well above 3% and services inflation is even stickier.

The US Federal Reserve has yet to blink on interest rate reductions but indicated optimism that inflation remains on track to head back to the Fed’s 2% goal, allowing for some policy loosening later this year. The US core Consumer Price Index eased to a three-year low of 3.4% in May, down from 3.6% in the previous month and below market forecasts of 3.5%.

The yuan slipped to its weakest level of the year even as the People’s Bank of China left its interest rate setting unchanged and Chinese stocks once again bucked the world trend for the month with the SSE down over 3% in the past week wiping out nearly all their year’s gains.

Japan’s Nikkei 225 gained over 2% this week, hitting its highest level since April. The yen moved closer towards the 160.50 per dollar level, with investors watching closely to see if a breach could result in further intervention. Japan’s core inflation rose to 2.5% for the first time in three months in May due to higher electricity costs.

With elections around the corner, we will see stock market volatility increasing in the months and weeks preceding the elections. However, presidential elections and changes in governments are just some of the many factors that influence stock markets. Irrespective of the ruling party, stock markets have tended to reward investors over the long term. Stock picking and timing the market during periods of all-time highs and increased volatility will only result in a losing outcome for most investors versus the markets. By staying focused and investing in a globally diversified portfolio across asset classes, you will be well-positioned to meet your long-term goals.

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*All figures are indicative only and not intended to act as financial or investment advice. Nothing in this communication constitutes investment, legal, accounting, tax advice, or a representation that any investment strategy is suitable or appropriate to your circumstances.

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