Soft serve
What happened in June.
Economic data was weaker around the world in June, putting the ‘soft’ back into the soft landing and unwinding concerns that some economies (eg the U.S.) may run ‘to hot’ for inflation to fall. Developed market central banks (the ECB, BoC, Riksbank etc) have now started their rate cutting cycle to support growth as inflation pressures fade, but the pace of policy easing will be more modest compared to expectations a few months. Australia is proving the exception to this view, as inflation is looking more stuck than sticky, creating a bias for further tightening.
Politics was firmly on the agenda in June as elections were called in the UK and Europe. In the UK, the election outcome is less about who will win, but by how much, given the hefty lead in the polls by the Labour party. Meanwhile in Europe the outcome of the European Parliamentary elections resulted in a decisive shift to the right. The result led to a snap election being called in France, with the far-right and far-left leaning parties performing strongly in the first round of voting.
In the U.S., the election campaigning is gathering pace but neither candidate is laying out any plans to reduce spending or meaningful raise taxes to address the ballooning fiscal deficit. A less fiscally prudent U.S. government could spark another period of rising inflation.
Fixed income markets have languished over the first six months the year. Easing inflation pressures and the onset of rate cutting cycles should mean lower yields on core government bonds. However, politics have complicated the picture as markets may re-price the inflation outlook given long-run spending plans of incoming governments. Core government bond yields are likely to remain range bound and investors wary of adding too much duration to portfolios until the outlook is clearer.
Equity markets moved higher in June and the MSCI World Index rose 2.4%, helped by the better performance of U.S. and Japanese markets as Europe lagged. Emerging markets outperformed (4.3%) supported by the AI exposed markets in Taiwan and Korea which are large weights in the index.
However, the narrowness of the U.S. rally is again in focus as the AI names dominate performance. Over the second quarter, the U.S. S&P 500 was up 4.3%, but the equal weighted index has fallen 2.6% over the same period. A broaden out in the U.S. market is expected given the improving earnings outlook in the non-AI related names and relatively better valuations. Similarly, while the European market has been buffeted by politics, the cyclical improvement in the economy and over discounted nature of the equity market provides ample opportunity for active stock selection to generate returns.
For the full summary of what happened in June check out our monthly market review on the website.
Never miss an update
Enjoy this wire? Hit the ‘like’ button to let us know.
Stay up to date with my current content by
following me below and you’ll be notified every time I post a wire
Kerry Craig, Executive Director, is a Global Market Strategist. Based in Melbourne, Kerry is responsible for communicating the latest market and economic views from our Global Market Insights Strategy Team.
........
For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programs are marketing communications and are not in scope for any MiFID II / MiFIR requirements specifically related to investment research. Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be used as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.
To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our Company’s Privacy Policy. For further information regarding our regional privacy policies please refer to the EMEA Privacy Policy; for locational Asia Pacific privacy policies, please click on the respective links: Hong Kong Privacy Policy, Australia Privacy Policy, Taiwan Privacy Policy, Japan
2 topics
Kerry Craig, Executive Director, is a Global Market Strategist. Based in Melbourne, Kerry is responsible for communicating the latest market and economic views from our Global Market Insights Strategy Team.
Expertise
Kerry Craig, Executive Director, is a Global Market Strategist. Based in Melbourne, Kerry is responsible for communicating the latest market and economic views from our Global Market Insights Strategy Team.
Expertise
Comments
Comments
Sign In or Join Free to comment
most popular
Equities
Don't let all time highs stop you buying this "bull" market
Centennial Asset Management