Monthly Comment - June 2024

Overview of June 2024 Global Financial Market Trends

Equities

In June 2024, global equities posted a modest gain, rising by 2.2% in USD terms.

This growth was driven by several factors, including corporate earnings reports

that exceeded expectations in key sectors such as technology and healthcare.

Despite these gains, concerns about overvaluation persisted, especially in the U.S.

market, where price-to-earnings ratios remain elevated. European markets also

saw growth, although the pace was moderated by geopolitical uncertainties and

the upcoming French elections, which posed additional risks to the Eurozone.

Bonds

The bond market in June saw positive returns, with global government bonds

yielding 0.9% in USD hedged terms. U.S. Treasury yields edged higher as the

Federal Reserve maintained a cautious stance on future rate hikes. European

bonds were influenced by similar trends, though the European Central Bank (ECB)

indicated a more dovish approach given the economic uncertainties tied to

regional political events and persistent inflation pressures.

Currencies

Currency markets experienced notable volatility. The U.S. dollar strengthened

against major currencies, reflecting investor confidence in the U.S. economy and

the Fed's policies. In contrast, the euro weakened due to slower economic growth

projections and political uncertainties surrounding the French elections. Emerging

market currencies fluctuated significantly, impacted by global economic conditions

and local political events.

Interest Rates

Central bank policies continued to be a critical focus in June. The Federal Reserve

indicated a potentially more dovish stance, balancing the need to control inflation

with concerns about economic growth. The ECB also faced challenges, aiming to

support growth while managing inflation and political risks. The Bank of England

maintained a cautious approach, highlighting the importance of financial stability

amidst rising asset prices.

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Commodities

Commodity markets were highly dynamic in June. Oil prices remained elevated

due to ongoing supply constraints and geopolitical tensions. Agricultural

commodities also saw price increases, driven by adverse weather conditions and

disruptions in global supply chains. These rising commodity prices contributed to

persistent inflation, complicating central bank efforts to stabilize their economies.

Equity Market Valuations

Equity valuations, particularly in the U.S., remained a point of concern. High price-

to-earnings ratios in technology and growth stocks indicated potential

overvaluation, raising fears of a market correction. Investors were cautious,

balancing optimism from strong earnings with the risks posed by high valuations

and potential central bank rate adjustments.

Central Bank Rate Policies and Inflation

Persistent inflation continued to challenge central banks globally. The Federal

Reserve's stance highlighted the delicate balance between curbing inflation and

supporting economic growth. Any shifts in policy could have profound market

implications, as seen with the potential for a more dovish outlook in the U.S. The

ECB faced additional pressure from the upcoming French elections, which could

influence economic policies and investor confidence in the Eurozone.

Conclusion

June 2024 highlighted the complex interplay of factors influencing global financial

markets. Equities showed modest gains, but valuations and potential corrections

remained concerns. Bond markets provided stable returns, reflecting cautious

investor sentiment amidst rising yields. Currency markets were volatile, driven by

economic and political factors. Central bank policies, aimed at balancing inflation

control and economic growth, were crucial in shaping market expectations.

Commodity prices added another layer of complexity, contributing to inflation and

influencing market dynamics.

Investors should remain vigilant, considering the potential impacts of central bank

policies, political events, and economic conditions on global financial markets. The

risks posed by high valuations and persistent inflation necessitate a careful

approach to investment strategies in the coming months.