Weekly Market Commentary
Week ending 21 June 2024
Weekly Market Commentary
Week ending 21 June 2024
Welcome to our weekly market update. Our focus is on providing clear, concise insights into stock and bond market movements and the broader economic landscape.
The views expressed here are subject to change without notice and we can’t accept any liability for any loss arising directly or indirectly from any use of it. This is for your information only. It is not a recommendation or advice, if you’re unsure about anything please speak to your financial adviser.
This week’s highlights
• S&P reaches year high: performance driven by Nvidia which is now the world’s largest company
• Weakening consumer trends in US: increased probability of interest rate cut in September
• Rates unchanged in UK: interest rates held at 5.25%, but 2 cuts priced in before end of year
Market Review
It’s been relatively quiet this week with the public holiday in the US falling on Wednesday.
The S&P reached a record high for the year. US equity performance continues to be driven by Nvidia, which is now the largest company in the world, representing 7.25% of the S&P500 index. However, in Europe, political and economic events are stirring bond markets. Ongoing concern around French political turmoil has caused a drag on European equities and the Euro.
US retail sales for May reaffirmed weakening consumer trends, fuelling growth concerns and increasing the probability of a September rate cut. Fed speakers this week maintained a hawkish tone, stressing data dependence and indicating the possibility of just one rate cut by year-end.
Across the pond, UK inflation hit the Bank of England’s (BoE) 2% target for the first time in almost
three years. Despite this, the BoE held rates at 5.25% on Thursday, in line with expectations. UK rates are likely to remain high until at least August given persistent services inflation and strong wage growth. Markets are pricing in approximately two cuts to interest rates before yearend. Elsewhere in Europe, rates were left largely unchanged with the exception of a 25bps cut in Switzerland.
Outlook
Outlook remains consistent with recent weeks. More central banks may be in a position to ease monetary policy in the second half of 2024 but employment, activity and inflation data over the next few months will be critical to the evolution of their thinking. The US economy continues to look strong, but other regions, including the Eurozone, face more challenging conditions. This could lead to diverging rate cutting cycles and opportunities in relative value trades.
Outlook
Outlook remains consistent with recent weeks. More central banks may be in a position to ease monetary policy in the second half of 2024 but employment, activity and inflation data over the next few months will be critical to the evolution of their thinking. The US economy continues to look strong, but other regions, including the Eurozone, face more challenging conditions. This could lead to diverging rate cutting cycles and opportunities in relative value trades.
Chart of the Week
France equity over Euro Stoxx 50 and France ten-year bond yield spread over Germany. After snap elections were called in France, political uncertainty continues to affect French government bond yields and equity performance. French bond yield spreads over German counterparts reached
their widest levels since 2017 last Friday. The CAC 40 underperformed the wider European index. We’ve also seen growing concern from key rating agencies around France’s deficit reduction approach and investors’ anxieties focus on the potential shape of the forthcoming French parliament and its attitude towards fiscal consolidation.
What This Means for You
It’s clear how quickly outlooks can change across the globe, making it increasingly challenging to predict impact on markets and investments. This is continued evidence that maintaining a well diversified,
long-term thinking to your investment approach rather than reacting to market swings is key. By staying committed to carefully considered plans, investors can navigate through periods of volatility and uncertainty.
Has provided the commentary within this document.
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PLEASE NOTE THE FOLLOWING
This guide is for general information and is not intended to address your personal and financial requirements and should not be deemed or treated as constituting financial advice. Nor does this guide constitute tax or legal advice and should not be relied upon as such. Tax treatment of investments and legal advice depends on the individual circumstances of each client and may be subject to change in the future. For further guidance on the matters discussed in this guide please speak to Shane Fox, who is a regulated financial adviser. Our services relate to certain investments whose prices are dependent on fluctuations in the financial markets beyond our control. Investments and the income from them may go down as well as up and you may get back less than the amount invested. Past performance cannot be used as a reliable prediction of future performance.
SAMANTHA HAGON