Market update: June 2022

June was a difficult month for the financial markets and had two faces. There was panic in the markets after inflationary pressure in the US was much higher than expected. Also, unexpected interest rate hikes by the central banks of Switzerland and the United Kingdom, among others, caused considerable fluctuations. In the second half of the month, however, there was a period of stabilization. For example, energy prices fell, giving the market some breathing space again. China’s COVID relaxations also helped shares in emerging markets. However, consumer confidence remained low. The expectation of a possible recession will be the most important factor for the course of the markets in the coming months.

Best fund performances in June 2022: UBS (Lux) Money Market Sustainable Fund -0.06%

Fear of recession dominates the financial markets; lower inflation pressure and recovery of consumer confidence are essential for positive returns in the coming months.

‍Equities in developed markets experienced a volatile start to the month. This was mainly due to inflationary pressure in the US (8.6% in May, YoY) and fears of aggressive interest rate hikes. The Fed raised interest rates by 0.75% during the month to curb inflation and kept the door open for similar increases in the future. The S&P 500 closed the month downwards (-8.4%), partly because there were no positive developments regarding the ongoing war in Ukraine. Equities in Europe had a similar month, with the Stoxx 600 falling by 8%.

Stocks in emerging markets performed better than stocks from developed countries. The Chinese markets rose by 6% during the month, making up for some of the losses from the beginning of this year. This was largely due to the Chinese COVID relaxations. But other major stocks in this market suffered heavy losses, such as Samsung (Korea) and TSMC (Taiwan), which both fell by 15%.

The yields on 10-year government bonds, which showed some signs of stabilization in May, rose 0.6% in the first half of the month. However, government bonds also cooled down quickly in the second half of the month. The US and German 10-year interest rates rose by 0.12% and 0.24% over the course of the month. The ECB did not raise interest rates this month, while central banks in Switzerland and the United Kingdom surprised the world with unplanned interest rate hikes.

Hoogrentende obligaties en bedrijfsobligaties presteerden slechter dan staatsobligaties doordat de risico opslag voor bedrijven groter werd uit angst voor een recessie. Het geldmarktrendement in Europa blijft laag (<0,5%), maar zal in de komende kwartalen, door de renteverhogingen, mogelijk iets stijgen.

What does July have in store for us?

- Any peaceful resolution of the war in Ukraine will be crucial to reducing volatility in the markets.

- The uncertainty and volatility that occurs in the market, and the underlying factors that cause it, will most likely persist in the coming period.

- The earnings season will provide much-needed clarity on the true health of companies. In addition, it will provide more insight into the impact of inflation on the business community.

Important dates:

- July 13 for the June inflation figures in the US

- July 26 Microsoft quarterly results

- July 28 Apple quarterly results

What does this mean for my plans?

‍Don't let the turbulent market disrupt your long-term goals. Vive's investment strategies take the downward market into account. Ultimately, well-diversified portfolios are the key to success in the long term. Consistent periodic investing in periods like these is crucial to take advantage of falling markets.