Market update: June 2022

June was a difficult month for financial markets and had two faces. One was panic in the markets after inflationary pressures in the U.S. were much higher than expected. Unexpected interest rate hikes by the central banks of Switzerland and the United Kingdom, among others, also caused significant swings. In the second half of the month, however, came a period of stabilization. Among other things, energy prices fell, giving the market some breathing room again. China's COVID easing also helped emerging market stocks. However, consumer confidence remained low. Expectations of a possible recession will be the main factor affecting markets in the coming months.

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

Fear of recession dominates financial markets; lower inflationary pressures and restored consumer confidence essential for positive returns in coming months

‍Equitiesin developed countries experienced a volatile start to the month. This was mainly due to inflationary pressures 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 hikes in the future. The S&P 500 closed the month down (-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 down 8%.

Emerging market equities outperformed developed market equities. Chinese markets rose 6% during the month, recouping some of the losses from the beginning of the year. This was largely due to China's COVID easing. But other major stocks in this market suffered heavy losses, such as Samsung (Korea) and TSMC (Taiwan), both of which fell 15%.

Yields on 10-year government bonds, which showed some signs of stabilizing in May, rose 0.6% in the first half of the month. But, government bond yields also quickly cooled again in the second half of the month. U.S. and German 10-year yields rose 0.12% and 0.24% during 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 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 occurring in the market, and the underlying factors causing it, are very likely to persist for the upcoming period.

- The numbers season will provide the much desired clarity on how the health of businesses really stands. In addition, it will provide more insight on the impact of inflation on business.

Important dates:

- July 13 for June inflation figures in the U.S.

- July 26 Microsoft quarterly results

- July 28 Apple quarterly results

‍What does this mean for my plans?

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