June 2023 Market Insights
Developed markets rebounded strongly in June due to strong U.S. economic data and ongoing economic growth. There is also some reappearing hope that some central banks are nearing the end of their rate tightening cycle.
Written by Kevin Hua Co-founder & Chief Investment Officer
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What happened to the markets in June?
Developed markets rebounded strongly in June due to strong U.S. economic data and ongoing economic growth. There is also some reappearing hope that some central banks are nearing the end of their rate tightening cycle.
The strongest positive performers were the U.S. Russell 2000 Index, up +7.95%, the Japan’s Nikkei 225 Index, up +7.45% and Japan’s TOPIX Index, up +7.41% (local prices). Only the U.K. FTSE 250 Index, down -1.64% (local price) was down of any significance.
The strength of the AUD by +2.42% against the USD and +0.36% against the € dampened AUD returns for the Trends and indices.
U.S. economic data is robust
The U.S. Federal Reserve kept interest rates constant at a benchmark rate of between 5.00% and 5.25% although it had flagged a few rate hikes for the balance of the year. Inflation is trending down with core inflation at 5.3% but is still well above the Federal Reserve’s target of 2.0%.
U.S. economic data remained robust with core retail sales (+0.4%) and core durable goods orders (+0.7%) were positive and housing activity also rebounded. Then only worrying sign was the uptick in the unemployment rate to 3.7%, up from 3.4% last month (the lowest level since 1953).
Europe in technical recession and inflation remains high
A GDP growth report revealing a technical recession in the European Zone was a negative for equities, but European markets generally recovered by month end, following improved industrial production data.
Inflation remained elevated in the U.K. at 8.7%, its highest reading since 1992 while headline inflation in the European Zone fell to 5.5%.
Central banks continued to raise their respective policy rates, including the European Central Bank (+0.25% to 3.5%) and the Bank of England (+0.50% to 5.0%).
Chinese economic data remains weak but Japan is rebounding
China's economy continues to encounter difficulties in its re-opening recovery and from the ongoing slump in the property market. Chinese equities continue to underperform as China’s economic data remained weak with retail sales growth decelerating to 12.7% and industrial production growth to 3.5%.
The People’s Bank of China announced marginal cuts to several key lending rates as it attempts to generate growth.
In Japan, both the manufacturing and non-manufacturing sectors rebounded while core inflation reached 4.3%, its highest level since 1981. However, the Bank of Japan made no changes to its interest rate policy.