In June equity and bond markets continued to move together, with both asset classes rallying over the month. Inflation in the US came in at 0.0% month on month, below market expectations, which proved positive for both equities and bonds. Retail sales in the US were also below market expectations, highlighting that the strength of the consumer is softening somewhat, after a very strong start to the year. At the Federal Reserve meeting, whilst the deposit rate was unchanged, the forward projections from the Fed (the Dots), showed just one cut this year, fewer than the two cuts that were previously implied for the year.
Equity markets rallied, with the MSCI World up over 3.0% on the month. Within equities, returns were once again strongest in US markets, and our holding in the iShares MSCI USA SRI was a large contributor to returns, outperforming the S&P 500. Stock markets continue to perform in part due to higher earnings expectations, particularly in businesses involved in AI. European equity markets lagged, beset by rising political volatility, as a surge in the polls for both the far-right and far-left parties in France impacted markets.
Fixed income also generated positive returns, with the 10-year US bond rallying 11bps over the month. Within the asset class, our position in UK Government bonds added value over the course of the month.
A holding in the NextEnergy Solar Fund, which builds and operates solar infrastructure on the UK grid was up significantly on the month, rallying nearly 13%. This was due to announcing the sale of a small portion of its assets and announcing a share buyback programme, both of which closed some of the discount that the vehicle trades at relative to its net asset value.
