Markets In Focus: June market snapshot

In June, global economic indicators varied. While some economies showed signs of recovery and resilience, others faced challenges stemming from geopolitical tensions and policy uncertainties.

Several economies, including the US and selected European regions, continued their upward trajectory towards recovery. This positive trend was fuelled by ongoing fiscal stimulus programmes, an upswing in consumer spending, and improved labour market conditions. However, central banks closely monitored inflationary pressures and deliberated on appropriate responses to prevent overheating.

Geopolitical tensions, particularly trade disputes and conflicts, exerted influence on global markets in June. These uncertainties created periods of market volatility and impacted investor sentiment.

Inflationary pressures remained a focal point of attention. Rising commodity prices, supply chain disruptions and pent-up consumer demand contributed to higher inflation readings.

At its June meeting, the US Federal Reserve voted to maintain interest rates but has since made hawkish remarks suggesting that two additional rate hikes are likely before the year is up. More rate increases are possible, given the strengthening labour market and the interest rate-sensitive housing market. Even though the Fed anticipates two additional rate increases, the market is anticipating only one additional 25 bps increase.

As the excitement after economic reopening has subsided, China has been reporting poor economic data. In June, factory activity decreased for a third consecutive month, with the manufacturing PMI at 49, which is still below the 50-point threshold. In addition, it appears that the services sector is slowing down as the non-manufacturing PMI dropped from 54.5 in May to 53.2 in June.

Global stocks outperform over five years

Global stocks, as measured by the MSCI World Net Index, delivered the highest returns to South African investors in the five years to 30 June 2023, with an average annual return of 16.30% in rand terms. For comparison, the FTSE/JSE All Share Index (ALSI) returned 9.59% a year in the same period. South African Bonds delivered 7.39% a year and cash 5.81%. South African listed property, as measured by the FTSE/JSE SA Listed Property Index (SAPY), has underperformed other asset classes over the long term, contracting by an average of 3.55% a year.

 Table 1: Total returns to 30 June 2023

Source: Morningstar | Total returns annualised to 30 June 2023