Markets In Focus: June market snapshot

South African investors largely focused on domestic political events in June 2024. Globally, interest rate cuts and election uncertainties dominated markets.

Initially, South African equities, bonds, and the rand strengthened following the announcement of a multi-party Government of National Unity (GNU), a week after the 29 May national election. This raised hopes of a more favourable political environment for investors. However, this newfound optimism was tempered by two weeks of uncertainty as debates over members of the new Cabinet continued until month-end.

Mid-month, the JSE All-share Index staged a strong rally, and ended June 4.08% higher, while the All-Bond Index exceeded it with a 5.24% return. Improved sentiment towards South Africa also helped the rand to strengthen by 3.01% against the dollar and 4.25% against the euro for the month.

In the US, economic data indicated a slowdown in inflation, with core PCE inflation for May reported at 2.6% year-on-year versus 2.8% year-on-year for April. According to Reuters, most analysts forecast the US Federal Reserve’s first interest rate cut by September, potentially benefiting smaller cap stocks. The main feature of the US equity market was again technology shares, with NVIDIA surpassing Microsoft in mid-June to briefly become the world’s most valuable company. However, ongoing uncertainty over the looming US presidential election is likely to feature more largely in markets in the months up to November, especially following President Biden‘s underwhelming performance in a televised debate against his rival Donald Trump.

In Europe, a well-flagged rate cut of 25 bps by the European Central Bank initially buoyed markets. This was followed by weakness as French President Emmanuel Macron announced a snap election on 9 June 2024. The retreat from French equities and bonds dragged down other European equity markets on fears about the stability of the Eurozone.

In Asia, increasing confidence in the Bank of Japan’s continued monetary policy normalisation attracted investors. A Bank of America survey in June showed Japan to be the favoured market among US asset managers, although some investors are starting to anticipate an interest rate hike in the second half of the year.

Over one year, South African investors would have reaped the most returns from property, with the SAPY showing a gain of 26.25% compared with 16.18% from the MSCI All-World Index. However, SAPY’s recent rally has not been enough to offset previous weakness, with the five-year return at a mere 0.90%, less than the 6.06% that an investor would have earned from cash (STeFI index).

Table 1: Total returns to 30 June 2024