Key Points
- S&P 500 was in bullish mode, returning 3.4%, whilst the FTSE 100 remained flat.
- Global economic indicators continue to paint a fairly bleak picture. However, for now, the market on the whole is shrugging this off.
- China’s reopening has been disappointing so far.
- Debt ceiling “resolved” by allowing ongoing spending and postponing potential adjustments until after the 2024 election.
- Consumers continued to spend.
- Geopolitical risk ongoing.
The US bull market continued, as markets reacted positively to any good news they could find, along with high hopes for the transformative power of Artificial Intelligence (AI). Inflation continued to be elevated although the trajectory in the US appears to be downwards. The FED “skipped” a rate hike this month, although insisted that further hikes should be expected; we believe them! In the UK, inflation continues to be too high, which forced the Bank of England to raise rates by 0.5%. There is now a sharp focus on mortgages and the effects of higher rates on UK households.
Over the month of June, the FTSE 100 was up 0.13%, in sterling terms the S&P 500 returned 3.41% and the MSCI World ended the month up 2.49%. Volatility remains low, helping support the positive trends in markets.
Some economic news came in surprisingly positive, although inflation remains persistent, the consensus is that it will begin to taper off and rate cuts are expected further down the line; although our expectation is for rates to remain higher for longer. The Strategic Petroleum Reserve (SPR) continues to be drained putting downward pressure on energy prices, but wages show signs of increasing, albeit still behind the pace of inflation. The consumer remains surprisingly strong although excess household savings will begin to deplete over time. Company earnings calls are becoming increasingly conscious of excess inventories. China’s reopening has disappointed so far, with the economic slowdown persisting and the government struggling to keep property prices elevated. We maintain an underweight to China, despite liking emerging markets in general.
Investor sentiment remains relatively bearish along with positioning, but the bullish trend has begun to increase in breadth across wider elements of the market rather than just ‘Big Tech’ and AI. We have been adding to equities and alternatives in bespoke where some opportunities remain attractively priced, as we gradually reduce the cash allocation by taking advantage of market dips. Currently, we remain slightly underweight to equities as we await our price targets for selected holdings, intending to add on further short-term weakness over the coming weeks. We are particularly pleased with the addition of the new alternative trend following fund DUNN WMA, which provides uncorrelated returns at a low cost. It has managed to benefit from the strong market trends despite mostly focusing on commodities markets which remain depressed.
Hardy rebalances occurred earlier this month retaining their relatively cautious outlook but increasing their weighting to the US growth equities to benefit from current market trends.
For both services we maintain a slight aversion to bonds given the risks of further rate hikes and surprise inflation, preferring to use alternatives as a significant ballast to portfolios. We prefer to keep equity portfolios well diversified across sectors to maintain their robustness, and to target improved equity dividend yield opportunities.
Important Information
This article is for information only and does not constitute advice or recommendation and you should not make any investment decisions based on it. The views and opinions of this article are those of Casterbridge at the time of writing and may change without notice. Any opinions should not be viewed as indicating any guarantee of return from investments managed by Casterbridge nor as advice of any nature. It is important to remember that past performance and the value of an investment, and any income from it, may go down as well as up and the investor may not get back the original amount invested.
