After a tricky first quarter, most equity markets have had a better second quarter. In the latter part of June trade war concerns weighed on equities, with markets outside the US most affected. This contributed to US equities being the best performing region in June while European equities were just in positive territory and UK equities were just in negative territory. Asian and Emerging Markets declined, and the Chinese stock market entered bear market territory. The conclusion of these trade arguments is hard to predict, but the longer this goes on the greater the risk that it starts to weigh on sentiment more broadly.
As well as global trade concerns, central bank policy divergence was a key theme in June as the Federal Reserve announced a rate increase and adopted a generally more hawkish stance, while the European Central Bank announced plans to delay rate hikes.
Government bond markets were buoyed by the risk-off tone towards the end of the month. This has helped push 10-year US Treasury yields well below the key 3% level and the yield curve (10 year / 2 year yields) has also flattened to the lowest level since 2007 at around 30bps. It is highly debatable that this somehow signals that a recession is on the way, but certainly the Fed would have to slow their pace of rate hikes if a proper trade war breaks out.
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This information has been produced by Jordan Buchanan using data supplied by Quilter Cheviot, and from publicly available data sourced from Bloomberg.com