CIO’s Market Watch – June 2024

Neil Birrell, Premier Miton’s Chief Investment Officer, provides a monthly summary of the key events in financial markets.

For information purposes only. Any views and opinions expressed here are those of the author at the time of writing and can change; they may not represent the views of Premier Miton and should not be taken as statements of fact, nor should they be relied upon for making investment decisions.

Investing involves risk. The value of an investment can go down as well as up which means that you could get back less than you originally invested when you come to sell your investment. The value of your investment might not keep up with any rise in the cost of living.

Premier Miton is unable to provide investment, tax or financial planning advice. We recommend that you discuss any investment decisions with a financial adviser.

June – in brief
 
  • Yes, it really happened; the central banks started arriving at the party.
  • The economic data; nothing too hot, nothing too cold.
  • Politics reinforces its spot at the top of the agenda.
  • A good month for stock markets, or was it?

It happened, it finally happened!

This year, there have been interest rate cuts by central banks around the world, but none of them have been impactful or newsworthy on a global scale, other than the monetary policy actions by the Bank of Japan.

Back in March, the Swiss National Bank made its first cut, but we were left delaying our expectations of the US Federal Reserve (Fed), Bank of England (BoE) and the European Central Bank (ECB) to make the move.

But, that all changed in June. Early in the month Canada was the first of the G7 countries to cut interest rates, closely followed by the European Central Bank and Switzerland. Again, it is a point in time to remember; interest rates are now on their way down.

However, it’s a bring-a-bottle party and the Fed and the BoE decided not join in. It would have been a major surprise if either of them had done so.

The Fed has consistently told us that it would be looking at the data as a guide to when to cut, with the economy and inflation remaining stronger than anticipated, the timing has been pushed back to later in the year.

But, the data is improving now, the Consumer Price Index (CPI) for May was flat compared to April – the first time in nearly two years it didn’t climb, with the core rate at the lowest level since April 2021.

Meanwhile, the Producer Price Index (the Fed’s favoured measure of inflation) also posted better than expected readings. The Fed hasn’t moved yet, but either one or two cuts are likely by the end of year.

 

US Consumer Price Index

Source: Bloomberg 31.12.2018 – 31.05.2024.

More on the UK later, but the BoE held off cutting rates as well, in what was an erroneous decision in my view. The CPI has got back to the 2% target and the economy, whilst doing better than feared, could do with some support. The next BoE meeting is in August, when a cut is expected, followed by another later in the year.

It’s never a Goldilocks scenario, but you can still eat your porridge

Economic nirvana to an investor is a Goldliocks scenario; not too hot nor too cold. In other words the economy is not so strong that it is in danger of overheating, requiring mitigating action, such as increasing interest rates, and not too slow that recession may be the outcome.

It rarely, if ever, happens and we are a way off that at present. For example, the UK economy is growing, but very slowly, and the US economy is maybe a little too strong for some tastes.

However, things are moving in the right direction, which should be taken as positive by investors.

After bubbling under the surface, politics erupted

In this note last month, I majored on the UK general election, and by the time you read this, the result may well be known. As I write, a big Labour majority does look to be a foregone conclusion, so let’s park it there and review the outcome next month, when we should know more of the new government’s policies.

Meanwhile, in the US, one of the candidates became a convicted felon! It’s difficult to know what to make of that. On the face of it, it doesn’t strike me to be a good thing for his ongoing candidature and possible Presidency, either from a domestic or international perspective.

However, the US legal and political system makes allowance for this, so it will make the run up to the election interesting viewing. We can keep a watching brief for now.

With all the elections around the world this year, I thought the European Parliament one might be amongst the least worthy of comment, an opinion I shared with a journalist a couple of weeks beforehand.

Well, following the big swings to the right and the snap election called in France, she phoned me up to ask if that was still my opinion. That’s the problem with expressing them!

The results were surprising. The action by President Macron more so, which led to considerable uncertainty.

Financial markets react unfavourably to uncertainty, so the fall in stock markets in Europe was not a surprise. Again, a close eye needs to be kept on what happens next, as it will have an impact on markets.

Stock markets good in small parts, less good in most 

World stock markets, as determined by the MSCI World Index, the most recognised measure, were higher in June.

That hides what really went on. As noted above, Europe was weak, the UK was down as well, along with Hong Kong and China, whilst Japan was up a little. The US is the dominant world market, so drives the returns of the world market and within that the largest companies drive returns.

The giant US technology companies, along with large and medium-sized ones, drove the US stock market higher. NVIDIA, the leader in the design and manufacture of semiconductors that drive artificial intelligence (AI) briefly overtook Microsoft as the world’s largest company, whilst Amazon joined an elite club, reaching a market capitalisation (total value) of over $2 billion.

This helped drive the well-known and most watched stock market index in the world, the S&P 500 Index, to a new all-time high. This is cause for celebration, but also a good reason to consider; what next? After all, whatever goes up, must… well, not necessarily.

However, there are risks given how high some of these share prices have gone and how influential they are on stock market indices as a result of their size, not just US indices, but the global ones in which they sit as well.

If their share prices fall, they have a big impact on the indices, which effects investor sentiment and other share prices fall as a result. Therefore, it is very important to be in the right regions, sectors and type of company; those that offer attractive long-term opportunities and that might do better in weaker stock market conditions, if that occurs.

There are many such opportunities around, particularly smaller companies globally and the UK more generally. Let’s finish there and pick up on post-election UK next month.

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Risks

Investing involves risk. Premier Miton is unable to provide investment, tax or financial planning advice. We recommend that you discuss any investment decisions with a financial adviser.

Forecasts are not reliable indicators of future returns.

Any performance information presented relates to the past. Past performance is not a reliable indicator of future returns.

IMPORTANT INFORMATION:

Whilst every effort has been made to ensure the accuracy of the information provided, we regret that we cannot accept responsibility for any omissions or errors.

Reference to any stock, fund or investment should not be considered advice or an investment recommendation.

Any views and opinions expressed here are those of the author at the time of writing and can change; they may not represent the views of Premier Miton and should not be taken as statements of fact, nor should they be relied upon for making investment decisions.

Issued by Premier Portfolio Managers Limited which is registered in England no. 01235867, authorised and regulated by the Financial Conduct Authority and a member of the ‘Premier Miton Investors’ marketing group and a subsidiary of Premier Miton Group plc (registered in England no. 06306664). Registered office: Eastgate Court, High Street, Guildford, Surrey GU1 3DE.

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This section of the website and the content it contains is for professional financial advisers only and should not be relied upon, or circulated to, retail clients. Retail clients should refer to the Individual Investor's site.

The content of the pages of this website is for your general information and use only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

You acknowledge that such information may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. Your use of any information or materials is entirely at your own risk, for which we shall not be liable.

The information contained on this website does not constitute an offer or solicitation to sell shares in the funds or portfolio or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products, represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

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Premier Miton Investors has expressed its own views and opinions on this website, and these may change and there is no obligation to update them. Nothing in this website should be construed as investment, tax, legal or other advice. The information contained herein is subject to change without notice.

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By clicking accept you acknowledge that your use of this website is subject to our privacy policy, cookie policy and our general legal and compliance information available on our website.

THE UNITED STATES OF AMERICA:The investment products referred to on this website have not been and will not be registered under the United States Securities Act of 1933, as amended. They may not be offered or sold in the United States of America, its territories and possessions, any State of the United States of America or the District of Columbia or offered, sold or transferred to US Persons (as defined below). The investment products referred to on this website have not been and will not be registered under the United States Investment Company Act of 1940, as amended. Premier Portfolio Managers Limited has not been and will not be registered under the United States Investment Advisers Act of 1940.

“US Person” generally includes the following: (a) any natural person resident in the United States; (b) a partnership or corporation organised or incorporated under the laws of the United States; (c) any estate of which any executor, or administrator, is a US Person; (d) any trust of which any trustee is a US Person; (e) any agency or branch of a non-US entity located in the United States; (f) any non-discretionary account or similar account (other than an estate or trust) for the benefit or account of a US Person; (g) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organised, incorporated or (if an individual) resident in the United States; and (h) any partnership or corporation if: i. organised or incorporated under the laws of any non-US jurisdiction; ii. formed by a US Person principally for the purpose of investing in securities not registered under the 1933 Act. In addition, a Shareholder must qualify as a “Non-United States Person” as used in the US Commodity Futures Trading Commission (“CFTC”) Rule 4.7.

Investment products referred to on this website may not be sold or transferred to a US citizen, or an entity taxed as such or required to file a tax return as such under the United States federal income tax laws (a “US Tax Resident”).

The information in this site is solely for the purpose of acquiring information as, or for, an Institutional Investor (a corporate or other non-retail investment professional acting for their own account). This information must not be used or relied upon by anyone that may be considered a “retail investor” by the home regulator of the country from which this site is accessed.  

The information contained in this website is directed at persons who are resident in the United Kingdom and complies with appropriate UK legislation and regulations and is not directed at, nor intended for distribution to, or use by, persons in any jurisdiction in which the dissemination of such investment related information is not permitted.

The information or opinions contained herein should not be construed as an offer, or solicitation to deal in any investment or fund nor shall any such investment products or services be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful or in which the person making the offer solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation.

Premier Miton Investors has expressed its own views and opinions on this website, and these may change and there is no obligation to update them. Nothing in this website should be construed as investment, tax, legal or other advice. The information contained herein is subject to change without notice.

Neither Premier Miton Investors nor any of its group companies or affiliates accepts any liability for any losses arising directly or indirectly from any information accessed from this website, to the fullest extent permitted by law.

By clicking accept you acknowledge that your use of this website is subject to our privacy policy, cookie policy and our general legal and compliance information available on our website.

THE UNITED STATES OF AMERICA: The investment products referred to on this website have not been and will not be registered under the United States Securities Act of 1933, as amended. They may not be offered or sold in the United States of America, its territories and possessions, any State of the United States of America or the District of Columbia or offered, sold or transferred to US Persons (as defined below). The investment products referred to on this website have not been and will not be registered under the United States Investment Company Act of 1940, as amended. Premier Portfolio Managers Limited has not been and will not be registered under the United States Investment Advisers Act of 1940.

 “US Person” generally includes the following: (a) any natural person resident in the United States; (b) a partnership or corporation organised or incorporated under the laws of the United States; (c) any estate of which any executor, or administrator, is a US Person; (d) any trust of which any trustee is a US Person; (e) any agency or branch of a non-US entity located in the United States; (f) any non-discretionary account or similar account (other than an estate or trust) for the benefit or account of a US Person; (g) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organised, incorporated or (if an individual) resident in the United States; and (h) any partnership or corporation if: i. organised or incorporated under the laws of any non-US jurisdiction; ii. formed by a US Person principally for the purpose of investing in securities not registered under the 1933 Act. In addition, a Shareholder must qualify as a “Non-United States Person” as used in the US Commodity Futures Trading Commission (“CFTC”) Rule 4.7.

 Investment products referred to on this website may not be sold or transferred to a US citizen, or an entity taxed as such or required to file a tax return as such under the United States federal income tax laws (a “US Tax Resident”). If those investment products are held by a US Person, a US Tax Resident or a person who does not qualify as a “Non-United States Person” within the meaning of CFTC Rule 4.7, Premier Portfolio Managers Limited shall be entitled to redeem such Shareholder’s entire holdings.