Markets have sewn up June in bullish fashion, capping a strong first half of 2023 in style.
For the fourth consecutive month, June saw gains aplenty in US equities – with the S&P 500 rising by 6 per cent to take its year-to-date gains above 15 per cent.
The tech-heavy Nasdaq index saw similar gains last month and is now up more than 38 per cent on the year.
With so much of the recent fundamentals driven by a slowing US inflation story and a resilient US jobs market, the risk-on mood has never been higher this year.
Just last week, the Price Consumption Expenditures price index – the Federal Reserve’s preferred measure of inflation – came in below analysts’ estimates and sparked expectations that there may be as little as two remaining rate hikes left in 2023, with the next hike almost all but delivered at the upcoming meeting in July.
US jobs, starting with weekly jobless claims and filtering through to the monthly US non-farm payrolls report, continue to show a hot labour market, which amid the backdrop of the slowing inflation story, suggests markets are now seeing recessionary threats receding.
All these factors have contributed to solid green arrows across riskier asset classes – and July will be key to gauging how realistic and sustainable the gains will be.
It’s been a shortened trading week as a result of the US Independence Day celebrations, but we will have some key pieces of data in the lead-up to the next Fed meeting this month.
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