Political events
The escalation of the ongoing conflict in Gaza affected global oil prices and market sentiment, as investors remained cautious about potential disruptions in oil supply routes. The persistent war in Ukraine continued to have significant impacts on European security and energy policies, contributing to volatility in European markets. The conflict is posing ongoing challenges for EU nations, which have to balance support for Ukraine with the need to maintain their own economic stability.
The European Union held pivotal elections, which were crucial in shaping the future political landscape of Europe. These elections had significant implications for EU policies on economic recovery, immigration, and climate change. The results led to shifts in power within the European Parliament, altering the balance between pro-EU and eurosceptic parties.
The situation on the markets
The US economy added more jobs than anticipated, with 272’000 new jobs created. Despite this job growth, the unemployment rate edged up slightly to 4.0%. Wage growth remained strong, contributing to persistent inflationary pressures. Inflation showed signs of moderation, with the core Consumer Price Index (CPI) rising by 3.4% year-over-year and the core Personal Consumption Expenditures (PCE) index increasing by 2.6%.
The European Central Bank (ECB) implemented its first interest rate cut since 2019, lowering the key rates by 25 basis points. The Federal Reserve maintained its benchmark rate at 5.25%-5.50% but signalled potential cuts later in the year. Despite earlier expectations of potential rate cuts, the Fed signalled that easing might be postponed but not ruled out.
The impact on the asset classes equities and bonds
The ECB’s rate cut significantly influenced European equities, while the S&P 500 and other major US indices saw continued strength supported by robust corporate earnings and favorable economic indicators.
Equities
France’s CAC 40 saw a rise of 2.5%, while Germany’s DAX increased by 3.0% as the market responded positively to monetary easing measures. The S&P 500 rose by 3.5% and the Nasdaq by 6.1%, continuing its upward trend from previous months. The Dow increased by 1.1%, reflecting steady, albeit slower, growth compared to other major indices. The Swiss indices moved sideways.
Bonds
Yields on US Treasuries fell, with the 10-year yield decreasing by 10 basis points to 4.4%. This decline was driven by lower inflation expectations and continued investor demand for safe-haven assets.
What are the implications for the Everon portfolios?
Most strategy styles developed slightly positively with a performance of up to 2%, whereby the strategies with a global focus outperformed those with a Swiss focus. The positive performance contribution of the bond component should also be emphasised. The allocations at both asset and individual security level were kept constant in June.
