Data source: Bloomberg

Strength in some Asian markets helped emerging market equities outperform developed markets in Q2. European equity main indices even closed the quarter in the red, with the French CAC 40 leading the downward move due to political tensions. Stocks related to the AI theme continued to perform strongly. The European Central Bank cut interest rates but sticky inflation kept other major central banks on hold.  

 Sources: JP Morgan, Schröder, Bloomberg

In the US

• US shares gained in Q2, led higher by the information technology and communication services sectors. Ongoing enthusiasm around AI continued to boost related companies thanks to strong earnings and outlook statements.

• Weaker sectors included materials and industrials.

• Among financials, several US banks announced plans to increase dividends after passing annual stress tests from the Fed.

In the Rest of the World

• Strength in some Asian markets helped emerging market equities outperform developed peers in Q2.
• Softer US macroeconomic data helped ease concerns about the timing of US interest rate cuts and a rebound in China also supported EM returns.
• Shares in China achieved strong gains as low valuations for many Chinese stocks encouraged Asia-focused investors to cautiously return to the Chinese market following concerns about India’s high valuations and Japan’s continued currency weakness.

In the US

• There were worries that the US economy may be overheating after the release of strong economic data. However, renewed hopes of a soft landing came back as the quarter progressed.
• Annual US inflation, as measured by the personal consumption expenditures index, eased slightly to 2.6% in May from 2.7% in April. The US labour market remained strong with 272,000 jobs added in May, according to the Bureau of Labor Statistics.
• The latest “dot plot”, showing the rate setting forecasts of Fed policymakers, indicated just one rate cut this year.

In the Rest of the World

• It was a difficult quarter for emerging markets, with the postponement of the Fed’s easing cycle pushing yields higher.
• With most EM countries well into their easing cycle and inflation already having normalised in some sectors, investors started to question their ability to offer additional monetary policy support.
• Unexpected election outcomes in South Africa, Mexico and India also contributed to investor unease.

• The US dollar was weaker against its G-10 peers. The Japanese yen was the notable exception, with wide interest rate differentials driving the currency underperformance.

• Digital asset prices consolidated in Q2 after a strong start to the year in Q1. Ethereum returned -5.8%, and Bitcoin -12%. Both tokens are still up around 50% year-to-date.

• There are new signs that institutions are becoming more interested in the crypto space, with investment consultants reporting a pick-up in inbound inquiries from their clients once again.

• The tide has turned on the regulatory front as well, with a clearer path to creating a robust framework in the US. Regulatory guidelines are important for the industry to gain legitimacy. Another example is Europe’s Markets in Crypto-Assets regulation going live.

• The S&P GSCI Index achieved a modest gain in the second quarter. Industrial metals and precious metals were the strongest components of the index, while agriculture was the weakest component.
• Within industrial metals, the price of zinc rose sharply in the quarter.
• In precious metals, the price of silver achieved strong gains, while the increase in the price of gold was more muted.
• The energy component achieved a modest gain over the quarter, with a robust price gain for natural gas.
• Within agriculture, a significant price gain for coffee failed to offset weaker prices for cotton, corn, cocoa, and sugar.

Christian Nolting, CIO, Deutsche Bank

“ If we look at the growth we have in mind, we see it slightly weaker over the next months but not necessarily leading to a recession, and then recovering. I think Q3 could also be the starting point to look a little bit on small and mid-caps. “

Alex Wolf, Head of Investment Strategy, JP Morgan

“ Strongearnings will power US and Japanese equities higher.”

31 July: FOMC Meetings

The FOMC (Federal Open Market Committee) is the branch of the Federal Reserve that determines the direction of monetary policy of the United States.

What we can expect: 

In this meeting, we can expect interest rates to remain unchanged, as the Fed looks for continuous signs of a cooling economy, the consensus suggest it is more likely to have only one rate cut at the end of 2024.

08 August: BoE Announcement and Minutes

The Bank of Engand (BoE) is the UK’s central bank. Its mission is to deliver monetary and financial policies.

What we can expect: 

We can expect to see a decrease of the interest rate from 5.25% to 5%, which would mean the second cut for 2024.

10-24 September: 79th Session of the UN General Assembly (UNGA)

The UN General Assembly (UNGA) is one of the six principal organs of the United Nations, comprising all 193 member states and serving as a forum for multilateral discussion of international issues. It will take place in New York Headquarters.

What we can expect: 

This session will cover country-specific issues, including human rights in Palestine, Afghanistan, Ukraine, and Venezuela. The panel discussions will also address topics such as refugee conditions, women rights and sustainable economic growth, among others.

20-21 September: Summit of the Future Actions Days

UN event focused on developing and committing to strategies for addressing global challenges. Member States, civil society, the private sector, and youth are gathering at the UN Headquarters in New York.

What we can expect: 

This year it will focus on three priority themes – digital and technology, peace and security, and sustainable development and financing. The participants will share and debate ideas with experts to find action plans for certain problematics.