Hello,

If April was about uneasy stabilisation and May about cautious optimism, then June was arguably more of a reality check. Markets were mixed, with equities delivering modest gains or small losses depending on the region, and some of the leadership that had looked very clear earlier in the year began to fray.

On the equity side, the US and Japan managed to eke out positive returns, while Europe (excluding the UK) performed somewhat better. That resilience reflected a more balanced sector mix and less direct exposure to the areas of the market under the greatest pressure, notably Asian technology and semiconductor stocks.

By contrast, more commodity-heavy and Asian tech-dominated markets, such as Pacific ex-Japan, the UK and emerging markets, struggled. Technology and Artificial Intelligence (AI) remained central themes. Strong earnings from large-cap US technology and AI-linked companies continued to support US benchmarks, but June brought a wobble in the broader AI trade. After a very strong run for businesses tied to data centres, chips and cloud infrastructure, investors began to question stretched valuations and became more cautious about the forward guidance provided by these companies.

Asian technology markets experienced a sharp round of profit-taking, particularly among semiconductor and hardware companies. That reversal weighed on emerging markets and Pacific ex-Japan, both of which had been major beneficiaries of the AI theme earlier in the year.

Closer to home, the UK again found itself on the back foot. A heavier exposure to energy and other commodity-related sectors, combined with a less growth-oriented sector mix, meant that UK equities did not fully participate in US-led technology strength and also felt the impact of another significant fall in oil prices. The result was only a modest positive return and continued underperformance relative to many developed market peers, although performance has been reasonably strong year to date.

On the policy front, June was an important month. In the US, the Federal Reserve delivered a hold on their interest rate, removing earlier language that had hinted at an easing bias. The Bank of England also left rates unchanged, with a split vote highlighting the tension between inflation moving closer to target and concerns that higher energy prices and a tight labour market could keep inflation persistent. In the euro area, the European Central Bank raised its policy rate by 0.25%, reinforcing the message that the fight against inflation is not yet over.

Against that backdrop, fixed income delivered another modest but positive month. Global government bonds, investment-grade credit, high yield and emerging market debt all produced small gains, with relatively little differentiation between sectors. From a multi-asset perspective, income continues to do most of the work, while higher-for-longer interest rate expectations are limiting the scope for capital gains from fixed income, at least for now.

Within alternatives, the most notable moves were again in energy and gold. Oil prices fell sharply as markets priced in further progress towards a US-Iran peace framework and weaker demand expectations. After trading with a significant war premium earlier in the year, crude oil has now given back much of that spike. While this helps the inflation outlook, it has weighed heavily on energy-focused equity markets.

Gold, which had been a key beneficiary of geopolitical stress and risk aversion, also declined as safe-haven demand faded and investors remained willing to hold risk assets despite ongoing uncertainty in markets and the broader economy.

Stepping back, June reinforced three key points.

First, global equity leadership remains heavily concentrated in US technology and AI-linked companies. When that trade wobbles, tech-heavy regions, particularly across Asia and emerging markets, can feel the effects very quickly.

Second, the macroeconomic and policy backdrop remains finely balanced. Inflation is easing but remains above target in most major economies, and central banks are clearly not ready to declare victory, keeping higher-for-longer interest rate scenarios firmly in play.

Third, diversification continues to matter. Leadership has already rotated multiple times this year, so maintaining a genuinely diversified mix across regions, sectors, styles and asset classes remains, in our view, the most sensible way to navigate this uncertainty.

Kind regards,

iPensions Wealth Team

Investment risks

Past performance is not a guide to future returns. The value of investments and any income may go down as well as up This may be partly the result of exchange rate fluctuations) and an investor may not get back the full amount invested. The information, data, analysis, and opinions presented herein are provided as of the date written and are subject to change without notice. Every effort has been made to ensure the accuracy of the information provided, but iPensions Wealth Limited makes no warranty, express or implied regarding such information.

Important Information

This communication is for iPensions Wealth Clients only and is not for general consumer use.

Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. The commentary does not constitute investment, legal, tax or other advice and is supplied for information purposes only. Issued by iPensions Wealth Limited, Second Floor, Marshall House, 2 Park Avenue, Sale, M33 6HE, UK. Authorised and regulated by the Financial Conduct Authority.