Global equity markets for the most part continued their resurgence in June with a strong recovery, rebounding from the tariff-driven angst and geopolitical volatility arising from the conflicts between Israel/Iran and Russia/Ukraine, as well as the positive trade policy sentiment emerging from the US-China trade talks.

US markets had a strong month as the S&P 500 rose by 5.0%, the Dow Jones was up 4.3% and the Nasdaq being the best performer, rising by 6.6% for June. Corporate earnings surprised to the upside, with margin resilience across sectors especially in tech and consumer discretionary. Credit growth is healthy, though moderating, as tighter bank lending is offset by capital markets activity for high-quality borrowers.

US first quarter GDP shrunk by 0.5%, with the tariff wars disrupting US business more than the previous estimate of 0.2%. The US Fed kept rates unchanged at its mid-June meeting, while lowering its growth outlook for 2025, as well as raising its inflation forecast. Rhetoric from Fed Chairman Powell indicated that tariff increases are likely to boost prices, adding a more persistent effect to inflation. The release of the Fed members’ economic projections showed that most are still anticipating two 0.25% rate cuts in the second half of the year. However, there is rising sentiment that it may be appropriate to leave rates unchanged for the rest of the year. The Fed’s dovish shift and ongoing fiscal support via infrastructure and industrial policy are aiding sentiment. Easing policy, combined with macro stability, creates a constructive, though late-cycle, environment for U.S. equities.

U.S. equity valuations are elevated, with the S&P 500 trading at 22.0x forward earnings. A sharp disparity exists between the top 10 stocks and the rest of the index, as well as between growth (28.7x) and value (16.9x), highlighting growing concentration risks. However, investor positioning remains concentrated in mega-cap tech. Fund flows show some rotation into cyclicals and AI themes, while small caps and value remain under-owned.

European markets had a mixed June, impacted by trade tensions, geopolitical risks, and a mixed bag of economic data. Added to this, tariff uncertainty ahead of the 9 July deadline also tempered market expectations. The Dax declined by 0.4% for the month, while the CAC closed lower by 1.1%.

Eurozone growth remains weak and uneven, with modest stabilisation in early 2025 driven by real wage gains, lower energy costs, and improving tourism in southern Europe. However, structural challenges, tepid consumer demand, and poor external demand continue to weigh on the outlook. Europe is seeing net negative earnings revisions. Credit growth remains subdued amid tighter financial conditions, weak capex, and cautious corporate investment behaviour, signalling a mid-to-late cycle environment.

The ECB delivered a rate cut but signalled caution ahead. Fiscal policy support is constrained by the reimposition of EU budget rules, limiting flexibility despite growing needs for green and defence spending. The lack of bold policy stimulus curbs upside potential. While European equities are relatively cheap (13–14x forward P/E vs. 21.5x in the U.S.), lower ROE, sector composition, and underrepresentation in growth areas diminish their appeal.

Europe is underperforming on a relative basis, with deteriorating technicals, negative earnings momentum, and lacklustre fund flows. Investor positioning remains neutral to underweight, with global allocators back to favouring U.S. and Japanese equities over Europe.

The UK market ended the month unchanged from the previous month, while inflation in May slowed in line with expectations, printing at 3.4%, from the April reading of 3.5%, with core inflation at 3.5% in May compared to the April reading of 3.8%. Chancellor of the Exchequer, Rachel Reeves, had to grapple with fiscal challenges in attempting to balance Labour’s fiscal rules amid political turmoil, as a rebellion by over 120 Labour MPs forced concessions as well as heightening the possibility of future tax hikes.

In Japan, the Nikkei ended the month higher by 6.6%, notwithstanding the continued concerns the negative impact the US tariffs might have on the Japanese economy. Japan’s 2025 real GDP growth is projected at 0.8%, slightly lower due to soft exports and subdued capital expenditure amid global trade uncertainty. Nonetheless, domestic demand remains resilient, underpinned by 5.3% base wage increases, stable employment, and easing financial conditions. The yen has stabilised, and equity market performance is increasingly driven by underlying earnings strength rather than currency moves. EPS growth is expected to hold at 5.5–6.0%, with robust contributions from financials, insurance, and IT services balancing ongoing weakness in autos and machinery. The equity market is shifting toward domestically oriented drivers, supported by strong wage gains, solid household finances, and rising consumption in durables, housing, and services.

Valuations remain compelling, with the market trading at ~14x forward earnings, below its historical average and at a 30% discount to the US and 10–15% to Europe. Shareholder returns exceed 3.5%, supported by rising buybacks and dividends, reflecting stronger capital discipline and profitability. Structural reforms continue to gain traction, with improvements in return on equity, reductions in cross-shareholdings, and enhanced governance practices. The market is now earnings-led, with positive revision trends and rising domestic and foreign investor interest. Low foreign ownership highlights ongoing re-rating potential within global allocations.

Asian markets had a strong June as Chinese stimulation efforts (better fiscal policies and monetary easing), aimed at boosting local demand and stabilising the under-pressure property market, impacted positively. The Hang Seng ended the month higher by 3.4%, while the Shanghai Composite ended firmer by 2.9%.

Emerging market earnings per share growth for the full year 2025 is expected at +15–16% YoY, led by EM Asia at ~19% (India, Korea, Taiwan, Indonesia), EMEA at ~11% (Saudi, UAE, Poland), and LatAm at ~5% (moderate due to FX vol and trade policy impacts). Positive earnings revisions continue, with Tech, Financials, and Commodities leading improvements. EM equities continue to trade at ~11.9x forward P/E, maintaining a ~30% discount to DM peers (S&P 500 ~20.8x, Europe ~15.0x). This persistent valuation gap highlights long-term opportunity for patient investors while recognising near-term volatility.

Positive flows into Asia EM ETFs and funds continue, with $11.2B net inflows YTD (as of June 30), led by India, Korea, Taiwan, and Indonesia. LATAM flows remain flat to mildly positive, with investor re-engagement tied to policy easing.

South Africa

Our local market had a solid June, with the ALSI ending the month higher by 2.2%, with resources up 4.8%, the vanguard of the gains. This was followed by industrials, up 2.2%, financials, up 0.8%, though the property sector lagged the market, declining by 1.4% for the month. Selected top performing shares for the month were Telkom, up 38.6%, platinum share Tharisa (up 28.1%), Northam (up 26.6%), and Implats (up 23.1%) on the back of a platinum price that was stronger by 28.5% from the previous month. We also noted strength in We Buy Cars (up 21.9%), MAS PLC (up 20.7%), Sibanye Stillwater (up 17.7%), Ninety-One (up 13.8%).

Selected underperforming shares were KAP (lower by 19.0%) on the back of an earnings warning, Sappi (down by 13.8%), Woolworths (down 11.7%), DRD Gold (lower by 11.1%), and Burstone and Equites, lower by 10.5% and 9.3% respectively.