Dear Reader,

June 2026 marked a significant shift in market sentiment after global equities entered the month near record highs. Investors became increasingly focused on persistent inflation pressures, uncertainty surrounding the Federal Reserve’s policy direction, concerns regarding the sustainability of elevated artificial intelligence-related valuations, and renewed volatility in Middle East geopolitical developments.

While underlying economic growth remained resilient across many major economies, particularly in the United States, markets demonstrated greater sensitivity to inflation and policy risks than in previous months. International markets delivered mixed returns, with technology shares coming under pressure as investors reassessed earnings expectations and capital expenditure requirements associated with artificial intelligence infrastructure.

United States

US markets experienced increased volatility during June as investors rotated away from some technology and growth-orientated shares.

June performance:

• Dow Jones: +2.5%
• S&P 500: –1.1%
• Nasdaq: –2.8%

Economic data sent mixed signals with inflation increasing again:

• Headline inflation (May): 4.2%
• Core inflation (May): 2.9%

Despite the inflation backdrop, economic activity remained resilient, with first-quarter GDP growth revised to an annualised 2.1%. The Federal Reserve’s preferred core PCE measure increased to 3.4%, and the Fed left interest rates unchanged at 3.50% – 3.75% while emphasising a data-dependent approach.

United Kingdom & Europe

The UK market posted a modest gain during June, with the FTSE advancing 0.8%. Inflation remained unchanged at 2.8% year-on-year as lower food price pressures offset higher transport costs. Political uncertainty intensified during the month, and the UK continues to face broader structural challenges including weak productivity growth, subdued business investment and strained public finances.

European markets delivered mixed results and generally proved more resilient than the US due to lower exposure to the technology sector:

• Germany’s DAX: –0.4%
• France’s CAC 40: +2.7%

Eurozone inflation increased to 3.2%, driven largely by rising energy costs. The European Central Bank raised interest rates by a further 25 basis points to 2.25%, while continuing to balance inflation control against subdued economic activity.

Asia

Performance across Asia was mixed. China delivered mixed market returns, with the Hang Seng declining sharply by 9.1%, while the Shanghai Composite Index rose marginally by 0.6%. Economic data improved modestly, with manufacturing PMI rising to 50.3 and non-manufacturing activity improving to 50.2.

Japan once again stood out among major developed markets, with the Nikkei advancing by 5.6%. Strong demand for technology-related companies, corporate governance reforms and supportive fiscal policies contributed to performance, while the Bank of Japan raised interest rates to 1.0% as inflation increased slightly to 1.5%.

South Africa

The local market weakened during June, with the FTSE/JSE All Share Index declining by 3.8%. Resource stocks were the primary drag on performance as geopolitical risk premiums unwound, and commodity prices softened; the Resource 10 Index declined by 10.6% during the month.

Domestic-facing sectors performed well:

• Listed property: +3.3%
• Financials: +2.3%
• Industrials: +1.9%

South African inflation accelerated to 4.5% year-on-year in May from 4.0% in April, while core inflation increased to 3.8%. The rise primarily reflected higher global energy prices filtering through to domestic fuel and transport costs.

Encouragingly, economic growth surprised on the upside, with first-quarter GDP expanding by 0.5% quarter-on-quarter and annual growth lifting to 1.9%. Key risks emerging from June include persistent inflation, AI valuation risk, geopolitical and energy market risk, central bank policy uncertainty and South African inflation and growth risk.