Equity markets surged in June to cap a strong first half of the year, with the rebound in tech stocks continuing to drive indexes higher. The S&P 500, a broad benchmark for large cap US stocks, added +7% in June and is up +17% in 2023.
Smaller companies closed the gap on their large cap peers, gaining +8% on the month after a flat start to the year.
Overseas equities lagged slightly for June, with the MSCI ACWI ex-US index adding +4.5% for a +9.5% return in the first half.
Within fixed income, the Barclays Aggregate Bond index fell -0.4% in June (+2.1% YTD), as rates continue to creep higher with the Fed poised for at least one more interest rate hike after a pause during the June meeting.
Commodities rallied +4% in June, though they are the only major asset class in negative territory this year, with the Bloomberg Commodity Index down -8% YTD.
After a tick up last month, we saw no changes in our proprietary Three Dials outlook during the month of June, as we outline below:
After rallying 20% from its October lows, the S&P officially entered a new bull market in June. Dating back to 1942, the average bull market has lasted over four years with a cumulative total return of 147.5%.
As investor optimism returns to equity markets, our Momentum Dial retains its Positive reading.
Consumer Confidence rose sharply in June as the outlook for prevailing business conditions in the US brightened despite near-term uncertainty. Moreover, outside of the US, economic projections are accelerating out of the 2022 lows, which would be a positive for global growth.
On balance, our Fundamental Dial remains in a Negative position as we await confirmation that the worst of the current economic malaise is behind us.
Global equities are fairly valued on a price-to-earnings basis, though the US growth sector remains an outlier driven by the recent surge in tech stock prices on lofty profit expectations.
For now, our Valuation Dial retains a Neutral reading.
Overall, our composite Three Dials reading takes a Neutral position, with one dial each in a Positive, Negative and Neutral position.
Sources: Morningstar