Global Market Overview – June 2024
In investing, concentration is a danger and the Nvidia stock tells a story that may turn out to prove just that. The most valuable stock on Earth, as it has been called, overtook Microsoft and Apple, reaching a market value of $3.34tr in June. However, this success was short-lived as the stock lost about $550bn in three trading sessions, amid concerns around artificial intelligence reaching a peak. Of course, that still leaves it with around $3tr to play with… but it shows how quickly things can change.
Because of their size, any fluctuations in the giant technology companies’ stocks result in a significant shift for the market-cap weighted benchmark index. These events are a good reminder of how portfolio diversification should always remain central to any investment strategy.
In the UK, the attention has been centred elsewhere. With UK voters hitting the polls on 4 July, it was highly unlikely that the Bank of England would steal the spotlight from politics and cut rates in June. After all, the central bank has kept rates unchanged at 5.25% since August 2023, and there was no major unforeseen event that prompted it to rush towards a cut.
That’s exactly what happened. And in fact, if anything finally suggested that the worst might be over is the fact that inflation hit the 2% target for the first time in almost three years. Food prices was the largest downwards contributor, but services inflation photobombed what would otherwise have been a perfect picture.
The effect of the UK election on the financial markets has been minimal, as expected. After all, with the exception of the Truss mandate, politics hasn’t meaningfully moved markets in a long time, and none of the potential election outcomes are expected to generate any extraordinary movements.
So, in this backdrop, the FTSE 100 remained relatively stable in the month.
But there seems to be no parallel between the elections in the UK, and those across some parts of Europe. A landslide win for the French far right in the European elections, coupled with the surprise call for a snap election in France, led to the worst week in two years for the French benchmark index CAC 40. French government bond yields also went up on the back of the event, and the spread between French and German bonds (the difference between the yields of these two securities) widened.
These political events in France alone were not enough to stop wider European stock growth, however, the MSCI Europe ex UK index still showed an 11% growth in the year. But the French elections have highlighted a picture of political stability on the other side of the channel, which UK investors have certainly welcomed.
Source: 7IM
Summary
Investors should try to focus on the fact that investing in the stock market over the long term, is a powerful tool to preserve the purchasing power of their wealth and on ensuring that they have an appropriate asset allocation for the level of risk with which they feel comfortable. A disciplined approach to asset allocation and identifying good active managers who can navigate these conditions successfully remains of the utmost importance.
June 2024
With thanks to Seven Investment Management LLP for their views and market thoughts. RiverPeak Wealth Limited
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