Equity markets delivered strong results to end of the 2nd quarter of 2023. The MSCI ACWI returned 5.8%, while in the US both the Nasdaq and S&P 500 were up by 6.6%. Markets in the East also performed well, with Japan’s Nikkei gaining 7.5% and Hong Honk’s Hang Seng Index ending the month 4.5% higher.
One of the factors contributing to these strong returns was the Federal Reserve’s decision to pause its rate hiking cycle for the first time in more than 15 months, a period within which the lending rate was increased 10 times. While inflation in the US has dropped to 4% year-over-year from a peak of more than 9% in 2020, Core PCE – the Fed’s preferred inflation index – remains stubbornly high. It currently sits at 4.62% compared to its highest level of 5.42% during 2022. In their latest commentary at the beginning of July, the Fed also signalled more hikes might be on the way.
Given the strong equity market performance, June was a tough month for those with short interests. In the US, short interest breached $1 trillion, the highest level since April 2022. As a collective, the group has now reportedly incurred losses of more than $120 billion in the first half of the year, with more than half of that coming in the first half of June.
In what was probably the biggest news event of the month – the world held its collective breath as it looked for a fleeting moment like a military coup was underway in Russia as Yevgeny Prigozhin, leader of the notorious Wagner mercenary group marched his men towards Moscow. In the end, it all ended in a whimper – but it will be fascinating to see the effect that this very public act of dissent has on Putin’s image in Russia.