Market Commentary June 2020

As we close out the second quarter of a turbulent 2020, the resilience of the financial markets has surprised many investors in the second quarter and June proved to be another month which rewarded risk taking.

Equities rose across the emerging and developed world as central banks and governments continued to provide enormous amounts of stimulus and economies started to reopen.

By and large the recovery in financial markets has been backed by improving economic data – a wide range of indicators, from retail sales and consumer confidence to industrial activity and employment. However, one area that has not been improving has been the growing number of new COVID 19 cases in the United States in June – a fact that was almost completely overlooked by investors.

Asian equity markets delivered the strongest returns in June – with a rise of 8.3%. Other markets that performed well were emerging markets like India and Brazil, however unlike the broader Asian markets both are still well down for the whole of 2020.

It was not quite as good a month for UK equity investors – with the FTSE All Share rising only 1.5%. Healthcare stocks were the largest detractor for the UK index in June, after its stellar run in 2020.

Within fixed income, corporate bonds outperformed government bonds and it was another good month for high yield credit, given the strong support from the financial authorities. It was notable that the US Federal Reserve made its first purchases in the US credit market, via a number of ETFs.

Few markets delivered negative returns in the month. Within equities, Japanese stocks were very marginally in the red in sterling terms while Gilts yields rose from their record lows, leading to a 50 basis point loss.