June general market comments

“Positively Inclined” – Wax Tailor, 2007.

June 2025 has delivered a market performance worthy of Wax Tailor’s “Positively Inclined” (thanks Mr Aznavour for the beat…): uplifting, resilient, and forward-looking. Trade progress, central bank support, and AI-driven innovation provide a strong backbeat, but inflation, fiscal concerns, and geopolitical risks keep a lid on the upside. June has been full of headlines triggering both optimism and pessimism; as tariffs risk stabilized, entered the short-lived war between Israel and Iran that could have seriously derailed the forward march markets tried to maintain after a very good month of May, while European Nato members bended to Mr Trump’s demands for higher military spending across the Old Continent.

Equity markets shrug off the threats and focused on the positives; the MSCI World added 4.2%, the S&P 500 5%, Emerging Markets 5.6% but Europe stalled (-1.3%) in the context of a pretty strong euro (or a very weak dollar); in a quite unusual mode, currency markets did not react as one could have expected when Israel started to bomb Iran, in other words the dollar stayed unscathed, and even ended the month down 3.7% versus the euro (and now down 13.7% year to date!).

If yields differential can sometimes provide clues about currencies moves, it doesn’t seem to play out this year as US 10 year at 4.24% offer roughly 170 basis points more yield than the German 10 year Bund. Yet this spread has narrowed year to date (60 bps), but does that justify the dismal performance of the dollar? Probably not. Sticky twin deficits, huge debt and Trump’s aggressive stance towards the Fed probably had their toll, more than anything else, on the dollar.

Middle-East tensions boosted Oil, which rose 7.1% in June, but Gold barely reacted (+0.4%), while risk-prone attitude from investors was reflected in the outperformance from Growth versus Value (+4.9% vs +3.5%) and a new bout of Mag-7 dominance, the very good month for credit (+1.2% for the Itraxx Crossover) and the Bitcoin, which rose 2.6%; the latter has also been buoyed by the Genius Act (17th of June: bipartisan bill poised to create the first comprehensive federal framework for stablecoin regulation).

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