Investment

June General Markets Comments

by Pierre Mouton

June General Markets Comments

« I want to know » – Adriano Celentano

I want to know… we all want to know: are we headed into a recession, or a slowdown? Have valuations sufficiently shrunk for this type of economic environment, or should we expect more pain ahead? Are fixed-income markets right when they bet on inflation coming back to 2.5% five years from now, or is core inflation higher and stickier? Are Central Banks still behind the curve, or ahead  now that economic activity seems more fragile? Will Russia and Ukraine agree one some kind of ceasefire soon, or will this conflict last for years as many military experts warn?

So many questions and so little clear answers indeed. We would like to know, but we don’t.

Uncertainty is the biggest handicap for financial markets to perform correctly and/or to behave smoothly; this is the reason why markets are so challenging and frustrating this year. The only strong message we receive from equity markets is that a severe slowdown, or a recession, is underway: only defensive sectors resist to the meltdown, and recently we have seen Energy and Materials, two good sectors so far this year, crack as well. Fixed-income markets indicate a mixed outlook: Government bonds yields are still quite high (read: low probability of a recession), but  Credit suffers, as witnessed by the Itraxx Crossover which lost 5.2% in June, and this is a signal of economic trouble ahead. Commodity markets are difficult to interpret: if a recession was due, they should crater, but they don’t, due to obvious supply constraints.

The MSCI World sank 8.8% in June, the S&P 500 8.4%, the MSCI Europe 7.9% the MSCI Emerging Markets 7.2%, and if Japan seemed to resist with a 2.2% drawdown for the Topix, this has to be mitigated by the dismal performance of the Yen (down 5.5% versus the dollar in June, 17.9% year to date!).

Oil fell 7.8%, more or less like Equity markets, Gold abandoned 1.6%, and Government bonds yields rose again: +17 bps for the US, +21 bps for Germany and +14 bps for Italy.

 

 

 

 

 

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS PARTNERS SA provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data or other financial instruments referred to in this general comment. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group

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Antonio Mira joined NS Partners in 2006 as Group Chief Financial Officer. He heads the corporate functions and is involved in coordinating and implementing the decisions of the Executive Committee.
An experienced bank auditor, Antonio started his career in 1995 with Arthur Andersen, where he worked for some 7 years before joining Ernst & Young in 2002 as a Senior Manager.
Antonio is a Swiss chartered accountant and a Business graduate of Lausanne University (HEC).

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