June Market Commentary

Market Momentum: Strategies for Hedging and Diversification in the Second Half

"Don't look for the needle in the haystack. Just buy the haystack!" — John Bogle

As we transition into the second half of 2025, the markets continue to present a mix of opportunities and challenges. June saw global financial markets navigate a volatile landscape shaped by macroeconomic uncertainty, shifting tariff policies, and escalating geopolitical tensions.

Despite these pressures, equity markets posted solid gains, largely fuelled by encouraging signs of trade deals, strong corporate earnings, and optimism around AI-driven growth in the tech sector.

The S&P 500 rose 5.05% in June, and the MSCI Emerging Markets Index gained 6.14%. However, persistent economic and geopolitical uncertainties are likely to cause periodic spikes in volatility.

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Developed Markets Performance

Executive Summary: 

In June 2025, developed markets continued to see increases, albeit with underlying volatility. The S&P 500 climbed 5.05% during the month, marking consecutive monthly gains for the first time since September 2024 and closing at new all-time highs. The Nasdaq Composite index rose by 0.5%, with a year-to-date (YTD) return of 5.4% largely driven by rallies in big-tech and AI-related stocks.

Market Summary: 

European indices, after a strong performance in May, remained relatively flat in June. The FTSE 100 ended the month with a modest gain of +0.10%, while the Euro Stoxx 600 saw a slight decline of -0.50%. Year-to-date, the CAC 40 a -7.17% decline.

Not all doom and gloom, as other European stock markets have been strong performers, with the Euro Stoxx 50 up 14.47% and Germany's DAX up 20.71% by late June.

Central bank actions and inflation figures also shaped the developed market landscape. The US Federal Reserve kept the federal funds rate unchanged for a fourth consecutive meeting in June 2025, while the European Central Bank (ECB) cut key interest rates by 25 basis points based on updated inflation and economic forecasts.

The annual inflation rate in the US rose slightly to 2.40% in May 2025, while Eurozone consumer price inflation rose to 2.00% year-on-year in June.

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Emerging Markets Performance

 

Executive Summary: 

Emerging markets continued their positive trajectory in June 2025. The MSCI Emerging Markets Index advanced by 6.14% for the month, demonstrating resilience. India's BSE Sensex also contributed to this positive momentum, recording a 2.60% gain for June, despite ending the month with a slight daily decline after a four-session rally. On June 26, the Sensex had surged by 0.36% to settle at 84,000. This performance was buoyed by easing geopolitical tensions and hopes of slower US rate hikes.

Market Summary:  

Building on its robust performance, the MSCI Emerging Markets Index advanced by 12.20% in the last three months, underscoring its continued alignment with global market momentum. Within this dynamic landscape, India stands out, with the BSE Sensex registering a 2.60% gain for the month.

This positive trajectory for India is attributed to favourable trade dynamics, proactive inflation control measures, and its significant demographic advantages, positioning it uniquely within the broader emerging markets complex.

The focus on women’s participation in the workforce further enhances the potential for economic growth. As such, the potential for diversification into emerging markets presents compelling opportunities for investors seeking higher returns amidst global economic fluctuations.

Forward Outlook: Portfolio Considerations:

Despite strong market performance, with the S&P 500 up 5.99% YTD and 5.05% in June, a proactive and flexible approach to portfolio management is essential. Continued macroeconomic and geopolitical uncertainties could disrupt this momentum, highlighting the complexity and potential for volatility in the latter half of 2025.

Effective portfolio management requires a strong framework for reducing risk and preserving capital. A well-diversified portfolio, covering different asset classes and regions, is crucial for minimising risks and stabilising returns during volatile periods. For the rest of the year, a well-diversified portfolio is best to handle potential shocks from upcoming tariffs, French elections, and Middle East instability. Lower market volatility and increased risk appetites also make hedging strategies more affordable.

Consider adding private assets to your diversification strategy, especially in non-US markets where less competition might lead to better returns. This includes various areas, such as urban real estate and other specialised investments. Diversification should cover both public and private markets across different regions.

For resilient equity investments, focus on high-quality companies with proven stability and a history of consistent shareholder returns. Portfolios incorporating a blend of traditional asset classes, such as a 60% equity and 40% fixed income allocation, have consistently demonstrated superior characteristics compared to concentrated equity exposure over long-term cycles.

These companies, often found in dividend growth indices, typically show less volatility during market downturns due to their strong fundamentals, profitability, and growth, making them ideal for defensive portfolios that offer income stability and capital preservation.

The "Race for Critical Minerals" is a major long-term investment and supply chain issue, highlighting the intricate geopolitical and economic forces that influence global resource availability.

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Disclaimer:

The commentary you find on this page is for information only; it is not intended as research or a recommendation suitable to your circumstance. Please seek financial advice from a professional before acting on investment decisions.

As is the very nature of investing, there are inherent risks, and the value of your investments will both rise and fall over time. Please do not assume that past performance will repeat itself, and you must be comfortable in the knowledge that you may receive less than you originally invested.