In June, Europe was weak, the UK fell too, along with Hong Kong and China, whilst Japan was up a little. Yet the dominant US market continued to be buoyed by returns from some of the world’s largest companies.
Continuing a theme that has dominated the year to date, the technology giants march on. NVIDIA, the leader in semiconductors that drive artificial intelligence (AI) momentarily overtook Microsoft as the world’s most valuable company, whilst Amazon joined the ranks of the elite, reaching a value of over $2 trillion. This helped drive the widely followed US S&P 500 index to a new all-time high, although it lost steam into the month end amid recurring concerns about delays to cuts in interest rates.
Top performing funds - June 2024
Battle of the tech titans
Nvidia, Apple and Microsoft jostled in a three-horse race for the title of the world’s most valuable company with each heading into the second half of the year with market values of over $3 trillion. Nvidia briefly took the top spot, but subsequently fell back to third after shedding roughly $550bn in market value following profit taking and disclosures of a scheduled sale of shares by the company’s chief executive and co-founder, Jensen Huang.
Apple also momentarily took the crown in June as investors responded positively to the company’s long-awaited announcement of its foray into the generative AI space through ‘Apple Intelligence’, which the company aims to integrate across its hardware and software products.
Indian takeaways
The other main standout during the month was the Indian market, which after a wobble on the day election results were announced recovered its poise. The result was closer than predicted and Prime Minister Modi had to establish a coalition government with new partners taking five out of the thirty-one cabinet seats.
Although this caused some initial uncertainty and concerns among investors, it transpired that there is considerable continuity with major posts, including finance, remaining in the same hands as before. Markets will now look to the budget, which comes out later this month, to examine more detailed financial plans.
Electoral baton passes to Europe
It was a quieter month elsewhere for share markets though. European stocks were under pressure as France’s President Macron called a surprise general election. In the first round of voting his centrist party trailed both the hard-right National Rally and a left-wing alliance, both of which have a more expansionary fiscal outlook that would potentially increase an already considerable debt pile the EU is already unhappy about. Eyeing an uncomfortable period for French politics and frictions within the EU over budgetary restraint, French equity and bond markets sank.
There were no such pre-election jitters in the UK as the market remained relatively upbeat about the prospect of a large Labour victory. Although there are likely to be both winners and losers at a company and sector level, there was little reaction from markets as manifestos were released with the all-important Labour party plans either trailed beforehand or left relatively vague.
Regardless of the result, there remain hard questions over how any policy agendas will be paid for while sticking to the fiscal rules and common policies currently in place. Even so, arguably overall market sentiment hinges more on the outcome of the US election in November. Following a poorly received performance in the first presidential debate against Donald Trump, there were some calls for Joe Biden to withdraw as the Democrat candidate, adding to the political uncertainty.
Elsewhere, it was a poor month for both China and resources stocks as the world’s second largest economy continued to trundle along in a low gear. Consumer confidence is still yet to recover meaningfully post-pandemic, and with almost two thirds of Chinese household wealth tied up in property, falling prices have contributed to weak domestic demand and have translated to muted company earnings growth.
Investment Trust mergers
Finally, in the investment trust world, the trend of mergers and consolidation continued as two of the UK's most popular trusts, Alliance Trust and Witan, announced the intention to merge and create a larger £5 billion ‘multi-manager’ investment vehicle whereby the managers select a range of specialists to oversee different parts of the portfolio.
The deal is expected to be completed later this year to create Alliance Witan PLC and follows a comprehensive strategic review by the Board of Witan. We believe the merger makes sense given the similarity in investment approach. In addition, the larger vehicle should be more cost efficient and offer better liquidity i.e., increase the ease and cost of buying and selling shares.
The transaction could prove to be a seminal moment for the investment trust world, and is evidence of investors’ appetite for scale, liquidity and low costs. It will increase pressure on other trust boards to ensure their own investment companies are still fit for purpose, or risk having to rely on other means such as share buybacks to plug the demand gap for their stock.
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Market commentary - June 2024
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