The Month in a Minute
📰 Overall: June was a good month across markets, assets, and our Plans, as inflation continued its decline. This led to increased investor confidence — and the beginning of interest rates cuts in some developed economies.
💪 Benchmark Performance: Wealthify's Original and Ethical Plans outperformed their benchmarks across all risk levels this month.
📈 Market Movers: US (+3.5%); Asia Pacific (+3.5%); Emerging Markets (+3.6%).
🗒️ Plan Summary: Original and Ethical Plans with a higher allocation to shares performed better than those with a higher allocation to bonds.
🌍 Original Plans: Shares (+2.6%) and bonds (+1.2%) both increased.
🌱 Ethical Plans: Shares (+2.6%) and bonds (+1.3%) both increased.
🕰️ Going Forward: Whilst we continue to favour bonds, the recent continued market momentum has benefited our modest allocation to shares. We remain confident in our cautious positioning and are optimistic that the diverse set of opportunities we’ve selected will continue to have a positive effect on Plans in 2024 (whilst still providing protection if economic conditions deteriorate).
Continued momentum from markets as investors look forward to the eventual first rate cut from the Federal Reserve.
Overall, it was a strong month for markets, as they continued their momentum from May with the US reaching new all-time highs.
With lower-than-expected sales numbers and increasing unemployment figures coming out of the US, this potential strain on the US consumer could bolster the Federal Reserve’s confidence in an interest rate cute. Markets are becoming increasingly optimistic about when this could happen.
This month began with a widely anticipated first rate cut from a major central bank, as the European Central Bank (ECB) decreased interest rates for the first time since 2019. Whilst, historically, the Federal Reserve have been the first to cut rates, economies that have reduced their interest rates now include Switzerland, Canada. and Singapore.
This could potentially show that, for much of the world, the fight against inflation could be nearing an end.
However, with the first UK interest rate cut expected in August – and an expected US cut pushed back until September – the future is still uncertain.
The inflation picture is improving though: UK inflation has dropped to its lowest level since July 2021, and the US has also continued its decline (coming ever closer to the Federal Reserve’s 2% target).
One worrying aspect of inflation that’s still concerning central banks is inflation on services; this looks at service-related categories like education, hospitality, and culture, and is typically seen as one of the stickier parts of inflation.
The US Services PMI (Purchasing Managers Index) data – which shows activity in the services sector – came in higher than expected in June. If it remains high, then the Federal Reserve may be more reluctant to cuts rate — despite increased pressure for cuts due to a decreasing inflation figure overall.
One region that will have benefited our Plans this month are the Japanese markets. Despite a few subdued weeks following their peak in March, Japanese markets rallied towards the end of June and are now back at their previous highs. This is despite the Bank of Japan struggling – in contrast to the rest of the world – to get inflation up.
Additional pressures came from the yen, which continues its decline, leaving many wondering when the Bank of Japan will intervene to boost the currency.
Markets
The US (+3.5%), Asia Pacific (+3.5%), and Emerging Markets (+3.6%) were the strongest performers this month. Tech companies fuelled much of this growth in the US, with the Nasdaq (+6.0%) continuing its momentum from last month.
Japanese tech companies were also helped by this, with the region also finishing the month on a positive (1.2%).
The UK 100 (-1.3%) and European shares (-1.3%), however, delivered modest losses. Although due to a strong first half of 2024, they remain at +8.7% and +12.2%, respectively, for the year-to-date. The UK 250 (-2.1%) saw some of the worst losses for the month — but is also still sitting strong at +10.5% so far this year.
Currency
In currency markets, the pound struggled against the dollar, finishing slightly down by -0.8%. The value of the pound fared better against the likes of the Euro, finishing higher by +0.5%.
The value of the yen continued its decline, ending -1.5% down against the pound. This continues to pose a challenge for the Bank of Japan, after lower-than-expected inflation figures jeopardised the country’s plans to raise interest rates.
Investment type performance breakdown
June was another positive month, with shares rising in our Original (+2.6%) and Ethical (+2.6%) Plans due to the continued improvement in market sentiment. Despite underperforming shares, bonds still produced modest returns in our Original (+1.2%) and Ethical (+1.3%) Plans.
The continued strength of US and Japanese markets drove much of this gain, due to our sizeable allocation to those regions. However, our healthy allocation to the UK’s FTSE 100 (-1.3%) and FTSE 250 (-2.1%) finished negative for the month.
Elsewhere in June, infrastructure exposure (-0.7%) in our Original plans was slightly dented by the pushing back of interest rate expectations.
The money market continues to benefit from higher interest rates, providing positive returns for both Ethical and Original Plans.
Summary with Plan details
Due to the improvement in market sentiment, Plans with a higher allocation to shares performed better than those with a higher allocation to bonds.
Our Investment Team continues to actively monitor the financial markets and their impact on Plans — and are always ready to act in your best interest as events unfold. We are continually evaluating new market information and key market drivers to help keep your Investment Plan on track.
It’s important to remember that it’s normal for markets to go down and up, with periods of volatility to be expected when you invest. As always, we continue to look for opportunities to best position your investments, with the goal of protecting your money and achieving your long-term objectives.
With investing your capital is at risk, the value of your investments can go down as well as up, and you could get back less than invested.
Past performance is not a reliable indicator of future results.
Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.
