Market Commentary – June 2023

Monthly Market Commentary from Quilter Cheviot

By Duncan Gwyther, Chief Investment Officer

There has been a notable decrease in market volatility in the last month, with global stock markets paring year-to-date gains. The MSCI All Country World Index declined in May leaving 2023 total returns at 8% – due to the appreciation of sterling’s value year-to-date this equates to 5% for UK-based investors.

Gauges of volatility on US stocks have fallen to their lowest levels in over two years, largely due to the avoidance of well-known risks materialising. Despite a game of brinkmanship, the federal debt limit was raised once again to avert a US default while fears around contagion in the US regional banking sector have also not transpired. This has caused futures markets to reprice the year-end Federal Reserve (Fed) funds rate to back above 5% – similar to the 5.25% currently – vs. 4% following Silicon Valley Bank’s failure in March.

US stocks posted a 0.4% gain in May, boosted slightly for sterling-based investors by a roughly 1% drop in the pound against the US dollar. A growing level of hype surrounding the benefits of Artificial Intelligence (AI) to workplaces and the broader economy caused sharp gains in some of the largest US stocks, with Nvidia hitting a market capitalisation of US$1tn. Nvidia’s stock surged over 30% in the days after announcing better than expected first quarter results and a sizable upward revision to its profit outlook, in the process becoming the sixth most valuable public company globally…

The value of your investments and the income from them can fall and you may not recover what you invested.

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