Global Market Overview
Global markets rallied strongly in June as dovish signals from the US Federal Reserve, optimism over artificial intelligence (AI) demand, and broad-based US Dollar weakness lifted sentiment across asset classes. The MSCI All Country World Index (ACWI) climbed 4.49% in USD terms, driven by gains in both developed and emerging markets. The MSCI World Index rose 4.32%, while the MSCI Emerging Markets Index outpaced with a 6.01% gain, buoyed by renewed risk appetite and stronger commodity prices.
A key catalyst was the 12 June Federal Open Market Committee (FOMC) meeting, where Fed Chair Jerome Powell acknowledged that “inflation is moving in the right direction” and that the Fed stood “prepared to act” should disinflation continue. Markets interpreted this as a clear pivot, pricing in a potential rate cut as early as September. This dovish tilt, paired with signs of a soft landing, sent both equities and bonds higher and steepened the yield curve as short-end rates declined faster than long-end yields.
Adding to the positive momentum was Nvidia’s blockbuster earnings release mid-month, which beat expectations and included upbeat guidance on AI chip demand. The result reignited enthusiasm in the tech sector and propelled the NASDAQ 100 up 6.32% for the month. However, market breadth remained a concern—performance continued to concentrate in a narrow group of mega-cap stocks, reinforcing the theme we’ve discussed in recent investment team meetings.
Meanwhile, the US Dollar Index (DXY) broke below the 100 level, a significant technical breakdown reflecting dovish Fed expectations and falling US real yields. The weakening Dollar became a strong tailwind for commodities, emerging market equities, and non-USD currencies. This was particularly beneficial to resource-linked economies and equity markets, including China and South Africa.
In Asia, China saw renewed investor interest as the Politburo hinted at forthcoming fiscal stimulus targeting infrastructure and consumption. The Hang Seng Index rose 3.95% in USD terms, extending its recovery on improving liquidity conditions and a more stable macro narrative. Japanese equities also gained, with the JPX-Nikkei Index up 2.01% in USD, supported by a weak Yen and resilient corporate earnings.
European markets underperformed somewhat, with the FTSE 100 rising just 1.67% in USD terms. Political uncertainty returned to the spotlight following European parliamentary elections, where support surged for populist and right-wing parties, raising concerns about future EU cohesion and fiscal discipline. Economic data out of Germany showed signs of weakness in industrial production, further dampening the region’s outlook.
In the commodity space, precious and industrial metals rallied strongly in response to the falling Dollar and optimism around China. Gold remained firm above $2,300/oz, while silver and platinum gained sharply. Industrial metals such as copper and nickel benefited from supply constraints and expectations of rising infrastructure demand. Crude oil ended the month slightly higher after OPEC+ reaffirmed its production targets in the final week of June.
South African Market Overview
South African assets remained firmly in favour during June, continuing their positive momentum from earlier in the quarter. The FTSE/JSE All Share Index rose 2.35% in ZAR and 4.00% in USD, pushing year-to-date returns to an impressive 16.70% in ZAR and 23.92% in USD. The strength was largely driven by resource and commodity-linked shares, particularly gold and platinum counters, in line with global trends discussed above.
The local bond market also delivered solid returns. The FTSE/JSE All Bond Index gained 2.28% in ZAR, supported by favourable global flows, stable inflation, and a slight firming of the Rand. Domestic yields remain attractive on a real basis, attracting modest foreign interest. The SteFI Composite delivered 0.60% for the month, continuing its consistent short term performance.
In contrast, the South African listed property sector came under renewed pressure, with the FTSE/JSE SA Listed Property Index falling 0.87% in ZAR. Concerns around retail vacancy rates, sluggish rental growth, and the evolving e-commerce landscape have dampened investor sentiment. Structural shifts—such as the rise of services like Checkers Sixty60—are fundamentally reshaping shopping centres and REIT tenant mixes.
Macro fundamentals remain fragile. Political negotiations within the GNU continue to play out, with market participants cautiously monitoring progress. Although the outcome remains uncertain, the absence of major disruptions has been viewed positively for now. However, risks around fiscal consolidation, electricity supply constraints, and persistent unemployment keep the domestic outlook clouded.
Importantly, the Rand appreciated during the month in line with broader emerging market strength, driven largely by global rather than local drivers. South Africa continues to benefit from its resource leverage, but its structural challenges remind us that this outperformance remains tethered to global goodwill and supportive commodity dynamics.
Key Insights from Weekly Investment Team Meetings
- Fed pivot expectations and Nvidia’s AI-driven rally sparked strong performance in US and global equities.
- Yield curve steepening expected as the Fed leans more dovish; markets now pricing in rate cuts before year-end.
- US Dollar weakness providing a tailwind to commodities and EM currencies.
- Commodities, particularly gold, silver, and PGMs, benefitted from increased demand and supportive macro signals.
- Property sector faces structural headwinds; retail space increasingly disrupted by e-commerce innovation.
- Barbell strategy remains in place: combining global growth/AI exposures with value in EMs and commodities.
- Market sentiment shows signs of complacency; volatility measures remain subdued despite lingering risks.
- Portfolio remains diversified with tilt toward high-quality fixed income and selected EM and tech exposures.
Portfolio Performance and Strategy
In June, we held our barbell strategy steady, anchoring portfolios with a blend of long term secular growth exposures (e.g., AI, US tech) and cyclical upside (e.g., commodities and EM value). Our gold and silver positions were retained given continued global Central Bank demand and their utility as tail-risk hedges. Our emerging market allocations, particularly in Asia and commodity-focused markets, were supported by improving flows and Dollar weakness.
Within fixed income, we favoured medium-duration US Treasuries and increased our allocation to SA nominal bonds, recognising their attractive real yields and relative resilience in the face of global volatility. Property remained underweight, with select offshore REITs and logistics-focused counters on our watchlist but no major additions.
We continue to emphasise flexibility and discipline in our asset allocation process. While global sentiment is improving and liquidity remains ample, underlying structural risks—particularly narrow equity market leadership and geopolitical volatility—require a steady hand. We remain committed to dynamic portfolio management, preserving capital while capturing tactical opportunities as they emerge.
Source of all data: Morningstar, unless otherwise stated.
Jacques de Kock
Quantitative Analyst & Portfolio Manager
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