Global Asset Allocation Team Market Update – June 2024

Global stock markets resumed their uptrend in May. The MSCI All Country World index rose 3.8%, more than reversing its loss from the month prior. The S&P 500 (+4.8%) led the global charge and had its best month since February, while the S&P/TSX (+2.6%) also pushed higher. Elsewhere, the MSCI EAFE advanced 3.3%, while the MSCI gauge of emerging market stocks eked out a modestly positive (+0.3%) monthly gain following a slew of measures aimed at supporting China’s property market. 

Fixed income markets also generated positive results last month. Treasury yields edged lower following reports of cooling growth and inflation in the United States that saw traders solidify around a Federal Reserve rate cut at the September gathering. The 10-year treasury yield fell 18 basis points to 4.50%, while the policy-sensitive 2-year yield declined by 16 basis points to 4.87%. Similar moves were seen in Canada as investors braced for a rate cut from the Bank of Canada this summer. The 10-year government bond yield fell 19 basis points to 3.63%, while the 2-year yield declined by 16 basis points to 4.18%. For the month, the Barclays US Aggregate Bond Index rose 1.7%, while the FTSE Canada Bond Universe gained 1.8%. 

The US dollar (DXY) snapped its four month winning streak and posted a monthly loss (-1.5%) as easing inflation pressures in the United States emboldened calls for the Federal Reserve to begin dialing back interest rates before year-end. The greenback lost ground against all of its major counterparts, with the euro (+1.7%), pound (+2.0%), yen (+0.3%), and Canadian dollar (+1.1%) all strengthening last month. 

Finally in commodity markets, oil capped a monthly loss as traders weighed declining geopolitical risks and persistent concerns around the demand outlook for China. In early June, OPEC and its allies extended output cuts into the third quarter – though the coalition set out a plan to restore some production as early as October which raised concerns about oversupply. By contrast, gold climbed on the back of the latest slide in treasury yields that increased the appeal of the non-interest-bearing precious metal – while copper hit an all-time high as predictions for tighter global supplies and rising consumption in electric vehicles and power grids countered signs of demand destruction from top consumer China.

[…]