Blair Campbell, MitonOptimal International (Guernsey)Factors which have presided over markets for the best part of the year to date persisted through June, as GDP readings and Purchasing Manager Indices (PMI) were amongst a multitude of constructive economic data releases indicating a continuation of the robust global recovery particularly in the developed world. Whilst, the spread of the seemingly more transmissible ‘delta variant’ of the Coronavirus has the potential to disrupt the speed of the recovery. Inflation concerns and the subsequent implications for Central Bank policy was also prominent as debate persists as to whether the data is transitory or more entrenched. Against this backdrop the MSCI Developed market gage returned 1.5% over the period outperforming the MSCI’s Emerging Market equivalents return of 0.2% as Asian bourses lagged through Covid-19 related considerations.

Minutes from the Federal Reserve’s (Fed) FOMC June meeting suggested a more hawkish tone with a number of Fed members upwardly revising their projections for the Fed Funds rate bringing forward the expectation of a rise in rates in 2023, 7 out of 18 expected to raise rates in 2022 compared to 4 members in March. Jerome Powell acknowledged the Fed talked about talking about tapering and latest CPI data confirmed prices increased at their fastest pace since August 2008 as headline CPI rose 5.0% in May. Growth doesn’t appear to have slowed however as the US posted an annualised growth rate of 6.4% in the first quarter and US Composite PMI data also indicated a substantial expansion with a reading of 63.9 for June (>50 indicates expansion). The S&P 500 finished the month 2.3% higher in local currency terms.

As in the US, inflation concerns are dominating the landscape in Europe. The Eurozone inflation rate rose to 2.0% in June though the European Central Bank (ECB) were quick to try and dispel investors’ fears suggesting the rise is temporary and central bank support will remain confirming at their June meeting that they’ll continue to run its emergency bond purchases and that its Pandemic Emergency Programme (PEPP) would last until March 2022. Data suggested business activity grew at its quickest pace for 15 years as economies continued to open from their Covid restrictions whilst the ECB predicted the Eurozone would grow at a rate of 4.6% this year. Europe as measured by the MSCI European index expanded 1.7% over the course of June.

In the United Kingdom (UK) a delay of four weeks to the projected easing of all remaining coronavirus restrictions in England (scheduled for the 21st) due to the rising cases of the Delta variant dampened investor sentiment resulting in a modest 0.20% gain for the UK’s FTSE All Share Index. Interest rates were unchanged by the Monetary Policy Committee whilst from a economic activity standpoint the CBI monthly Industrial Trends Survey measuring the UK’s manufacturing output volumes indicated the three months to June grew at the fastest pace since 1975

The change in guidance on expected rate rises from the Fed saw a sell-off in Treasuries with the 10 year yield spiking 8.3 basis points (bps) on the day, however, the mood changed soon after as confidence in the Fed grew and the 10 year yield tightened 13bps to 1.47% over the month. Credit indices were generally ‘in the black’ as Sterling and Euro denominated corporate bond (Investment Grade and High Yield) yields fell alongside a modest tightening in spreads.

Source of all data: Bloomberg. The content of this article is for information purposes only and does not constitute an offer or invitation to any person. The opinions expressed are subject to change and are not to be interpreted as investment advice. You should consult an adviser who will be able to provide appropriate advice that is based on your specific needs and circumstances. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable and given in good faith, but no representation is made as to their accuracy, completeness or correctness.


MitonOptimal Portfolio Management (CI) Limited
PO Box 354,
St Peter Port,


+44 (0)1481 740044

Regulatory Information

MitonOptimal Portfolio Management (CI) Limited (Registration No. 36763) is licensed and regulated by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended.

Send this to a friend