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30/06/2024

The MSCI World continued to record highs in June on hopes that the Fed could make a first rate cut in September thanks to the drop in inflation and the first signs of an economic slowdown in the US. At its June monetary committee meeting, the Fed left its key rates unchanged for the 7th time in a row, justifying this decision by raising inflation forecasts. The monetary committee’s median projections now point to only one rate cut in 2024 compared to three at the March meeting. However, the publication after the Fed’s meeting of the lowest Core PCE since March 2021 at 2.60% year-on-year opened the door to a possible second rate cut before the end of the year. Despite financing costs remaining at their highest levels in 20 years, the US economy remains robust, as reflected by the rise in the ISM services index, continued job creation and strong retail sales thanks to the wealth effect. However, the confidence of US households is deteriorating due to concerns about their future financial situation linked to the persistent inflation, high interest rates and a rebalancing labour market. In the eurozone, the ECB, which considered that “it is now appropriate to moderate the degree of monetary policy restriction”, unsurprisingly made an initial rate cut at the beginning of the month despite upward revisions to inflation forecasts. Considering that inflation has not yet been defeated, the bank still advocates maintaining a restrictive policy for the rest of 2024. The latest data in the eurozone fell short of expectations, nevertheless reinforcing the hope of further rate cuts by the end of the year. The MSCI World TR gained a further 3.35% in euros this month and has risen 15.18% since the beginning of the year, the best first half since June 2021, thanks again to US equities, which reached new records. The S&P 500 TR and the Nasdaq TR rose by 4.85% and 7.33%, respectively. in € during the month, still driven by the “Magnificent 7”, which gained another 11.01% (Bloomberg Magnificent 7 TR) despite the start of consolidation at the end of the month for the Nvidia share. Eurozone equities lost 2.72% over the month (Euro Stoxx TR), mainly due to the 6.42% drop in the CAC 40, the worst month since June 2021. This underperformance was due to President Macron’s unexpected decision to call legislative elections in the wake of the results of the European elections, the outcome of which could have harmful economic consequences in view of the programmes of the rival extreme parties. The cyclical sectors suffered particularly in June, as illustrated by the respective declines of -9.22% and -6.78% in materials and banks, while the defensive sectors limited their decline: healthcare -1.60% and telecoms -1.03%. Reflecting fears of a further deterioration in public finances regardless of the future majority, French 10-year yields rose to 3.30% at the end of the month, and especially the spread to the German 10-year Bund jumped by 35bp to 82bp on 27 June, a level not seen since 2012.
The fund slightly underperformed its benchmark index due to its exposure to Europe and in particular to France through sectors that were particularly impacted by the uncertainties linked to the dissolution of parliament in France following the European elections (banks, automotive public services) and the underexposure to the technology sector. The bond allocation played its defensive role well.