The S&P 500 and Nasdaq extended their winning streaks for the fourth consecutive month in June rising 6.6% and 6.7%, respectively. Market breadth improved with all S&P 500 GICS sectors rising. Cyclical sectors like Consumer Discretionary, Industrials, and Materials led, while defensives lagged. The upward revision to Q1 GDP, resilient consumer spending, and softer than expected headline inflation reduced recession fears. Earnings expectations also improved going into 2H 2023 fueled by efficiency initiatives surrounding AI. Despite the Federal Reserve’s hawkish pause in June, their updated dot plot and projection materials maintained an upward bias through signaling potentially two more rate hikes this year. Expectations for a potentially higher terminal rate predominantly impacted durations between 1 and 10 years, weighing on segments of the fixed income market.

Globally, returns were weaker, albeit positive, with both Europe and China underperforming the broader MSCI ACWI index. Manufacturing activity contracted more than expected in both regions. Individually, Europe has more progress to make in its fight with inflation, while China’s post-lockdown rebound was weaker than expected.

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