Equity markets rallied strongly in the first half of 2023. The S&P 500 Index rose 15.9% year to date and the Nasdaq Index 38.8%. The report noted that the rally was narrow: three stocks accounted for around 40% of the S&P 500's return and five for over 60%, fewer than 30% of S&P 500 constituents had beaten the index, the lowest proportion in 32 years, and the equal-weighted S&P 500 had returned 6.0%. The US had a 68.9% weight in the MSCI World Index, and an equal-weighted MSCI World Index would have returned 7.7% year to date. Over the quarter Japanese equities rose 18.36%, US equities 8.30%, Italian equities 4.12% and Swiss equities 1.57%, while Chinese equities fell 5.15% and UK equities 1.31%.
The US Federal Reserve paused in June, though 16 of the 18 members of its committee projected at least one more rate rise before the year end. Rates were raised during the past month in Australia, Canada, the euro area, Norway, Switzerland and the UK, the euro area rate being at its highest in 20 years. Policy rates were 5.25% in the US, 4.00% in the euro area, 5.00% in the UK and 1.75% in Switzerland, and inflation was 4.00%, 5.50%, 8.70% and 1.70% respectively. US bond yields rose from their lows of the quarter. The US yield curve, measured as the difference between 3-month and 10-year Treasury yields, was at its most inverted since 1981, excluding March's banking crisis.
In currencies, the euro rose 0.66% against the US dollar over the quarter to 1.09 and sterling rose 3.01% to 1.27, while the dollar rose 8.68% against the yen to 144.32 and fell 2.13% against the Swiss franc to 0.90. Gold fell 2.46% to USD 1,919.57 and WTI crude fell 6.88% to USD 70.37.
The report also discussed the risk of recession after 15 months of rate rises and an inverted yield curve, the response of central banks to inflation, and scenarios for the economy including a mild recession, a hard landing and persistent inflation.
Important information: This snapshot summarises MWC Group's market commentary for the period shown and is provided for general information only. It is not investment, tax or legal advice, a personal recommendation, or an offer or solicitation to buy or sell any investment, and it does not take account of your personal circumstances. Views and figures reflect conditions at the date of publication and may since have changed. Past performance is not a reliable indicator of future results. The value of investments and any income from them can fall as well as rise, and you may get back less than you invested. Exchange-rate movements can affect returns. Market data comes from third-party sources believed to be reliable, but its accuracy cannot be guaranteed. Please seek personal advice before making any investment decision. Issued by MWC Group UK, the UK branch of Manentia Wealth Consulting Group AG, authorised and regulated by the Financial Conduct Authority (FRN 973440).