Executive Summary – Download the Full Market Outlook

US large caps eked out a fractional gain in June, placing them 2.6 per cent higher for the year. Given the level of uncertainty surrounding trade policy, most investors would be satisfied with a 5 per cent gain for the year.

Small caps moved fractionally higher last month and represent the best performing major equity market to date. Their domestic focus is a plus. Smaller companies were also among the biggest beneficiaries of the corporate tax cut. Perhaps there’s a little catch-up going on too. The Russell 2000 trailed the S&P 500 by 14.5 per cent over 5 years through 2017.

International large caps suffered a 1.2 per cent decline last month on top of a 2.2 per cent pullback in May, reversing what was a promising start to the year. The sector has been weighed down by economic disappointment as well as an appreciating dollar. The Greenback has surged 6 per cent since April.

Emerging market equities have suffered a second month of ignominious returns. The asset class which had led the performance parade through the first quarter, gave it all back and then some. Now emerging equities are at the bottom of the totem pole. Political uncertainties that increase the possibility of diminished trade has the potential to dent many of these export-oriented economies.

Intermediate-term interest rates slipped for a second consecutive month as the ECB surprised the markets by declaring their zero interest rate policy will remain in place for the next 4 quarters at least. Short-term rates rose as the Fed continued its tightening program.

High yield bonds gained incrementally last month as credit conditions stabilized.


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