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Market Comment - June

While most equity indices traded flat to slightly lower in June, the technology heavy weight Nasdaq continued its meteoric rise, helping the massively concentrated S&P 500 to

post solid gains The dominance from technology has led to index rebalancing, where MSCI Indices in June and the S&P 500 in July must increase the weight of technology

stocks, which confirms the previously mentioned reflexivity trade we are currently witnessing Subsequently, the past four weeks clearly deviated from the business cycle

model we are tracking Late cycle sectors, especially materials and industrials underperformed strongly, while early cycle sectors, such as technology and discretionary

outperformed We doubt that we are wrong in our business cycle analyses and will give the market a little bit more time to adjust The Nasdaq, according to our research is

trading in its maximum price target range The same goes for the S&P 100 representing the one hundred biggest companies by market capitalization There are multiple factors

that will have an impact on market volatility Earnings, politics, and interest rates All will be sources for an increase in volatility in the coming months While positive market

seasonality lasts until mid July, the volatility index VIX is showing positive seasonality from mid July until October, especially during election years As previously mentioned, we

believe that we are in the latest stage of the secular bull market that started in 2009 Secular bull markets are born on pessimism, grown on skepticism, mature on optimism,

and die on euphoria While short term, the market sentiment is turning slightly greedy, especially in technology, the real euphoria is clearly missing For how long the current

bull market will extend in time is difficult to say Let us measure the longest secular bull markets in history The latest lasted 18 years, from 1982 2000 where the top building

process started in 1999 Its predecessor lasted 19 years, from 1949 1968 where the top building process started in 1966 What the current market cycle has in common with

those previous ones is the fact that we saw high market concentration in indices like today Obviously, there have been periods during which the market cap weighted S&P 500

deviated from the average stock returns, but obviously historically periods like these have previously reversed over time Will this time be different? We should doubt A theory,

which the market must confirm in the coming months, could be that we see a sector rotation, which brings the late cycle sectors in favor A feasible option would be, that the

market starts a consolidation period, lasting until September October which resolves in another strong leg up into 2025 where late cycle sectors outperform Looking at

Europe, which has a lower exposure towards technology, the underperformance may well have an additional source called China China’s domestic weakness has been a drag

for the European Economy A weakening US economy, which is nothing unusual during a late cycle, may see Europe once again vulnerable to external forces Even if we witness

headwinds from US large cap companies in the coming months, it will be difficult for Europe to become an outperformer

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