Market Comment - June

The past month saw a pause in the equity rally, with most market indices trading flat or slightly down. The biggest difference was made by small caps, as the Russell 2000 traded up 3.70% while large caps, measured by the S&P100, dominated by big technology companies, lost 2.79%. Looking at sectors and industry groups, industrials gained 7.23% followed by healthcare up 6.57%, while the communication sector lost 7.18%, followed by energy down 5.00%. Industry groups saw even larger swings. While Biotechnology gained 15.89%, Gold Miners lost 15.67%. Investors seem to rotate within their holdings, which in the end translated into indices not performing strongly. Crude oil lost a stunning 22.57%, almost reaching our downside target of USD 64, missing it by around 2 Dollars. Currencies saw notable strength in the US-Dollar index, which gained 2.33%, while the Swiss Franc and especially the Japanese Yen continued to weaken. The Japanese currency is showing a scary picture, trading on a last important support and showing absolutely no sign of strength. Against the US-Dollar, it finished the month at 162.51. With the current setup, it could be that this currency pair, instead of building a top against the US-Dollar, is one again in a distribution phase, or inversely, the US-Dollar once again in an accumulation phase against the Yen. If so, we cannot rule out that the US-Dollar/Yen currency pair will rally to 190. Looking at equity indices, the market was able to shake off initial weakness during the beginning of the month where the Nasdaq100 traded down almost 7.00%, while the S&P lost 4.05%. European indices provided much less volatility as investors showed some interest for large capitalized consumer staples and healthcare names. The smaller weight of the technology sector helped as well. While during the first half of the year, investors were fully focused on the AI trade, it could be that quality companies, that have been left behind, get more attention. In this context, the coming earnings season will be an especially interesting one. The geopolitical issues currently seem not to have a big impact. In Switzerland, the negative performance of Partners Group raised some eyebrows. The

company lost 27.60% of its value during the past four weeks, raising the question how solid the private equity market is. It is important to notice that the global economy is in a good

shape. While the valuation of private equity remains elusive, investors are more worried about the private credit market. But within a good economy, credit is not a problem. The shortterm financing though, which dominates private credit could become an issue. If too many investors remove capital from private credit, the financing of private companies can become difficult. On the other hand, most private equity companies refuse to return capital to investors. Most private credit funds are currently “gated”, meaning large withdrawals are not possible. This framework certainly provides a fragile picture of the private market. To call it a crisis may be too early. While the month of June does not own a very strong seasonal

framework, the month of July does. As previously mentioned, the market currently does not follow a classic mid-term seasonality pattern. Maybe it is because the market has been very

much news driven, especially by the conflict in the Middle East. Looking at the big picture of the current bull market that has started in 2009, we once again have to acknowledge that

every major market that we are tracking, meaning the S&P500, the Nasdaq100, the Stoxx600 and the MSCI World Index, all trade above long-termtrends at extended levels. For long term investors, this is not a good place to add exposure. The global deficit spending by governments, especially in the US. certainly helps.