Nothing like the prospect of an interest-rate cut to prop up the market, and growing bets the Federal Reserve might soon loosen monetary policy has lined the S&P 500 up for its biggest June advance since the 1950s.
In afternoon trade on the final trading session for June, the S&P 500 was up 6.7 per cent month-to-date. That is set to be the biggest monthly advance since January, when the market was roaring back from its late-2018 sell-off, and also the biggest June increase since 1955.
Rising expectations the Fed could soon cut interest rates to guard against the adverse economic effects of the US’s trade war with its allies were augmented by signals the European Central Bank, too, might also be forced to begin easing monetary policy again. That all helped propel the S&P 500 and Dow Jones Industrial Average to record highs this month, although they were slightly short of those peaks at month end.
The Dow, up 7.2 per cent for June, was eyeing an advance on par with January, but an extra little burst would put it on track for its biggest monthly rise since October 2015.
The Nasdaq Composite, up 7.4 per cent in June, was also on track for its biggest monthly rise since January. While the Big Tech “Faangs” were no slouch, it was chipmakers that really shone. The Philadelphia semiconductor index, which tracks 30 stocks in the sector, was eyeing a 13 per cent advance for June that would be its biggest monthly rise since October 2011.
One of June’s other star performers is gold. The precious metal benefited from investor flight to perceived haven assets as geopolitical tension in the Middle East simmered, and punched through $1,400 an ounce for the first time since September 2013. That has left gold up 8.2 per cent this month, on track for its biggest monthly advance in three years.
At the other end of the scale was the dollar. The prospect of an interest-rate cut and some soft economic data have taken their toll on the greenback, with the dollar index down 1.6 per cent in June and facing its biggest monthly drop since January 2018.
Bonds, overall, did not score the chunky gains equities did in June, although higher-yielding debt outperformed relatively safer, government paper.
Still, the downward trend for yields remained intact over the quarter, and Treasuries broadly outperformed Wall Street stocks during the past three months. The yield on the benchmark 10-year US Treasury fell below 2 per cent for the first time since November 2016. Yields on benchmark French and Swedish government bonds fell below zero in June for the first time on record, swelling the universe of negative-yielding debt to a record $12.5tn.
For the June quarter, the 10-year yield has fallen about 40 basis points, the biggest drop since first three months of 2016, in the wake of the Federal Reserve raising interest rates for the first time in this cycle. This is also the first time since the March quarter of 2015 the 10-year have declined for three consecutive quarters.
