Market developments
Equities:
Tech Mega Caps, including Apple, fueled a strong rally, propelling the Nasdaq 100 to a historic firsthalf performance. Investors embraced positive inflation data, favoring economic growth. Tech stocks, driven by artificial intelligence, outperformed. The Nasdaq 100 surged by nearly $5 trillion this year, defying bubble concerns with a 40% gain. The “Big Seven” tech companies, such as Apple, Microsoft, Alphabet, Amazon, Meta Platforms, Nvidia, and Tesla, are expected to drive earnings growth, with AI as a key driver. The S&P 500 and the Nasdaq closed the week up 2.35% and 2.2% respectively.
Fixed income:
U.S 10-year yields rose to over 3.8% this week. In May, key indicators of U.S. inflation showed a slowdown, with consumer spending remaining stagnant and the personal consumption expenditures price index, favoured by the Fed, increased by 0.1%. Compared to the previous year, the index recorded a decrease to 3.8%, marking the smallest annual increase in over two years. Given the economic data, the futures market is now pricing in a peak Fed Funds rate of 5.4% with a very low probability of rate cuts this year.
Commodities:
Although positive for the week, Oil recorded nearly a 7% decline in Q2 due to ample supplies and concerns over global demand. Robust crude exports from Russia and Iran, coupled with worries about a potential global economic slowdown, weighed on prices. The outlook for the second half remains uncertain, with mixed expectations of a tightening market and potential impact from further interest rate increases.