MONTHLY MARKET OVERVIEW & COMMENTARY | JUNE 2025 REBOUNDING CONFIDENCE BUT VOLATILITY LINGERS

June saw a robust recovery across global equity markets as geopolitical tensions eased and investors welcomed signs of progress on trade, especially between the U.S. and China. U.S. tech stocks led the charge, helping the S&P 500 and Nasdaq reach fresh record highs. While inflation remains sticky in parts of the developed world, softer economic data and dovish policy rhetoric have revived expectations for gradual interest rate cuts. That said, fiscal fragilities and political risks continue to cast a shadow over the investment landscape, especially heading into the second half of 2025.

TRENDS THIS MONTH:

• Global equities rebounded, led by U.S. and Japanese stocks
• Commodities were mixed: oil prices eased after initial spikes; gold declined on improved risk sentiment
• Developed market bond yields fell, reflecting a dovish policy tone
• South Africa posted its first primary budget surplus in over a decade, but political instability returned                        

UNITED STATES: RECORD HIGHS AND TRADE TAILWINDS

Equity Performance:

• S&P 500: +4.96%
• Nasdaq: +6.57%
• Dow Jones: +4.32%

U.S. equities rallied in June, bolstered by a signed U.S.–China trade deal and dovish remarks from several Federal Reserve officials. Strong gains in the tech sector, combined with improving consumer sentiment, pushed all three major indices to record levels. The University of Michigan’s sentiment index jumped to 60.7, while inflation expectations cooled markedly.

While core PCE inflation ticked slightly higher to 2.7% year-on-year, it remained within a manageable range. However, fiscal risks remain prominent: ballooning deficits, political impasse, and fresh spending proposals threaten long-term debt sustainability. The yield on 10-year Treasuries declined to 4.21%, signalling changing market expectations around future interest rate moves.

Outlook:

U.S. equities continue to be supported by earnings momentum and easing trade friction, but stretched valuations and unresolved fiscal issues suggest maintaining a balanced exposure.

EUROZONE/ UK MARKETS: STABILISING INFLATION, SLUGGISH GROWTH

Equity Performance:

• EuroStoxx50:-1.05%
• FTSE100:-0.13%

European markets underperformed their global peers as weak economic data and lingering tariff concerns dampened investor appetite. The ECB signalled an end to its cutting cycle but left the door open to further policy support should inflation remain subdued. Headline eurozone inflation dipped below 2%, while growth remained tepid.

In the UK, the FTSE 100 was flat despite falling inflation and a softer labour market. Governor Bailey emphasised that domestic factors would continue to guide policy, hinting at gradual rate reductions later this year.

Outlook:

European markets remain vulnerable to policy uncertainty and weak growth. Investors may benefit from selective exposure, particularly to quality dividend-paying stocks.

JAPAN: EARNINGS MOMENTUM AND POLICY NORMALISATION 

Equity Performance:

• Nikkei 225: +6.64%

Japan delivered another strong performance in June, supported by robust earnings and optimism around global trade. Tech stocks led the way, and a weaker yen provided a further boost to exporters. While the Bank of Japan held its benchmark rate steady, it signalled a slower pace of bond tapering to avoid market disruption.

Outlook:

Japanese equities remain well-positioned amid improving fundamentals, though any surprises on inflation or currency volatility could test sentiment.

CHINA: FRAGILE REBOUND AMID STRUCTURAL HEADWINDS

Equity Performance:

• Shanghai Composite: +3.11%
• Hang Seng: +3.4%

China saw modest gains as stimulus measures and trade developments helped lift sentiment. Manufacturing data remained soft, but services activity improved slightly. Nonetheless, the property sector continues to weigh on overall growth, and concerns over financial stability persist.

Outlook:

Further stimulus is likely, but policy support will remain targeted. Investors should continue to monitor real estate risks and export performance closely.

SOUTH AFRICA: FISCAL BREAKTHROUGH, POLITICAL FRICTION

Equity Performance:

• JSE All Share: +2.23%
• ZAR/USD: +1.62%
• 10-year Bond Yield: -44bps

South African markets posted respectable gains in June, driven by stronger mining sector performance and an improving fiscal narrative. The country recorded its first primary budget surplus in 16 years - a key milestone that signals a shift towards fiscal prudence.

However, political risks resurfaced after President Ramaphosa abruptly dismissed a DA deputy minister, straining the fragile coalition government. While the move did not derail the passage of the national budget, it renewed concerns about governance stability.

Inflation remained subdued at 2.8% in May, supporting expectations that the South African Reserve Bank (SARB) may consider further rate cuts. Encouragingly, retail sales rebounded, rising 5.1% year-on-year in April, pointing to some consumer resilience. Meanwhile, the country completed all Financial Action Task Force (FATF) requirements, boosting hopes for removal from the grey list later this year.

Outlook:

Improving fiscal metrics and low inflation support the case for South Africa, but political volatility and structural constraints continue to limit upside.

FINAL THOUGHTS: A CONSTRUCTIVE QUARTER, BUT RISKS REMAIN

The second quarter of 2025 ended on a high note for most major asset classes. After sharp drawdowns in April, equities staged a strong comeback on the back of easing trade tensions and supportive monetary signals. However, the global economy still faces key risks - ranging from U.S. fiscal fragility to geopolitical flashpoints and uneven growth in China.


CHART OF THE MONTH:

International markets are handing Trump 2.0 another victory. The S&P 500 is back to its record. Treasury Secretary Scott Bessent has targeted lower bond yields, cheaper oil, and a weaker dollar. The market is delivering all of them. Source: Bloomberg 

Credits: Strategiq Capital, Bloomberg