Following a strong May, global equity markets saw mixed returns in June. The US central bank kept its restrictive stance on monetary policy which took some of the wind out of the market’s sails. However, the US roared further ahead of most other regions, driven again by large contributions from the tech titans dominating that market.

In Europe, President Macron called a snap election in France. The prospect of a far-right government led to weakness in continental equities and saw borrowing costs for the French government climb to their highest level since last November.

Over the last two years just seven companies dubbed the ‘Magnificent-7’ contributed almost 50% of the performance of the S&P 500 Index. If we focus on 2024, returns have been even more concentrated with 5 out of the 7 representing almost 60% of the index return. In the last three months alone, Nvidia, Alphabet and Apple have represented 90% of the index returns.

Various studies have highlighted how this degree of market concentration has rarely been seen in the past and so it shouldn’t be a surprise to see some of them go through price corrections (drops of 10% or more, as NVIDIA briefly did over the space of a few days in June), if there is any disappointment from them relative to lofty expectations.

Looking beyond the Magnificent-7, we believe other companies could begin to pleasantly surprise investors with their own earnings. Indeed, when we look at analyst expectations, we see broad improvements in the outlook, notably outside the US and beyond the technology sector.

The cautionary note continues to be the fact there are indicators pointing to slowing growth. In the case of the US, we take comfort this is an economy slowing from a fast pace towards something more normal. Meanwhile, weakness in Europe continues to be seen in the manufacturing sector though there are tentative signs of improvement.