As we move into June, the sixth month of the year, named after Juno, the Roman goddess associated with protection and prosperity, it provides a natural moment to reflect and reset. This sense of renewal is helped by the start of the FIFA World Cup, where optimism always builds and every nation dares to believe.
While England fans will be hoping for World Cup triumph there was hope that a resolution between the US and Iran would finally be agreed, as they negotiated the reopening of the Strait of Hormuz. However, early on Monday, reports emerged of a series of strikes carried out by both sides, continuing to strain the ceasefire that had been agreed. Iranian forces struck Kuwait, hitting the airport and injuring dozens of people, while the US military conducted defensive strikes closer to the Strait of Hormuz. Trump later announced that he had to instruct Israeli president Netanyahu to refrain from further attacks on Hezbollah, which only added additional pressure to the already fragile ceasefire with Iran.
Midweek, the US House of Representatives passed a war powers resolution to block President Trump from carrying out any further strikes on Iran. The vote stood at 215–208, with a number of Republicans siding with Democrats in a congressional attempt to force an end to the conflict. The news flow from the US administration often does not reflect the reality on the ground, as earlier this week Iran made it clear it would be suspending any further negotiation talks. Despite this, President Trump continues to claim that negotiations are “going very well”.
The US Fed Beige Book is a report issued by the Federal Reserve that provides a regular snapshot of economic conditions across its 12 regional districts. It essentially offers a ground-level view of how the economy is performing. The latest report indicated that the US economy is expanding at a slight to moderate pace, with business activity increasing in ten of the twelve districts. Manufacturing has also been a key bright spot, expanding across nine districts, supported by defence spending and a significant buildout of data centre infrastructure. However, one area of concern is the impact of soaring energy costs, driven by the ongoing conflict, which are reshaping consumer behaviour, with lower- to middle-income households feeling the squeeze.
It is the first Friday of the month, so with that we receive the US Non-Farm payroll figures. For May, 172,000 jobs were created, signalling continued strength in the labour market, following the addition of 179,000 jobs in the previous month. The unemployment rate also remained steady at 4.3% for the third consecutive month. Against a backdrop of moderate economic growth, this data reinforces the view of a still-resilient labour market and is unlikely to prompt the Federal Reserve to shift away from its current holding of interest rates.
Eurozone inflation for May was released on Tuesday, showing further acceleration as headline inflation rose to 3.2%, the highest level since September 2023. At the start of the year, headline inflation stood at just 1.7% in January, highlighting the significant increase, largely driven by energy costs. Services inflation also picked up, rising to 3.5%. In response, markets have already begun to price in a 25 bps (0.25%) rate hike when the European Central Bank (ECB) meets next Thursday.
In the UK, political drama has continued to take centre stage following the publication of documents relating to Lord Mandelson’s appointment as British ambassador to the US. While over 1,000 pages were released, several key takeaways emerged, including critical remarks about Starmer and his government, suggesting a need for a complete overhaul. The documents also revealed Mandelson urged ministers to adopt a more “Trumpian,” risk-taking, and daredevil approach to counter mounting pressure from Reform, alongside highlighting significant vetting concerns only undertaken in an attempt to avoid potential issues with Washington. This episode remains a blemish for Prime Minister Starmer, who acknowledged that appointing Mandelson was a mistake, compounded by revelations that he uses auto-deleting messages.
The political pressure continues to mount, as Andy Burnham announced this week his intention to replace Starmer as Prime Minister, contingent on winning his by-election in a couple of weeks’ time. However, his path to the top is far from straightforward, with Burnham’s run as the Labour candidate in Makerfield being strongly contested by the Reform Party. It has also emerged that former Health Secretary Wes Streeting has launched a leadership bid, further intensifying the pressure within the party.
Away from politics we have seen continued focus on the artificial intelligence narrative within stock markets. We have witnessed meteoric rises in share prices, with the US technology sector rising over 40% over April and May, while the semiconductor sector rose a staggering 66%. Semiconductor companies are currently the main beneficiaries of the capex boom from the hyperscalers, and they have seen their earnings explode.
Narrow market leadership can present challenges for diversified approaches; however, we have been pleased that recent portfolio changes have increased exposure to the US technology sector. While we are mindful of the sector’s strong performance in recent weeks, we remain disciplined and are always open to taking profits following such moves.
Nathan Amaning, Investment Analyst
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