Global equity markets posted their third-straight positive monthly performance to end 2Q20 on a strong footing. Developed markets (DMs) had their best quarter (MSCI World +19.4%) since 2Q09, while the S&P 500 Index recorded its best quarter (+20.5%) since 4Q98. June started on a positive note with payroll data showing that US employers had added 2.5mn jobs during May as the US unemployment rate dropped to 13.3%, significantly better than the 7.5mn job losses and 19% unemployment rate expected by economists.
The strong jobs data helped drive a rotation into value stocks as the Russell Value Index outperformed the Russell Growth Index by 6% in the first week of June. However, that rotation reversed quickly with the growth index ending the month 5% ahead. Regionally, the US lagged in June (S&P 500 +2% MoM), underperforming Europe (Eurostoxx +6.4% MoM) and emerging markets ([EMs] MSCI EM +7.4% MoM), but technology shares remained the most consistent performers – the tech-heavy Nasdaq 100 Index was up 6.4% for the month and is now 16.9% higher YTD, a full 20% ahead of the S&P 500 Index.
COVID-19 infections in Europe continued to remain well under control allowing economic activity to continue to normalise, though in the US, the aggressive reopening of the economy caused a re-acceleration of new cases, leaving several states needing to consider tightening movement restrictions once again. Although concerns around a second wave of infections caused a slight wobble in markets mid-month, talk of more stimulus got markets back on track as US President Donald Trump floated the prospect of another $1trn of fiscal stimulus, possibly via payroll tax cuts, and the US Federal Reserve (Fed) announced details of its corporate bond buying programme, which exceeded expectations. The release of US May retail sales, that were up 17.7% MoM (ahead of expectations of an 8.4% increase), added to the positive sentiment. Stimulus kept bond yields anchored around record lows
Brent crude oil rallied 16.5% during June as OPEC+ delivered better-than-expected news on supply cuts. Having agreed to cut the equivalent of about 10% of global oil supply in May and June, the cuts were due to start rolling off in June, but OPEC+ agreed to extend the 10% cuts until at least July. In addition, some of the smaller producers who have been flouting the supply cuts will now make those up over the next few months.