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Emerging clarity
June offered investors a compelling mix of theme driven growth alongside a drag from tightening monetary policy. Market returns were primarily driven by strong momentum in artificial intelligence investments, more hawkish central bank communication, and a stabilisation in energy markets. Earnings growth forecasts have been revised upwards once again, and despite ongoing equity market volatility, we continue to recommend an overweight position in equities within portfolios.
Volatility in summer markets
International equity returns were broadly flat in June, but remain close to 14% in positive territory year-to-date. The defining theme continues to be the strong concentration of global equity market gains in artificial intelligence and the semiconductor industry. This is particularly visible in returns driven by Japan and emerging Asian markets.
In North America, returns were more subdued in June as rising interest rates in the United States weighed on equity valuations. In Europe, equity markets performed somewhat better, gaining nearly 3%, supported by falling oil prices and easing energy risks.
The Helsinki stock exchange clearly lagged international markets in June. The OMX Helsinki Cap Index declined by almost 4%, as several large-cap stocks – notably Nokia and Neste – came under pressure. Year-to-date performance remains solid, however, at more than 8%.
Wide dispersion across sectors
Performance varied markedly across sectors. Financials delivered the strongest returns at +5.6%, supported by higher interest rates improving banks’ earnings outlook. The technology sector, by contrast, paused after its earlier strong performance and slipped slightly into negative territory for the month.
The weakest-performing sector was communication services (-6.8%), where price movements in large individual companies and heightened geopolitical uncertainty weighed on returns. Consumer goods declined by 5%, reflecting continued caution among consumers in a higher interest rate environment. Energy was also negative (-2.7%) as oil prices fell below $75 per barrel amid increased supply. Shipping flows through the Strait of Hormuz have resumed.
SpaceX and AI listings in focus
The most notable single event in June was SpaceX’s historic initial public offering, which raised approximately $86bn and at its peak valued the company at over $2.5tn. The subsequent share price performance reflected the market’s current volatility: the stock surged above $200 after listing, only to correct by around 30% as investors took profits.
The AI theme is set to remain central to market developments. SpaceX has announced its intention to acquire Cursor for $60bn. At the same time, other major AI companies—including Anthropic and OpenAI—are preparing for listing, ensuring investor attention remains firmly focused on the technology sector.
Interest rates move higher
The interest rate environment has shifted notably in recent months. A spike in energy prices, driven by the Middle East conflict, has intensified inflationary pressures. Long-term rates have stabilised at elevated levels during June.
The yield on the US 10-year government bond is currently around 4.4%, while the German equivalent stands at approximately 2.9%. At the same time, the 12-month Euribor has risen to 2.8%, signalling expectations of further tightening by the European Central Bank later this year. In the euro area, the central bank raised policy rates by 25 basis points at its June meeting, and its inflation forecast for 2026 increased to 3.0%.
The US Federal Reserve kept its policy rate unchanged at 3.50–3.75% in June. Markets are pricing in roughly a two-thirds probability of a rate hike already in the autumn. The Fed has also raised its inflation forecast to 3.6% by year-end, well above its 2% target. Higher rates are weighing particularly on growth stocks through valuation pressure and rising financing costs.
Markets are pricing in 1–2 rate hikes by central banks over the next 12 months.
Growth remains steady
The overall picture for the global economy remains relatively stable. The International Monetary Fund estimates global growth at around 3.1% in 2026 and 3.2% in 2027. Regional differences, however, are significant.
The US economy is expected to grow by just over 2%, China by 4.5%, and the euro area by 1.3%. The Middle East conflict, higher energy prices and elevated interest rates are weighing most heavily on Europe’s outlook. Recent business confidence indicators for June point to only modest growth in Europe.
Strong earnings support equities
Corporate earnings remain the key pillar supporting equity markets and the primary reason why we maintain an overweight position in equities. Globally, corporate earnings are expected to rise by as much as 27% in 2026. This represents exceptionally strong growth, particularly given that recent years have already delivered robust earnings expansion. In July, investor focus will turn to second-quarter earnings results. In the United States, S&P 500 companies are expected to deliver year-on-year earnings growth of more than 20% for the quarter, with revenues rising by over 10%.
This strong earnings growth underpins current valuation levels, even though markets are no longer inexpensive. The global price/earnings ratio stands at around 18, above the historical average of 16, leaving limited room for disappointment.
