June 2016 – monthly market commentary

June was the month Brexit happened. British voters voted to leave the European Union. Therefore, one has to calculate market returns before June 23 and after June 23. Predictably, European stocks bore the brunt of the shock result. MSCI Europe dropped 6.5% in USD terms for the month. S&P 500 index was flat for the month at 0.26% as the index rallied in the last few trading days of the month. Japan stocks, as the country struggles with both growth and deflation, were down 3.2% in the month. Emerging markets had fared better. Asia ex-Japan stocks netted a gain of 2.75%. India was up 1.04%. China stocks fared slightly better with a gain of 1.24%. Brazil, one of our favourite markets, was up 19.5%. Russia was up 2.5%.

WTI crude price was down 1.6% during the month. As risk aversion picked up among investors, the price of gold went up 8.8% during the month with the bulk of the gains coming post-Brexit. The overall S&P Goldman Commodities Total Return Index was flat for the month. Unsurprisingly, US Treasury bonds posted gains in the month. They were up 2.8% whereas European sovereign bonds were up only 0.7%.

Brexit was not a trigger but a reminder of the fraught political and economic world. Increasingly, financial markets will reflect that reality in the second half of the year.

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