June Monthly Market Review

Jul 13
6 min read

Global markets delivered positive returns in June, as continued enthusiasm around artificial intelligence and semiconductor stocks outweighed concerns over rising inflation and restrictive monetary policy. Technology-led gains supported equity markets, while healthcare and biotechnology also performed strongly. However, bond performance dampened overall returns, with the Balanced portfolio benchmark gaining 0.43%. Central banks took differing approaches during the month: the Bank of England and Federal Reserve held rates steady, while the European Central Bank increased rates for the first time since 2023.

AI Enthusiasm Offsets Rising Inflation

AI momentum continues to support equity markets
ECB raises rates for the first time since 2023
Technology and semiconductors led market gains

The Balanced portfolio benchmark returned 0.43% in June, with bond performance dampening overall returns.

Inflation and Interest Rates.

UK.

In June 2026, the Bank of England left Bank Rate unchanged at 3.75%, with policymakers voting 7–2 to hold rates steady as they weighed slowing domestic inflation against risks from higher energy prices linked to Middle East tensions. Notably, two MPC members voted for a rate increase, highlighting a more hawkish tone.

UK inflation provided some relief: CPI inflation held at 2.8% in May, unchanged from April and below consensus expectations of 3.0%. Lower food prices helped offset higher transport and fuel costs, reducing immediate pressure on the Bank to tighten policy further.

U.S. Federal Reserve.

In June 2026, the Federal Reserve left interest rates unchanged at 3.75%, maintaining a cautious stance as inflation remained above its 2.00% target and policymakers assessed the impact of higher energy prices and ongoing geopolitical tensions. While rates were held steady, Fed officials signalled growing concern that inflation pressures could prove more persistent than previously expected.

Inflation accelerated during the month, with US CPI rising 4.20% year-on-year in May, up from 3.80% in April and marking the fastest pace in three years. Higher gasoline and energy costs were the primary drivers, although core inflation remained relatively contained. The data reinforced expectations that the Fed would keep policy restrictive for longer.

European Central Bank (ECB).

In June 2026, the European Central Bank raised interest rates by 0.25%, taking its deposit rate to 2.25%, its first rate increase since 2023. The ECB acted in response to rising inflationary pressures stemming from higher energy prices, seeking to prevent temporary price shocks from becoming embedded in inflation expectations.

Inflation in the euro area had risen above 3.00%, exceeding the ECB’s 2.00% target, driven largely by surging oil and gas prices. Reflecting this backdrop, the ECB revised its 2026 inflation forecast up to 3.00% and warned that inflation would likely remain elevated into 2027, even as economic growth slows.

Market performance.

Developed markets.

The Netherlands (+13.58%) was the standout performer in June, supported by strong gains in European technology and semiconductor stocks, particularly AI-related names such as ASML. Improving investor sentiment, easing Middle East tensions and a broader rally in European equities also provided a favourable backdrop.

In contrast, Norway (-11.77%) was the weakest-performing developed market. The country's energy-heavy equity market came under pressure as oil prices fell sharply during the month following signs of easing geopolitical tensions and reduced concerns over global energy supply disruptions.

Emerging Markets.

Colombia (+13.90%) was the strongest-performing emerging market in June. Investor sentiment improved following the country's presidential election, with Colombian assets rallying on expectations of more market-friendly economic policies and fiscal discipline under the incoming administration. Reuters reported that markets responded positively to the election outcome, helping support a strong rebound in Colombian equities.

By contrast, Indonesia (-7.30%) was the weakest performer. Indonesian equities remained under pressure amid concerns over government policy, a sharply weakening rupiah and uncertainty surrounding MSCI's review of the country's emerging market status. Reuters noted that Indonesia was among the world's worst-performing equity markets in 2026, with investor confidence hurt by governance and market transparency concerns.

Sector performance.

UT Healthcare and Biotechnology (+8.20%) was the strongest-performing sector in June. Healthcare stocks benefited from increased investor interest as markets rotated away from some of the more crowded technology trades, while positive developments across the pharmaceutical and biotechnology industries supported sentiment. Reuters reported that healthcare was among the leading sectors in both European and US markets during the month, with several large healthcare companies posting strong gains.

By contrast, UT Commodity/Natural Resources (-7.00%) was the weakest performer. The sector came under pressure as oil prices retreated sharply during June on easing concerns over energy supply disruptions and improving prospects for a lasting agreement in the Middle East. Lower energy prices weighed on resource and commodity-related equities, particularly energy producers.

Source: FE FundInfo, 10/07/26

Summary.

Global markets delivered positive returns during the month, but the drivers of performance were increasingly narrow. While rising energy prices pushed inflation higher across the US and Europe, investor confidence remained focused on the earnings and productivity potential of artificial intelligence, supporting another strong month for technology and semiconductor-related equities.

The reacceleration in inflation is significant because it challenges expectations for a smooth easing cycle from central banks. The Federal Reserve and Bank of England chose to keep rates unchanged, while the ECB resumed tightening, signalling that policymakers remain more concerned about inflation persistence than growth risks. For investors, this reinforces the prospect of interest rates remaining restrictive for longer, creating a less supportive backdrop for both fixed income and more highly valued areas of the market.

Encouragingly, performance broadened modestly during the month, with healthcare and biotechnology also generating strong returns. This suggests investors may be starting to look beyond technology for opportunities, which would be a healthier foundation for markets if sustained. Conversely, falling oil prices weighed on energy and natural resource sectors, demonstrating how quickly market leadership can shift as geopolitical concerns evolve.

Looking ahead, the investment backdrop remains constructive but more balanced than earlier in the year. Structural themes such as AI adoption and resilient economic activity continue to support risk assets, yet higher inflation, restrictive monetary policy, and geopolitical uncertainty remain meaningful risks. In this environment, diversification across regions, sectors, and asset classes is likely to remain critical in capturing opportunities while managing volatility.

Sources.

The ‘Balanced portfolio benchmark’ is the UT Mixed Investment 20-60% Shares Sector.

Bank of England's Bailey Signals No Need to Move Quickly to Curb Inflation Jump – By William Schomberg, Reuters (via U.S. News), 29 May 2026

Bank of England Policymakers Set Out Views on Rates Outlook in Minutes of June Meeting – By Reuters Staff, Reuters, 18 June 2026.

UK Inflation Unexpectedly Sticks at 13-Month Low Before BoE Rate Decision – By David Milliken and Suban Abdulla, Reuters, 17 June 2026.

Bank Rate Maintained at 3.75% – June 2026 Monetary Policy Summary and Minutes – By Monetary Policy Committee, Bank of England, 18 June 2026.

Consumer Price Inflation, UK: May 2026 – By Consumer Price Inflation Team, Office for National Statistics (ONS), 17 June 2026.

Fed Policymakers' Inflation Concerns Grew at June Meeting, Minutes Show – By Howard Schneider, Reuters, 8 July 2026.

VIEW: CPI Rises at Fastest Rate in Three Years but Meets Market Expectations – By Reuters, Reuters, 10 June 2026.

Federal Reserve Issues FOMC Statement – By Federal Open Market Committee, Federal Reserve, 17 June 2026.

Consumer Price Index Summary – May 2026 – By U.S. Bureau of Labor Statistics, Bureau of Labor Statistics, 10 June 2026.

European shares rally as Middle East peace hopes drag oil prices lower – By Utkarsh Hathi and Ragini Mathur, Reuters, 12 June 2026.

Europe's STOXX 600 Ends at Record High as US-Iran Deal Lifts Sentiment – By Johann M Cherian, Utkarsh Hathi and Purvi Agarwal, Reuters (via U.S. News), 15 June 2026.

Europe's STOXX 600 clocks biggest quarterly gain in over five years on AI boost – By Johann M Cherian and Tharuniyaa Lakshmi, Reuters, 30 June 2026.

Stocks end quarter with big gains as oil tumbles the most in years; gold, yen also fall – By Rodrigo Campos and Amanda Cooper, Reuters, 30 June 2026.

Colombia presidential candidates have rival visions, but fiscal reality looms for both – By Nelson Bocanegra and Rodrigo Campos, Reuters, 16 June 2026.

Prabowo's populist policies propel a 'doom-loop' in Indonesian markets – By Rae Wee, Karin Strohecker and Marc Jones, Reuters, 8 June 2026.

Indonesia clings to emerging markets mantle as MSCI extends review – By Ankur Banerjee, Reuters, 23 June 2026.

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