Mutual funds: monthly reports

CIO Report – June 2026

Markets

June was dominated by monetary policy and the conflict in the Middle East. The memorandum of understanding between the US and Iran led to a marked fall in oil prices and eased the stagflation concerns that had previously been dominant. At the same time, economic data remained robust, prompting the Federal Reserve under new Chair Kevin Warsh to communicate in a surprisingly hawkish tone. Other major central banks also turned more restrictive. Across the main asset classes, the picture was mixed. Equities performed unevenly by region: European markets and Japan advanced, while US equities came under pressure, driven in particular by weaker technology stocks. In bond markets, government bonds benefited from receding inflation concerns, while corporate bonds delivered slightly positive returns. In currency markets, the US dollar strengthened, supported by higher US rate expectations and a more hawkish Fed. Among commodities, the sharp decline in oil prices was the main story, though precious metals also fell markedly, weighed down by the stronger dollar and higher rate expectations.

Outlook

Global economic activity remains resilient and continues to benefit from the shift of financial market liquidity into the real economy. This is being driven primarily by the AI investment boom, high fiscal deficits, rising defence spending and the diversification of global supply chains. Recent economic data have accordingly come in better than expected, and the world economy has so far absorbed the energy price shock well. The provisional agreement between the US and Iran has provided further relief, with oil prices falling back to pre-war levels as a result. The flip side of this environment, however, remains stubborn inflation and increasingly hawkish monetary policy. The Federal Reserve under new Chair Kevin Warsh has proved surprisingly restrictive; around half of the Fed leadership expect one to two further rate hikes by year-end. At the same time, the global liquidity cycle has turned and is now in a critical zone. For equity markets, this means the air is getting thinner, even though upward trends have remained intact so far. A shift from direct equity holdings into convertible bonds already looks attractive at this stage, as they offer an appealing asymmetric risk/reward profile. Caution remains warranted on government bonds, whereas corporate bonds appear more attractive overall, supported by solid fundamentals and high running yields. We view gold as tactically neutral, but remain constructive on it over the longer term.