EN - JUL 2024 - Jules Monthly Commentary

Oil prices bounced in June as geopolitical uncertainty gripped commodity markets. Surprise election announcements in the United Kingdom and France, destabilizing election results in Mexico and South Africa, a populist turn in governance by Brazil President Lula, rising odds of a second Trump presidency and an earlier-than-usual hurricane season in the US all increased global macro uncertainty. As one of the best hedges for global turmoil, oil rallied.

Source: Bloomberg. Denominated in US dollars. As at June 30, 2024.

The euro dropped against peers when President Macron called French legislative elections amidst the far-right National Rally party’s gains in the June European elections. The Japanese yen also had a rough month in June, dropping to decade lows against the US dollar, triggering fears of currency intervention by the Japanese government. We expect both the euro and yen to recover against the Canadian dollar in coming months.

Source: Bloomberg. Rebased to 100 one year ago. As at June 30, 2024.

A second Donald Trump presidency — the odds of which jumped after Joe Biden’s poor debate performance — would probably mean lower US interest rates in the short term but higher rates in the long term. Trump would probably fire Fed Chair Jay Powell, replacing him with a Fed Chair more aligned with his view that interest rates are too high. But the likely expansion of deficits under a Trump administration would eventually force the Fed to change course and keep rates higher for longer.

The S&P 500 made multiple all-time highs in June, driven by a still-surging technology sector. Signs of a cooling US economy and tamer inflation readings trimmed the already-slim odds of additional hikes by the Federal Reserve. We also saw a sharp reversal in the materials and utilities sectors, two of the best performing sectors of the past few months. We expect those two sectors to continue underperforming.

Source: Bloomberg. Rebased to 100 one year ago. All indices expressed in local currency, except MSCI EM, which is denominated in US dollars. As at June 30, 2024.

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