June 2016 || Newsletter
The month of May was proving to be quite uneventful as major equity markets evolved in a trendless manner within tight ranges. However, at month-end, they were shaken out of their lethargy by the realization that the Federal Reserve could well raise interest rates as early as June. This contributed to a positive end to the month for global equity markets and to additional gains for the dollar, while gold continued to slide and Treasury yields moved higher. The developed equity markets registered modest monthly gains while the prospect of higher US interest rates hurt the assets of emerging markets.
Following the publication of the minutes from the Fed’s April meeting, Janet Yellen and other Fed members clearly emphasized their belief that a rate hike would be appropriate if upcoming economic data pointed to stronger second-quarter growth as well as firming inflation and employment. The view that the world’s largest economy was robust enough to withstand a rate increase was taken positively by investors who have generally remained cautious towards risk assets.
In the bond markets, the yields on 10-year Treasuries rebounded from May’s lowest levels but ended only modestly higher for the month. In contrast, the yields on two-year Treasury notes jumped from a May low of 0.71% to end at a level of 0.90%, a 0.11% monthly increase.
- The rise of Fed rate hike expectations
- Gold loses its positive momentum
- Key Data
- Investment Strategy
- Portfolio Activity/News