Monthly Review and Outlook June 2026

Global equities were weaker overall during June, with developed markets outperforming emerging markets. Market leadership broadened beyond the technology sector, as investors rotated into other areas of the market after strong gains in AI-related stocks earlier in the year.

• United States: US equities declined over the month as investors moved away from some of the large technology and communication services companies that have driven much of the market's recent performance. Industrials and healthcare were among the strongest-performing sectors as market leadership broadened.
• Europe: Eurozone equities delivered positive returns, led by gains in the information technology and financials sectors. Investors continued to focus on corporate earnings and the outlook for economic growth as the region adjusted to changing interest rate expectations.
• United Kingdom: UK equities posted modest gains. Weakness in the energy and basic materials sectors limited overall market progress. Political developments were also in focus following the resignation of Prime Minister Keir Starmer, with attention turning to the expected leadership transition.
• Japan: Japanese equities rose in local currency terms despite periods of volatility. AI- and semiconductor-related stocks continued to perform well, while financial companies also benefited from the changing interest rate environment. The yen weakened further against the US dollar during the month.
• Emerging Markets: Emerging market equities lagged developed markets. The AI-driven rally that had supported performance earlier in the year lost momentum, particularly in markets with greater exposure to technology stocks. A stronger US dollar also weighed on investor sentiment despite some easing of geopolitical tensions following a US-Iran agreement.

Fixed income markets delivered positive returns overall during June as government bond yields generally moved lower, although markets remained sensitive to changes in energy prices and expectations for future monetary policy.

An initial rise in bond yields during the month reversed as investors reassessed the outlook for economic growth and inflation. In the US, short-term yields rose while longer-dated yields fell, reflecting expectations that interest rates could remain higher for longer.

Central banks remained active during the month. The European Central Bank and the Bank of Japan both raised interest rates by 0.25%, while the Bank of England left rates unchanged. Policymakers continued to emphasise a cautious and data-dependent approach given ongoing economic uncertainty.

Corporate bond markets produced positive returns, with euro-denominated investment grade and high yield bonds outperforming their US counterparts. Primary issuance remained strong as companies continued to refinance debt and fund investment, including spending related to AI development.

Commodities declined again during June.

Energy was the weakest-performing component as oil prices fell back towards levels seen before the recent Middle East conflict. This reflected easing geopolitical concerns and expectations of adequate global supply. 

Gold also weakened during the month as investors adjusted expectations for inflation and the future path of US interest rates.

Looking ahead, investors will continue to monitor the outlook for inflation, interest rates and economic growth, alongside developments in global politics and international relations.

While enthusiasm around AI and long-term technology trends remains supportive for markets, June highlighted that leadership can broaden and market performance may become more balanced across sectors and regions.

Central banks are likely to remain data-dependent as they weigh inflation risks against signs of moderating growth. This could lead to periods of volatility as markets adjust expectations for future policy decisions.

As ever, maintaining a diversified approach across asset classes and regions remains important. While short-term market movements can create uncertainty, a long-term perspective continues to provide a solid foundation for investing.

Forecasts of future performance are not a reliable guide to actual results, neither is past performance a reliable indicator of future results. The value of investments and the income from them can fall as well as rise and are not guaranteed, and the investor might not get back their initial investment.

Any views expressed are our in‑house views as at end‑June 2026. Investment markets and conditions can change rapidly, and the views expressed should not be taken as statements of fact nor relied upon when making investment decisions. This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.

Schroders Investment Management (SIM) provides investment management and advice services for Lloyds Wealth funds and portfolios respectively.

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