Globally equity markets rallied strongly in June. In the US, the S&P 500 increased +5.0%, the Nasdaq rose +6.6%, whilst in the UK, the FTSE fell -0.1%. Domestically, the All-Ordinaries Accumulation index underperformed its US peers, rising +1.4%. On the ASX, the top performing sector was energy, as the Middle East conflict pushed up energy prices. The worst performing sector was gold, as investors took profits following a 6-12 month period of strong outperformance. In global news, the conflict in the Middle East continued to create volatility in financial markets, with the Brent crude oil price rising +6% in June. In Australia, the key piece of news was a lower than expected inflation data point which has resulted in expectations of a 25 basis point reduction in the official cash rate (currently 3.85%) in July.

In bond markets, the US 10-year bond yield fell -19 basis points (bp) to 4.25%, whilst its Australian counterpart declined -11bp to close at 4.16%. The Australian dollar was stronger in June, closing at US$0.658, up 1.5 cents.

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Apparently, Confucius did not say "One Picture is Worth Ten Thousand Words" after all. It was an advertisement in a 1920s trade journal for the use of images in ads on the sides of streetcars...

We get a bit fixated on US equity valuations, with Vanguard highlighting the high hurdles required to achieve another decade of >12% returns; even as the 10 year bond yield has been more competitive and tariffs drive negative earnings revisions in the US. The Ex-US equities world has been fairing better out of the tariff scenario. We check in on interest rate expectations in the US and Australia. Bain bemoans a softer global buyout environment lately while The Information tackles the private market liquidity problem graphically. Finally, the US office CMBS delinquency rate charts near-vertical while Aussie mortgage arrears have been on the rise.

Total market cap of S&P 500 firms >10x Price/Sales (US$ trillion)

 

Source: Kailash Capital Research

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Repeat of returns >12% for US equities requires record-high profit margins, record-high valuations, or a combination of both

 

Source: Vanguard

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S&P 500 Price/Free Cash Flow (cap weighted and equal weighted) v index level

 

Source: Fidelity

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US 10-year government bond yield

 

Source: FRED

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Consensus S&P 500 earnings by calendar year

 

Source: Columbia Threadneedle

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Forward 12-month global earnings forecasts & net balance of upgrades v downgrades

 

Source: Barclays Private Bank

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% of companies with downwards earnings revisions & impact of tariffs

 

Source: Schwab

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The rest of the world is ahead since Feb 19 - in common currency

 

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US market still looking for a Fed Reserve cash rate cut in September - but not quite as sure as a week ago

 

Source: CME

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Australian market backing in a 25 basis points rate cut by the RBA in July

 

Source: ASX

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Global buyout deal value, by region ($US billion)

 

Source: Bain, Dealogic

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Scarcity of opportunities to convert private investments into cash

 

Source: The Information

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Australia mortgage arrears

 

Source: cotality

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US Office CMBS delinquency rate %

 

Source: Trepp, WOLFSTREET.com

July 2025 Edition