June 2024

May saw equity markets push ahead again following the April pullback.

Source: MSCI, ACWI Euro investor. Index rebased to 100 as at 31.12.23

Other notable items:

  • Inflation in the Euro area ticked up slightly in May, while the US market reacted positively to a slight fall in April inflation numbers announced in May.
  • The ECB cut rates by 0.25% this week, becoming the first of the three major central banks to do so.
  • Bonds remained flat during May and are down slightly over the first five months of 2024.
  • Oil prices fell, while natural gas prices rose during the month.
  • Geopolitics were prominent in May:
    • Following Taiwan’s elections, China conducted aggressive military drills around Taiwan.
    • Discussions of a possible deal to create a permanent ceasefire in the Israel-Hamas war emerged last weekend.
    • The US approved Ukraine’s use of US-supplied weapons to strike targets inside Russia.
    • Elections in India and South Africa led to changes in the balance of power. In India, Modi’s party lost its majority, and in South Africa, the African National Congress (ANC) lost its majority. Both now face the challenge of forming coalition governments, complicating governance and significant policy changes.

Month and YTD Market Numbers

With European parliament elections occurring currently, it creates a natural time to consider longer term issues for the EU. With this in mind, two articles in the Financial Times this month caught my attention and are summarised below. The one about demographic challenge is particularly striking.

EU’s Demographic Challenge

The EU faces a demographic crisis marked by a faster-than-expected population decline, straining government finances and economic prospects.

Birth rates have plummeted, leading to a shrinking working-age population that reduces tax revenues and pressures budgets. Sectors such as engineering and care are experiencing severe workforce shortages, and current immigration levels and increased female workforce participation are insufficient to offset these declines.

Addressing this crisis requires more effective pro-natal policies and a nuanced approach to immigration, despite its political sensitivity. Enhancing education and skill development is crucial to improving productivity. Additionally, encouraging older individuals to remain in the workforce longer and changing perceptions of ageing can help mitigate some of these demographic challenges. Immediate policy changes are essential for ensuring Europe’s long-term economic stability and growth.

For full article see Has Europe already reached its demographic tipping point? (ft.com)

EU – A Vision Of What Needs to Happen

Authored by French President Emmanuel Macron and German Chancellor Olaf Scholz, the article addresses the significant challenges Europe faces, including the ongoing Russian war in Ukraine, and broader geopolitical shifts. These challenges they suggest threaten the foundations of European living and its global role. To tackle these issues, the authors propose five key ideas which are informative as to the where the emphasis is likely to be going forward.

  • Strengthen Europe’s Industrial and Technological Leadership: Focus on innovation and reduce bureaucracy to boost competitiveness and resilience.
  • Advance the Green Deal and Digital Transition: Ensure Europe becomes the first climate-neutral continent and a leader in digital technologies.
  • Fully Decarbonize Energy Systems: Implement an integrated energy market while respecting national energy choices to increase resilience and sovereignty.
  • Create a Stronger European Financial Market: They suggest doing this by further integrating the banking and capital markets union, relaunching the securitization market, and improving supervision.
  • Modernise the Single Market: Reduce fragmentation and barriers to improve connectivity, skills, mobility, and market convergence.

For full article see Macron and Scholz: we must strengthen European sovereignty (ft.com)

Inflation Ticks Up Slightly in the EU while the latest US Numbers Showed a Slight Reduction

While inflation has fallen from its peak last year, recent numbers highlight the risk that the path to reaching the target 2% level is likely to be bumpy. Stubborn inflation combined with resilient economic growth in the US has caused a significant shift in expectations for interest rate cuts this year, from six or seven cuts earlier in the year to just one or two now.

Meanwhile, despite the slight uptick in EU inflation, the ECB cut rates by 0.25% on June 6, 2024. While this initiates the interest rate cutting cycle, the timing of the next cut is uncertain and likely to be data-dependent.

Nvidia Keeps Going

Nvidia delivered better than expected results again and announced a 10 for 1 stock split. The graphic below, by Visual Capitalist, was one of the most viewed in May, showing Nvidia is as big as all of these well-known companies combined. That was when it’s market cap was $ 2.5 trillion. Nvidia’s market value surpassed $3 trillion on Wednesday, making it the world’s second-most valuable company, overtaking Apple. This milestone follows a year of remarkable growth fuelled by high demand for its artificial intelligence chips.

Nvidia is Worth More Than All of These Companies Combined – Voronoi (voronoiapp.com)

Our Investment Outlook

The year has started positively, and the outlook has gradually improved since the turnaround last October. However, we are aware that markets have already anticipated a lot of positive outcomes and that there are still risks that could disrupt markets. We experienced some of that in April.

We remain somewhat cautious and are less keen to have clients increase their equity holdings at these prices.  Of course, holding cash is comfortable when gross returns available are still above 3.5% p.a. Overall, these factors underscore the need for a measured approach to investment in the coming year.


John Tuohy is Chief Executive of Acuvest, an Irish-owned, independent advisory firm specialising in wealth management, pensions, and investment advisory services for individuals, companies, pension schemes, charities, and institutions. John is a Chartered Financial Analyst (CFA) and a Fellow of the Chartered Association of Certified Accountants.