On the last day of June, we will take a look at the various asset classes and the returns they generated during this time. It was not the best month for the market bulls, while the bears could have many reasons to be happy.
Of the popular markets, the biggest loss this quarter may have been in the Nasdaq 100 Technology Companies Index, which fell 23 percent in value, while the index lost nearly a third of its capitalization in six months. It seems that the previous high valuations of technology companies, the lack of space to generate even more profit growth (as during the pandemic) and interest rate hikes may have contributed to the stock market collapse. Thus, a bear market, meaning those gambling on index declines, may have unfolded in full force. The S&P 500 index fell 18 percent in the quarter and nearly 21 percent in six months. Of the three major U.S. indexes, the Dow Jones index suffered the smallest losses, falling 12 percent in the quarter and less than 16 percent in six months.
In the commodities market, silver may have fared worst in the last quarter. Its price fell nearly 19 percent and by 12.5 percent in six months. A strong U.S. dollar, high bond yields and a world that is quickly starting to return to traditional energy sources may have put pressure on silver prices. Moreover, silver, as also an industrial metal, may have been pressured by expectations of a strong slowdown in the global economy or a recession that may soon be confirmed. A decline in industrial activity could affect the demand for silver and thus its price.
Industrial metals seem to be on one side, and energy commodities on the other. The increase in the price of oil on world markets in six months could be up to 45% and natural gas over 70%.
Meanwhile, in the foreign exchange market, the U.S. dollar was unremarkable. Looking at the USD index, the US currency reached its highest level in 20 years. In this six-month period, the value of the dollar rose by 10 percent, and in the last quarter alone it was more than 7 percent. Meanwhile, the Japanese yen seemed to lose the most in the forex market. JPY depreciation amounted to about 10 percent, which may have been influenced primarily by the divergence in the monetary policy pursued by the US Federal Reserve and the Bank of Japan. The Fed may be looking to raise interest rates quickly, while the Bank of Japan wants to control interest rates still as low as possible.
The next six months may look as interesting as the passing one. In the most optimistic scenario, energy commodity prices could catch their peak. Investors' attention will be able to focus on the bond market, which could pay even higher interest.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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