Current market commentary
The stock markets have been treading water recently. European equities have been much more volatile than US equities due to the upcoming elections in France. The Q2 reporting season should also provide fresh impetus. There have been positive earnings revisions in the run-up, particularly for US equities, meaning that it is likely to be more difficult to exceed analysts' estimates to the same extent as in recent quarters. Bond yields have also recently moved sideways. The upcoming US labour market data and the inflation figures for June are likely to be particularly relevant for the future direction. If the trend towards disinflation and weaker US economic data of recent weeks continues, it is likely to be difficult for interest rates to rise. However, if inflation once again proves to be more stubborn than expected, many bond bulls are likely to be caught on the wrong foot. For the S&P 500, the first two weeks of July are traditionally the seasonally strongest.
Short-term outlook
The next two weeks will be dominated by central banks and elections. The ECB's central bank forum will take place on 1-3 July and the UK general election will be held on 4 July. US stock markets will also be closed for Independence Day. The French election will be held on 7 July. On 9 and 10 July, Federal Reserve Chairman Jerome Powell will deliver his semi-annual address to the US Congress. Today will see the release of the US, Chinese and Eurozone manufacturing PMIs for June and on Wednesday the services PMIs for June. Consumer Prices (June) and Unemployment Rate (May) for the Eurozone are also due tomorrow. On Wednesday, the market will focus on the US trade balance (May), the ADP employment change (June) and the minutes of the last Fed meeting. On Friday, the US unemployment rate (Jun), non-farm payrolls (Jun) and hourly earnings (Jun) will be released. The following week, the market will look ahead to US inflation (June) and sentiment data (July).
Volatility - YTD highs in Europe and YTD lows in the USA
![](https://www.berenberg.de/uploads/web/Asset-Management/News-EN/Monitor_en/2024/_1400x789_crop_center-center_none/2024-07-01-Monitor-ENG-Grafik.png)
- The announcement of new elections in France led to a doubling of the realised 20T volatility for the Euro Stoxx 50. After elections, uncertainty tends to decrease and volatility falls – often regardless of the outcome – see Brexit and Trump's election victory.
- In the USA, volatility is historically low, which is due to the low correlation between the individual index members. Recently, many megacaps have often performed in exactly the opposite direction to the market as a whole.