Last month, investors had to navigate shifting trade policies and rising geopolitical tensions in the Middle East. The 12-day war between Israel and Iran saw the oil price surge on news that the United States had carried out missile strikes on Iranian nuclear sites and then fall back once it became clear that Iran had telegraphed its bombing of a US airbase in Qatar. Equity markets were remarkably sanguine in the face of this geopolitical event, continuing to move higher in June.
All major regional equity markets delivered positive returns over the month. The S&P 500 achieved the fastest recovery from a 20% fall since the 1950s and ended the month at an all-time high. The US stock market was the strongest performing major developed market, despite the dollar continuing to weaken against most global currencies, including sterling. Within the US, our holding in the iShares US Value ETF, which buys stocks at a valuation discount to the broader market, outperformed the broad index over the month.
Emerging markets outperformed developed markets in June and continue to present significant opportunities for equity investors in our view. During the month, we purchased a holding in a Latin American ETF which trades at a significant discount to global equities and where the outlook for corporate earnings is improving.
Fixed income markets rose in June. Despite the Fed continuing to signal that it was on hold in terms of moving towards rate cuts, geopolitical concerns led to lower yields. Our holding in long-dated US Inflation linked bonds, which are attractive both in an environment of higher expected inflation or slower growth, performed strongly relative to the broader bond market.
Within our alternatives allocation, the position in the iShares UK Property fund benefited from the fall in longer term UK Government Bond yields and was up 1.1% last month. UK Property continues to trade at a deep discount to underlying net asset values, with continuing strong rental growth.
