In June, persistently sticky inflation saw markets factor in a higher-for-longer inflation and interest rate outlook, which saw both equity and bond markets come under pressure.

1. AI mega-cap shares (notably Nvidia) dominated performance during the second quarter. This led the S&P500 to hit a new high but the equal-weighted S&P 500 ended the quarter 3% lower, further evidence of the widening valuation divergence between AI and the rest of the market.

2. In June the ECB cut its official interest rate. The Fed is holding course, with the prevailing view that US interest rates will decline once this year. Expectations remain that The Bank of England will ease rates and that they will reach 3% by the end of 2025.

3. The UK stock market has started to draw in investors. During the second quarter, the FTSE 100 gained 3.8%, and the index is 7.9% higher year-to-date

4. In France, the second round of elections remains a big risk event in light of the successes of Marine Le Pen’s National Rally gains.

5. The earnings-growth gap between high-flying mega-cap stocks and the rest of the market is anticipated by many, including BlackRock, to close later this year, offering opportunities for stock selection.