It’s been a great start to the year for many financial markets, but June is often a tricky month for stocks.
There was good reason for investors to cheer in May, even those waiting the UK market to catch up with overseas rivals. Another month of positive returns – this time a hard-won gain of 0.8% - means the FTSE 100 has now risen every month since February, taking profit for 2021 so far to 8.7%.
But it was a tough month for high-flying growth stocks both here and in the US. London’s AIM market, packed with smaller companies across exciting sectors, fell 2.2% in May, and America’s tech-focused Nasdaq fell 1.5%.
It has something to do with the threat of inflation, triggered by a resurgence in demand as global economies emerge from pandemic lockdowns. Inflation reflects an increase in costs for businesses and expectation that consumers can afford less. Inflation is not the friend of growth stocks as it also has an impact on growth in corporate profits.
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However, both markets started the year strongly and, despite the blip last month, AIM is still up 8.5% in 2021 and the Nasdaq 6.7%.
Europe was popular last month, With France and Germany registering gains of 3.4% and 2.5% respectively. And more regular stocks, those outside the tech sectors, did well in the US. The Dow Jones was up 1.9% and the broader S&P 500 rose 0.5%.
Top performers in the FTSE 100 included Polymetal International (LSE:POLY), up over 13%, and M&G (LSE:MNG), up 12.5%. Sainsbury’s (LSE:SBRY) added 11.7% and Ashtead (LSE:AHT) 10.7%, while Lloyds Banking Group (LSE:LLOY) shares rose almost 10%.
In the US, Ford (NYSE:F) stood out with an incredible 26% return in May, Halliburton (NYSE:HAL) added almost 15%, Citigroup (NYSE:C) and Morgan Stanley (NYSE:MS) 10% and eBay (NASDAQ:EBAY) over 9%. Top tech risers included exercise equipment maker Peloton Interactive (NASDAQ:PTON), which recovered 12% after crashing at the beginning of the month on product safety concerns. Tesla (NASDAQ:TSLA) was down 12% for the month and still out of favour. It remains to be seen whether this a just a blip, or a long-term shift away from the dynamic electric vehicle firm.
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Will the sun shine on investors in June?
“June is not usually a good month for investors,” so says Harriman’s Stock Market Almanac. “The market falls more often than it rises in June, and when the market does decline the falls can be quite large, whereas the positive returns are usually only modest.”
The FTSE All-Share has risen in June for the past two years – up 3.4% in 2019 and 1.4% in 2020 – but only four times in the past 14 years. Overall, it has one of the worst records for share price returns of any month.
There are few obvious potential catalysts in the diary. June is a very quiet month for company results, especially from FTSE 100 constituents.
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