Month in the markets: US shares lead the way

Almost every time the Dow Jones index has gained between 10% and 20% in the first half of the year, it has ended the year positive. 

Shares around the world continued to gain in price in June, with the S&P Global 1200 gaining 1.34%. As a result, the global index saw a price return of 13.4% in the first half of 2021.

American shares were largely responsible for the strong performance of global shares in June. For example, the S&P Developed ex-US Index lost almost 1% in June. Meanwhile, the flagship S&P 500 Index gained 2.3% over the course of the month.

June’s strong returns bring the S&P 500 to a year-to-date return to just over 15%. Meanwhile, the Dow Jones Industrial Average gained just 0.2%. However, measured since the start of the year, it has gained 12%. 

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This potentially bodes well for US shares, based on historical performance. As Tim Edwards, managing director of index investment strategy at S&P Dow Jones Indices, points out, of the 24 historical occasions that the Dow Jones index saw a gain of between 10% and 20% in the first half of the year, only once did it fail to finish the full year in positive territory. Although perhaps ominously, the only time it failed to do so was in 1929, following the Wall Street Crash and start of the Great Depression.

June saw the continued retreat of cyclical and value stocks. The S&P MidCap 400 clocked a loss of 1% in June, while the S&P SmallCap 600 gained just 0.3%. This potential rotation can also be seen in factor and sector indices.

The S&P 500 Growth Index gained 5.7%, while the S&P 500 Quality Index gained 4.7%. In contrast, the S&P 500 Enhanced Value Index lost 2.9% and the S&P 500 Dividend Aristocrats Index lost 1.2%. However, value stocks have still outperformed growth year-to-date, with the enhanced value index’s return sitting at 26.6% compared to growth’s 14.3%.

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The S&P 500 Information Technology Index was by far the best performer, returning almost 7% in June alone. Meanwhile, the highly cyclical S&P 500 Financials Index lost almost 3%. However, despite its value and cyclical bias, the S&P 500 Energy Index still staged a strong performance, gaining 4.6%.

Europe and the UK continued to experience gains in June. The S&P Europe 350 Index was up 1.7%, while the S&P United Kingdom Index returned 0.4%. Year-to-date, Europe has gained almost 16% and the UK 11.5%.

Healthcare was the best-performing sector on the continent in June, with the S&P Europe 350 Health Care Index gaining 6.8%. Information technology also saw strong returns, rising by 4.7%. Only two sectors on the continent finished June in the red: financials and utilities.

Emerging markets saw moderate gains, with the S&P Emerging Broad Market Index up by 0.5% in June. Brazil saw the best performance, returning 5.4%. The second strongest was Taiwan, with a return of just over 2%. China underperformed the index, although it was still able to post a positive return of 0.4%. Meanwhile, India advanced by 0.3%. The worst performance came from Peru, with a loss of 11.5%. Investors sold Peru's currency and stocks following the election of left-wing candidate Pedro Castillo.