June saw stronger equity markets as the ‘Magnificent Seven’ – Alphabet +6.5%, Microsoft +8.4%, Amazon +10.3%, Apple +10.3%, Nvidia +13.5%, Meta +8.9% and Tesla +11.1% – all of which we hold in our portfolio, continued to drive US equities higher despite signs of slowing US economic activity. While US inflation remained ‘sticky’ in areas, notably shelter, consumer price inflation fell to 3.0% in June, while UK inflation returned to the Bank of England’s 2.0% target during May. Eurozone inflation cooling to 2.5% prompted the first 25 basis point rate cut from the European Central Bank, which lowered the deposit rate to 3.75%, meaning that four of the G10 central banks have now cut rates so far this year. June also saw politics take centre stage, with French President Emmanuel Macron announcing a snap legislative election that resulted in a broad-based sell-off of French assets, while Keir Starmer delivered a landslide victory in the UK general election for the Labour Party.

Across regions, equities in the US (+4.4%) – predominantly driven by technology – and emerging markets (+3.8%) delivered outperformance versus the global benchmark, while Japan (-0.3%), the UK (-1.3%), China (-1.5%) and Europe (-1.6%) underperformed in sterling terms. Performance from emerging markets has lagged significantly over the past year, with persistent concerns around the health of the Chinese economy, and a potentially consequential US presidential election in November, acting to cool investor sentiment. China’s property market recovery has not unfolded as had been hoped, with stimulus measures thus far largely targeted elsewhere, such as towards strategic industries including electric vehicle manufacturing. However, within emerging markets, there were clear areas of strength, including Taiwan (+12.4%) and India (+7.8%), with our largest Indian holding, HDFC Bank, gaining by 10.8% in June. While the Nikkei Index returned +2.9% in local currency terms over the month, further yen depreciation remained a headwind, reducing sterling returns. In Europe, following President Macron’s surprise decision to call a snap election, growing popularity for Marine Le Pen’s Eurosceptic National Rally (RN) party sent French shares lower, with the CAC 40 Index down 6.7% in sterling terms during June. Despite this, our European strategy outperformed, being broadly flat over the month in absolute terms, with SAP (+13.6%) and Novo Nordisk (+7.9%) delivering robust returns as European healthcare and technology shares proved less sensitive to election-related volatility.

Broadcom (+22.0%), which is a top-10 listed holding within the Trust’s portfolio, was our strongest performer in June. The US-based chipmaker announced that revenue climbed around 40% year-on-year in the second quarter, with artificial intelligence (AI) revenues surging by 280% over the same period. The company’s recent $69bn VMware acquisition – the US-based cloud computing giant – has accelerated Broadcom’s expansion into the enterprise software space and successfully diversified its revenue stream, with this part of the business now contributing to over 40% of revenues. In contrast, our underweight in Apple (+10.3%) was a drag on relative returns, as the company announced a partnership with OpenAI to integrate ChatGPT into Apple devices, in its first major advance into the AI space.

We ended the month at a discount of 11.4%. Net gearing continued to be conservative at 4.9% (with debt at fair value) for month-end.