Expansion accelerates taper talk

Key points

• The MSCI All Country World (global shares) Index rose 1.2% (in USD) in June. New Zealand and Australian shares (in AUD) also performed strongly, returning 2.8% and 2.3%.
• Bonds delivered a small gain, with the Bloomberg NZ Bond Composite 0+Yr Index returning 0.12% in June. The fall in 10-year government bond yields in New Zealand was muted (falling just 0.03%) relative to the US, who saw their 10-year Treasury yield fall 0.13% over the month. Globally yield curves flattened in June.
• The market has sided with policy makers in deciding that inflation is transitory, for now. US headline inflation is currently 5% year on year, surveys suggest prices paid by firms are at historic highs and consumer inflation expectations have started to increase.

Key developments

Globally, equities were up 6.9% in USD (+7.2% in NZD) in the June quarter with stronger economic growth supporting earnings forecast increases. There was some real variation in returns across global markets and equity sectors during the month and quarter as investors factored in the battle between constructive reflation, pockets of inflation, the impact of the delta COVID-19 variant and risks around central bank monetary policy settings.