Global Markets Monthly: June 2026

The International Monetary Fund, in its April World Economic Outlook subtitled "Global Economy in the Shadow of War", lowered its 2026 global growth forecast to 3.1 percent and raised its global headline inflation forecast to 4.4 percent, with adverse scenarios extending to 2.5 percent growth and 5.4 percent inflation. The revision reflects a supply side inflation shock, examined in Section 3, rather than excess demand. The policy response to that shock is the subject of this section.

The central banks held or tightened around a common inflation problem, while differing in their starting points. The Federal Reserve, chaired by Kevin Warsh, held its target range at 3.50 to 3.75 percent on 17 June on a unanimous vote, its fourth consecutive hold. The accompanying projections, however, raised the median expectation for the policy rate at the end of 2026 to 3.8 percent from 3.4 percent in March. We would read a hold paired with a higher projected path as a hawkish outcome: it indicates that the committee judges current inflation sufficiently persistent to contemplate a further increase. The statement described inflation as elevated relative to the 2 percent objective and activity as expanding at a solid pace, with growth near 2 percent and unemployment around 4.4 percent. On that evidence there is little in the United States data that would compel near term easing.

The European Central Bank reached the opposite operational decision from a weaker growth position. On 11 June it raised its three policy rates by 25 basis points, taking the deposit rate to 2.25 percent, citing inflation transmitted through energy, with euro area harmonised inflation at 3.2 percent in May. It did so while projecting growth of only 0.8 percent for 2026, a combination that limits how far the tightening can be carried. The Bank of England held at 3.75 percent on a seven to two vote, with two members preferring an increase and United Kingdom inflation at 2.8 percent. The common feature is that the energy shock lifted the near term inflation profile across the developed economies simultaneously, leaving each central bank with less room to support growth than it held in the first quarter.

For the economies covered later in this report, the constraint is external. Asian central banks set policy within the limits imposed by United States rates and the dollar, and those limits tightened in June. The Bank of Japan's increase to 1.00 percent, examined in Section 7, is consistent with the global pattern. The principal exception is China, where the People's Bank held loan prime rates for a thirteenth consecutive month against inflation of 1.2 percent, retaining both the capacity and the reason to ease while most of the world holds or tightens. That divergence is itself a source of currency and capital flow pressure, a point developed in Sections 4 and 5.

The Iran war and its partial resolution in June have been the most consequential single influence on global markets this year. The conflict between the United States and Israel on one side and Iran on the other began on 28 February, and in early March Iran declared the Strait of Hormuz closed. Because roughly a fifth of seaborne crude transits that strait, the closure produced an immediate energy shock: Brent crude rose to a peak near US$120, and Dubai crude reached an intraday record of approximately US$166 on 19 March.

The development that defined June was a specific and partial de escalation. On 17 June the United States and Iran signed a memorandum of understanding that extended the ceasefire by sixty days, under which Iran committed to reopen the strait and to admit international inspectors and the United States committed to lift its naval blockade and ease oil sanctions. We would describe this precisely as a ceasefire framework rather than a peace treaty, because the underlying questions, the Iranian nuclear programme in particular, remain under negotiation in Switzerland and unresolved. Commercial transit through Hormuz resumed on 18 June, and officials reported a single day record of approximately 16 million barrels passing through the strait on 21 June. The de escalation has not been linear: both parties have alleged ceasefire violations, and Iran briefly re asserted closure on 20 June before traffic recovered.

The price response has been pronounced and is, in our reading, the more important market signal than the diplomacy itself. Brent fell from its March peak to US$74.73 on 24 June, and West Texas Intermediate settled at US$70.34, its first close below US$70 since early March, a decline of approximately 40 percent from the wartime high. We would draw two inferences from the evidence. The immediate upside risk to inflation from energy has diminished, which over time eases the constraint on the central banks examined in Section 2. The inflation already generated by the first half spike, however, continues to move through the consumer price data with the usual lag, which is why policy remained restrictive in June even as crude fell. The relief in spot prices and the firmness in policy are not in tension; they reflect the difference between a shock and its delayed transmission.

Two further developments bear on the global backdrop. On 20 February the United States Supreme Court ruled that the International Emergency Economic Powers Act could not be used to impose tariffs, after which the administration introduced a 10 percent surcharge under separate authority that is scheduled to expire on 24 July, a date that now functions as a discrete event risk. Separately, the United States and China reached an understanding on 11 June that held tariffs at 30 percent and paused further escalation for sixty days. We would characterise both as temporary stabilisations rather than settlements, since neither resolves the direction of trade policy.

Restrictive policy and a still elevated inflation profile have held developed market yields firm and the dollar strong. These two variables are the principal channel through which the global backdrop is transmitted into the regional markets and into the flow of capital examined in Section 5.

The United States ten year Treasury yield traded near 4.45 percent in late June, having eased modestly on hopes of de escalation while shorter dated yields rose to their highest of the year on the repricing of the Federal Reserve's path. The development with the widest consequence was in the currency. The dollar index reached approximately 101.6 on 24 June, its highest in more than a year and an increase of around 3.5 percent for the year to date, with the dollar strongest against the euro and the Australian dollar. A firm dollar tightens financial conditions across the region directly, by raising the local currency cost of dollar funding, and indirectly, by encouraging capital to remain in dollar denominated assets. The pressure was evident in the yen, which traded near 161 to the dollar, and in the won near 1,547, among the weaker major currencies of the period.

Japan is the exception within the region, and the development there is structurally significant. The Bank of Japan raised its rate to 1.00 percent, and the ten year Japanese government yield rose to 2.67 percent, the most consequential fixed income repricing in the region in many years. The mechanism is the following. Japanese institutions have for decades directed savings into higher yielding offshore assets, and a domestic yield at 2.67 percent reduces the incentive to continue. The implication extends beyond Japan, because a sustained repatriation of Japanese capital would remove a long standing source of demand from global, and particularly United States, fixed income. We would not overstate the near term magnitude of this effect, which depends on hedging costs and the pace of further Bank of Japan tightening, but the direction is now established and the consideration is structural rather than tactical.

The cost of capital matters here for a second reason. The combination of a high policy rate and an elevated term structure is precisely the condition under which capital remains in cash and in private credit rather than in long duration risk, which connects this section directly to the flows examined next.

Beneath the monthly movement in prices, a set of slower and more consequential shifts is changing where capital sits and who controls it. We examine these in detail, because they bear more directly on the medium term opportunity than the month's index returns. The evidence points to five connected developments: the consolidation of public equity capital into passive vehicles and a narrow group of companies; a record accumulation of cash; the migration of credit from banks to private lenders; a distribution constraint in private equity; and the rising weight of sovereign and family capital as direct allocators.

Passive investing, and the concentration it produces

Global exchange traded fund assets reached a record US$23.08 trillion at the end of May, on ETFGI figures, having drawn net inflows of US$1.07 trillion in the first five months of the year, a figure that already exceeds any prior full year. Passive vehicles now hold more than 55 percent of United States fund assets, having moved ahead of active management on Morningstar's measure. The consequence is not neutral. Because index funds allocate in proportion to market capitalisation, and because the largest technology companies now constitute approximately 34 percent of the S&P 500 and the ten largest close to 40 percent, a dollar invested passively is disproportionately a dollar invested in a small number of artificial intelligence exposed companies. The narrowness that Section 6 observes in prices is therefore in part a flow phenomenon, reinforced by the structure of how capital is invested. Active management has not disappeared so much as changed form, with active exchange traded fund assets reaching a record US$2.49 trillion.

A record cash balance

United States money market fund assets reached US$7.92 trillion in mid June, on Investment Company Institute figures, and global money market fund assets a record US$13.47 trillion at the end of the first quarter. We would read this balance in two ways. It is the rational response to a policy rate that pays investors to wait, consistent with the restrictive stance described in Section 2. It also represents substantial latent demand, since a meaningful decline in front end rates would reduce the return on cash and could redirect a portion of this balance into risk assets. For the present, the persistence of high short term yields keeps the cash in place, which is itself evidence that the market does not expect near term easing.

The migration of credit from banks to private lenders

The most structurally important shift, in our assessment, is the continued migration of credit provision out of the banking system. The direction is long established: the share of middle market lending provided by banks fell from more than 70 percent in 1994 to approximately 10 percent by 2020, on International Monetary Fund figures, and private debt financed roughly 77 percent of leveraged buyouts in 2024. June added regulatory and cyclical reinforcement. The Federal Reserve re proposed the Basel III endgame in March in a form that would lower large bank capital requirements rather than raise them, and a commercial real estate maturity wall of approximately US$875 billion to US$936 billion falls due during 2026, on Mortgage Bankers Association and S&P estimates, at a point when banks are reluctant to extend. Private credit has occupied the space, with assets estimated between US$1.5 trillion and US$2.5 trillion depending on definition and projected toward US$4 trillion by 2030. The relationship between the two systems has itself changed, in that banks increasingly lend to the private funds rather than to the end borrower, with bank loans to non bank financial institutions of approximately US$1.2 trillion. We would note the accompanying risk, evidenced by the September 2025 failures of Tricolor and First Brands and by the International Monetary Fund's observation that more than 40 percent of direct lending borrowers had negative operating cash flow at the end of 2024. The migration is, in our view, durable, but it transfers credit risk into a less transparent part of the system.

Private equity, rich in assets and short of liquidity

Global private equity assets under management stand near US$8.6 trillion, with buyout dry powder of approximately US$1.3 trillion, on Preqin and Bain figures. The binding constraint is distribution rather than capital. Distributions to investors fell to 14 percent of net asset value in 2025, the lowest since the global financial crisis, and Bain estimates that approximately 32,000 unsold portfolio companies worth US$3.8 trillion are now held beyond their intended horizon, while buyout fundraising fell for a fourth consecutive year, declining 16 percent to US$395 billion in 2025. This is the principal reason allocators are cautious on new commitments, and it frames the significance of the regional exception examined in Section 7, where Asian private equity returned to a net distribution position in 2025. Against a global distribution drought, that improvement is material rather than marginal.

Venture capital, and the concentration of risk capital in artificial intelligence

Venture capital expresses the same concentration in its most pronounced form. Global venture funding reached a record of approximately US$300 billion in the first quarter, on Crunchbase figures, of which roughly 80 percent was directed to artificial intelligence and the four largest transactions, led by OpenAI and Anthropic, accounted for approximately 65 percent of the global total. Anthropic raised US$65 billion in late May at a valuation of US$965 billion. The United States received approximately 83 percent of global venture funding in the quarter. The implication, in our reading, is that private capital is financing the artificial intelligence build out at a scale and concentration with few precedents, and that a growing share of that exposure sits in private vehicles beyond the reach of public market investors.

Sovereign wealth and family capital as direct allocators

The final development is the rising weight of state and family capital. Sovereign wealth fund assets exceeded US$15 trillion for the first time at the end of 2025, on Global SWF figures, with these funds deploying a record US$278 billion across 562 transactions during the year and directing approximately US$66 billion into artificial intelligence and digital infrastructure. Family office capital has grown in parallel, with approximately 8,030 single family offices managing an estimated US$3.1 trillion as of 2024, on Deloitte figures, a total Deloitte projects to rise toward 9,030 in 2025, and a marked tilt toward alternatives and direct investment. The geography is shifting in a manner directly relevant to this firm: Hong Kong recorded 3,384 single family offices at the end of 2025, now exceeding Singapore, and Dubai's International Financial Centre reported more than 1,250 family related entities, with the number of foundations rising sharply in the first quarter. The growth of allocator capital in the Gulf and across Asia, deploying directly and increasingly into the same artificial intelligence infrastructure theme, is among the more consequential structural developments for the region's capital markets.

June produced both records and reversals in equity and issuance markets, and the two are connected. The concentration of capital described in Section 5 produced new index highs and the largest listing in history, and also produced sharp drawdowns, in the United States and in Asia, within the space of three weeks.

Global equities and the fragility of narrow leadership

The S&P 500 reached a record of 7,519 in late May before retracing into the high 7,300s by 24 June, leaving it up approximately 9 percent for the year to date. The path was not smooth. On 5 June the index fell 2.6 percent and the Nasdaq Composite 4.2 percent, removing an estimated US$1 trillion in a single session, on a stronger than expected employment report that reduced expectations of rate cuts and disappointing guidance from a major artificial intelligence chip supplier. We would draw attention to one detail that complicates the simple concentration narrative: the largest technology companies underperformed the broader index in the first half, returning approximately 5.4 percent against the index's 7.9 percent, while still constituting around 34 percent of its capitalisation. The leadership of the United States market broadened even as the leadership of the Asian markets narrowed, which indicates that the concentration risk is more acute in Asia than in the United States at present. European equities rose over the half year, with the STOXX Europe 600 up approximately 10 percent on a total return basis, although the 2025 defence rally reversed when Germany cancelled a 12.8 billion euro frigate programme and signs of de escalation in Ukraine emerged, leaving Rheinmetall down by approximately a quarter for the year.

The SpaceX listing and the structure of the issuance market

The defining issuance event of the month, and of the year, was the listing of SpaceX on 12 June. The company priced at US$135 per share and raised approximately US$85.7 billion including the over allotment, at a valuation near US$1.75 trillion, on demand reported at roughly four times the offering. It is the largest initial public offering on record by a wide margin, exceeding the previous record, the US$29.4 billion Saudi Aramco listing of 2019, by close to a factor of three. Its subsequent trading is as informative as its size: the shares rose approximately 19 percent on debut and the company briefly carried a valuation above US$2.2 trillion before falling approximately 16 percent in a single session, a pattern consistent with the concentrated, momentum sensitive character of the present artificial intelligence trade. The listing also illustrates the prevailing structure of the issuance market, which is one of fewer but far larger transactions, with global initial public offering proceeds rising 36 percent by value in the first quarter even as the number of listings fell 23 percent. The connection to the region is direct: the SpaceX listing drew capital from across global markets, alongside broader outflows from Korean equities during June, a dynamic examined in Section 7.

Mergers, acquisitions and the global and regional divergence

Activity in mergers and acquisitions strengthened globally while lagging in the region, a divergence that is itself informative. Global deal value rose approximately 26 percent for the year on year in the first quarter to near US$1.2 trillion and is on course for roughly US$4 trillion for the full year, the strongest since 2021, led by transactions in technology, energy and healthcare and including the largest merger recorded, the combination of SpaceX and xAI at approximately US$1.25 trillion completed earlier in the year. Regional deal value, by contrast, fell 36 percent in the first quarter, which indicates that corporate confidence in the region is recovering more slowly than the global aggregate. We would read the regional figures as a matter of timing rather than weakness, with the region a phase behind the global cycle, consistent with the private capital evidence in Section 5.

The proposition we would advance is that the markets covered here behaved in June as a higher sensitivity expression of the global conditions described above rather than as an independent cycle. The evidence for that proposition is set out below across the semiconductor complex, Korea and Japan, and the dispersion between China and India.

The semiconductor complex and the external source of demand

The earnings underpinning the regional technology trade are not in dispute. Taiwan Semiconductor Manufacturing Company increased first quarter revenue by 35 percent to approximately US$35.9 billion, with advanced nodes at 7 nanometre and below representing 74 percent of wafer revenue, and SK Hynix exceeded 50 trillion won in quarterly revenue at a 72 percent operating margin, an increase of 198 percent driven by high bandwidth memory. We would emphasise a point that is frequently understated: this demand is determined outside the region. It originates in the capital expenditure budgets of United States hyperscalers, which now exceed US$600 billion for 2026 and are concentrated among a small number of companies, as Section 5 sets out. The regional complex is the manufacturing expression of a demand cycle set in the United States, which is the reason its June price action tracked the United States technology selloff rather than any regional development. The clearest regional marker of the period was the change in market leadership on 22 June, when SK Hynix overtook Samsung as Korea's most valuable listed company.

Korea, Japan and the anatomy of the June reversal

Korea has been the strongest equity market in the world for the year, and June clarified both the source and the fragility of that performance. The KOSPI set a record on 22 June, declined by approximately 10 percent in the following session, and recovered on 24 June. The decline did not originate in domestic fundamentals; it coincided with the global technology selloff and heavy foreign selling, against a backdrop of Korean retail outflows into United States listings, including SpaceX, through June. The supporting fundamentals are nonetheless genuine, including the value up reform programme and the advance of the third tranche of Commercial Code amendments. Japan presents the same theme in a more developed form. The Nikkei reached an intraday record above 72,800 before retracing, supported by record corporate buybacks near 18 trillion yen for the year to March and by a governance reform programme that is also reshaping the market for corporate control, to which we return below.

China, India and the dispersion within the region

The region is far from uniform. China's onshore indices rose over the year on a domestic technology and semiconductor bid, while the Hong Kong market was weaker, a divergence consistent with capital favouring the policy supported onshore market over the offshore gateway. India underperformed, with the Nifty 50 down approximately 8 percent, which we attribute principally to capital flows rather than to fundamentals: the firm dollar and elevated oil described in Sections 3 and 4 encouraged foreign investors to reduce exposure to a highly valued market, even as the domestic primary market remained the most active in the region. The filing of the Reliance Jio draft prospectus on 19 June, for what would rank among India's largest listings, illustrates the strength of that primary pipeline against the weakness of the secondary market. We read the Indian divergence as a flow driven dislocation rather than a deterioration, and we would re engage selectively in consequence.

The corporate control theme, and where the region leads

The one respect in which the regional picture is improving against a softer global comparison is the return of liquidity to private markets, the global drought in which Section 5 sets out. Regional private equity exit value rose 24 percent in 2025, the number of exits above US$1 billion increased roughly fourfold to the highest since 2021, and the region returned to a net distribution position for the first time since 2021. The most clearly defined structural trade is the Japanese take private, where pressure from the Tokyo Stock Exchange on companies trading below book value, an increase of close to 90 percent in activist campaigns, and abundant sponsor capital produced buyout volume of approximately US$27.6 billion in 2025, close to three times the prior year, including the carve out of York Holdings by Bain Capital and the privatisations of TechnoPro by Blackstone and Topcon by KKR. The governance reform that is revaluing Japanese equities is generating the supply of buyout candidates, a connection between the listed and unlisted markets that we regard as the most investable in the region.

We set out below the developments that would most alter the analysis above, with the evidence we would treat as decisive in each case.

The durability of the ceasefire. The framework signed on 17 June is a sixty day arrangement, not a settlement, and both parties have alleged violations. A breakdown would restore the energy premium and the upside inflation risk that has constrained policy. We would monitor the volume and continuity of Hormuz transit and the progress of the Switzerland talks ahead of the August expiry.

The transmission of first half inflation. Spot energy has fallen, but the inflation generated earlier in the year continues to move through the data, and forecasters expect elevated United States prints in the second quarter. A failure of core inflation to moderate would validate the hawkish policy path and sustain the dollar, to the detriment of Asian currencies and equities.

Concentration and the redeployment of cash. The June drawdowns in the United States and Korea demonstrated the sensitivity of a narrow, artificial intelligence led market to incremental disappointment. The record cash balance described in Section 5 is the offsetting factor, since a fall in front end rates could redirect it into risk assets. We would monitor the breadth of market participation and the guidance of the principal chip suppliers.

Credit quality in private lending. The migration of credit into private vehicles transfers risk to a less transparent part of the system, and the International Monetary Fund has noted that a large share of direct lending borrowers had negative operating cash flow. We would monitor default and recovery data and any further failures of the kind seen in September 2025.

United States trade policy. The 24 July expiry of the tariff surcharge and the sixty day United States and China pause are discrete event risks whose resolution is not yet determinable, and which bear directly on the region's export economies.