Market insights

Last week, US Treasury yields fell as US inflation came in lower than markets expected. Global bond yields and the US dollar also fell as markets firmed up their view that the US Federal Reserve (Fed) will cut interest rates in September and December.

A bit like the unpredictable weather we’ve had over the past few weeks, politics has been a rollercoaster. As expected, the UK election delivered a Labour win. While there might be tax and broader fiscal implications at the individual level, the outcome wasn’t unexpected, which is why it hasn’t moved markets that much.

The overall outcome of the French legislative elections came as expected: a hung parliament where no party/alliance managed to secure the absolute majority of 289 seats. But it came with a twist.

That Labour won a strong absolute majority, and the Conservative Party sank to the lowest result ever isn’t a surprise for markets, given the polls. The next government plans to follow the same fiscal rules as the outgoing one and so, in our view, it will have limited fiscal space. However, there could be modest effects on different groups of consumers and firms.

When we invest in companies and funds, we’re committed to active ownership. It’s an approach that not only enhances the investment process but can also have a positive impact on people and the planet.

The French head to the polls on June 30 and July 7 to elect their members of Parliament. How does that work? There are 577 seats up for grabs, so a party needs 289 seats to have an outright majority to govern. Anything less, in general, would mean that several parties may try to work together to form a coalition. This has been the case since 2022, with a coalition supporting President Macron given that his party does not have an outright majority.

Staying the course

All eyes are on Europe this summer. It’s one of the most visited regions, time and again, by tourists from all around the globe. The European Football Championship also kicked off last week in Germany, the Summer Olympics in Paris starts next month and, for those more politically minded, we just had the European elections and there are key national elections in France and the UK on the horizon (and, Europe aside, the all-important US election in November).

Will the US follow Europe’s lead on interest rate cuts?

As expected, the European Central Bank (ECB) lowered interest rates by 25 basis points last week. The main refinancing rate is now 4.25%, and the deposit rate is 3.75%. Even though the decision was expected, European equities fell slightly, government bond prices rose (yields fell), and the euro appreciated right after the announcement.