For the month as a whole, the US S&P 500 fell 1,0 percent measured in USD, the European Stoxx 600 ended up 2,7 percent measured in EUR, and the Nordic VINX rose 3,3 percent measured in NOK. Here at home, the Oslo Stock Exchange fell 4,7 percent (OSEBX).
Oil price toward pre-war levels
Toward the end of June, Brent crude fell back toward 70 dollars a barrel, the levels seen before the Iran war broke out and the Strait of Hormuz was closed, after having reached 120 dollars when fears were at their peak. Traffic through the strait has still not been normalized, and no peace agreement has been signed either, although negotiations on a letter of intent have been underway with repeated interruptions. The financial markets nevertheless take it on faith that an agreement will be reached and that the strait will reopen. In the US, the price of gasoline has fallen below four dollars per gallon from a peak of 4,5, and will probably fall further. Since gasoline consumption is highest between May and August, the so-called “driving season”, lower prices give American households more purchasing power than was feared a few months ago. With the fall in the oil price, Trump’s chances in the autumn midterm elections have also increased somewhat.
Rate hikes from the central banks
Even though the oil price has fallen, that has not stopped the central banks from raising interest rates. The inflation outlook rose through the second quarter, and the European Central Bank raised its rate in June for the first time since 2023, with a further hike priced in by year-end. The US Federal Reserve also signaled possible hikes ahead by raising its rate expectations. The newly appointed Fed Chair Kevin Warsh refrained from stating his own view on rates, as he is critical of forward guidance. That does not, however, mean that he is following Trump’s wish for lower rates, on the contrary, his message on price stability was so clear that the market interpreted it as hawkish. The market is now pricing in a rate hike toward the end of October and the possibility of one more within the next twelve months.
Strong half-year and IPOs in the pipeline
Equity markets have so far taken the prospect of higher rates in stride, even though rate hikes have historically dampened growth and earnings expectations. Long-term interest rates have risen less than short-term ones, in part because the market perceives the effect of the oil price on inflation as transitory. Global equities thus put a strong first half of the year behind them, marked by the closure of the Strait of Hormuz, sharp swings in the oil price, and renewed AI optimism, with the energy and technology sectors performing clearly best. Emerging markets led the way, with South Korea and Taiwan out in front driven by AI, while China and India were negative contributors, a concentration that makes emerging markets appear less diversifying than before. The appetite for investment was underscored by a successful IPO of SpaceX in June, the largest ever, which raised nearly three times as much capital as the previous record and made Elon Musk the world’s richest person once again. Later this year, Anthropic, the company behind Claude, is also expected to go public.
The road ahead
The Strait of Hormuz has still not been fully normalized and the central banks have shifted to rate hikes, but the oil price has already fallen back toward the levels seen before the Iran war, and the market is pricing in a peace agreement and a full reopening of the strait. Lower oil and gasoline prices give American households more purchasing power going into “driving season” than was feared, and since the effect of the oil price on inflation is perceived as transitory, long-term interest rates have risen little. A strong first half of the year driven by energy, technology, and broad AI optimism, together with the record IPO of SpaceX, shows that the appetite for investment and value creation continues at full tilt. For investors with a long horizon, equities therefore still appear an attractive alternative for placing capital.