Focus in the market returned to the glaring issues of high inflation, monetary tightening, and the risks of recession. Poor sentiment in the market drove the wide market lower, with the Dow, S&P 500, and the NASDAQ falling 6.71%, 8.39%, and 8.71% respectively over the month of June.

According to Fed President Jerome Powell, it has become increasingly difficult to achieve ‘soft landing’ for the economy. As inflationary pressures remain elevated, monetary tightening is expected to continue, and rates are expected to hit 3.50% by the end of the year. However, economy is also starting to slow down, with surveys finding deteriorating confidence for both corporates and consumers, company executives noted that consumers are growing more cautious on expenditure due to higher prices and the increased uncertainty, companies have also scaled back on their expansion plans. At the moment, we still see the recessionary risks higher.

That said, as not all indicators are negative, recession is not yet at the doorstep. Although short term rebounds are still possible, the equity market is still firmly down trending. We believe that this is not the time to re-enter the US equity market, as recession risks have yet to be fully priced in, given that earnings estimates in the market have yet to be downward revised. If there is further correction, we could then reassess if it presents an investment opportunity.