June marked a turning point, but not because risks disappeared, but rather because investors stopped fearing them. Equity markets surged to new highs, not in spite of tariffs, fiscal strain, and geopolitical shocks, but because those threats proved manageable. The "wall of worry" is still standing, but markets are sprinting up it. The S&P 500 rallied another +5.1%, closing the best first half since 2019. And the dollar continued its slide, marking its worst half-year performance since 1973. Beneath the volatility, the narrative shifted. Investors are beginning to look through the noise to a 2026 defined by looser policy, AI-driven productivity gains, and a rebalancing of global growth. June was less about resolution and more about revaluation. Risk appetite returned not because the macro turned clean, but because it turned more predictable.
Equities
June delivered a powerful reminder that equity markets are forward-looking machines. The S&P 500 gained +5.1% in the month, closing at new all-time highs and defying macro uncertainty ranging from tariff threats to geopolitical shocks. At the core of this resilience was a renewed belief in earnings durability, monetary easing, and the long-term productivity boost from AI.
Tech leadership remained dominant. Nvidia jumped +17%, Meta +14%, and the Nasdaq climbed +6.6%, cementing the “AI premium” as the most powerful force in equity markets. Analysts now expect 2025 EPS growth for the S&P 500 to reach +7%, even with margin pressure from tariffs. Importantly, the anticipated Q2 deceleration in EPS growth to +4% from +12% in Q1 is being absorbed without panic, as investors appear willing to trade short-term pain for long-term margin efficiency. And to the surprise of many, financials were the second-best performing sector in June, buoyed by the largest hedge fund rotation into the group in over a decade. Furthermore, robust buyback activity, now approaching USD 1 trillion year-to-date, alongside systematic buying from volatility-control funds, has added further support as markets climb the wall of worry.
In Europe, equities gave back part of May’s rally, with the STOXX 600 down -1.3%. Sector performance was polarized: semiconductors surged +8%, tracking U.S. AI sentiment, while defense stocks declined -7% on profit-taking after the NATO summit. Macro data turned softer, especially in the periphery, and the strong EUR acted as a headwind for exporters. Nevertheless, earnings from European banks remain robust, and capital flows into the continent, excluding the UK, picked up late in the month.
Emerging markets extended their outperformance, powered by dollar weakness and thematic tailwinds. Taiwan (+12.7%) and Korea (+8.3%) led, supported by semiconductor exports and favorable FX moves. The MSCI EM index advanced +6.1% in June, bringing its Q2 return to +12.2%, the strongest quarterly gain since Q4 2020. LatAm posted solid returns as well, with Brazil’s Bovespa up +1.3%.
Quarter-end performance revealed the scale of the rebound: the S&P 500 gained +10.9% in Q2, the Nasdaq soared +18%, and EM equities matched developed markets in USD terms. The lesson from Q2? Markets do not need perfection, just more predictability, and a little help from earnings and policy.
Fixed Income
Bond markets in June reflected a curious tension: easing central bank rhetoric on one hand, and fiscal alarm bells on the other. Yields stayed elevated not because growth was surging, but because debt sustainability is increasingly in focus. In the U.S., the Treasury curve steepened further, with the 30-year yield ending the month at 4.77%, up 20bps over the quarter. While front-end rates were anchored by dovish Fed expectations - markets are now pricing in 65bps of cuts by year-end - the long end struggled under the weight of ballooning issuance and renewed deficit concerns tied to President Trump’s “Big Beautiful Bill.” The legislation could add USD 3 to 5 trillion to federal debt over the next decade. The result: a persistent term premium that reflects not just inflation risk but growing structural unease over fiscal trajectory. Despite these pressures, U.S. Treasuries managed a modest total return of +0.8% for Q2, thanks largely to front-end resilience and safe-haven demand during geopolitical flare-ups.
Europe’s bond markets painted a calmer picture. The ECB cut rates for an eighth consecutive time, bringing the deposit rate to 2.0%, and signaled it is nearing the end of its easing cycle. Bund yields declined modestly, while peripheral spreads tightened. Italian BTPs outperformed, delivering +2.9% in Q2, as net issuance expectations improved and fiscal outlooks stabilized. European government bonds returned +1.9% on the quarter, outpacing U.S. sovereigns and JGBs.
Credit markets continued their upward march. Global investment-grade credit gained +4.4% in Q2, supported by solid earnings, low defaults, and tight supply. Emerging market hard currency debt also performed well, up +2.9% in June and +12.4% year-to-date, driven by carry demand and dollar weakness.
Commodities and Currencies
June was another reminder that geopolitics may drive headlines, but fundamentals still anchor commodities. Oil saw significant two-way volatility, with Brent crude briefly spiking to nearly USD 80/bbl following U.S. and Israeli airstrikes on Iranian nuclear sites. Yet markets quickly priced out the risk premium after a ceasefire was announced just 12 days later. Brent settled at USD 66.5 by month-end, up +5% on the month, but still down -9.5% for the quarter.
Precious metals extended their 2025 rally. Silver rose +9.5% in June and +5.9% over the quarter, outpacing gold, which edged up just +0.4%. The divergence reflects a shift in investor focus: while gold has plateaued amid declining volatility and reduced defensive positioning, silver has benefited from its dual identity, both as a safe haven and an industrial input linked to AI infrastructure and energy transition themes.
The U.S. dollar, however, remained the dominant macro variable across asset classes. The DXY index fell -2.5% in June, bringing its YTD decline to -10.7%.
Disclaimer
This document is for information purposes only. It constitutes neither an offer nor a recommendation to purchase, hold or sell financial instruments or banking services, and does not release the recipient from carrying out their assessment. The recipient is recommended to check the information in terms of its compatibility with their circumstances and its legal, regulatory, tax and other consequences, possibly on the advice of a consultant. The data and information contained in this publication were prepared by MBaer Merchant Bank AG with the utmost care. However, MBaer Merchant Bank AG does not assume any liability for the correctness, completeness, reliability or topicality, or any liability for losses resulting from the use of this information. This document may not be reproduced in whole or in part without the written permission of MBaer Merchant Bank AG.
Dieses Dokument dient ausschliesslich Informationszwecken. Es stellt weder ein Angebot noch eine Empfehlung zum Erwerb, Halten oder Verkauf von Finanzinstrumenten oder Bankdienstleistungen dar und entbindet den Empfänger nicht von seiner eigenen Beurteilung. Insbesondere ist dem Empfänger empfohlen, allenfalls unter Beizug eines Beraters, die Informationen in Bezug auf die Vereinbarkeit mit seinen eigenen Verhältnissen, auf juristische, regulatorische, steuerliche, u.a. Konsequenzen zu prüfen. Die in der vorliegenden Publikation enthaltenen Daten und Informationen wurden von der MBaer Merchant Bank AG unter grösster Sorgfalt zusammengestellt. Die MBaer Merchant Bank AG übernimmt jedoch keine Gewähr für deren Korrektheit, Vollständigkeit, Zuverlässigkeit und Aktualität und keine Haftung für Verluste, die aus der Verwendung dieser Informationen entstehen. Dieses Dokument darf weder ganz oder teilweise, ohne die schriftliche Genehmigung der MBaer Merchant Bank AG reproduziert werden.