Market insights,
June 2026
Investing
5 min read
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In June, the headline act of the month for investors was the welcome US-Iran ceasefire that was reached, but also occasionally breached.
A lethal heatwave in Europe, a record-breaking IPO for SpaceX, as well as Kevin Warsh’s debut rate announcement as Fed Chair, also made the headlines. As did a short-lived, yet potentially significant, sell-off of tech stocks.
Peace in the Middle East?
Starting with the Middle East, and investors breathed a collective sigh of relief as the US and Iran signed a Memorandum of Understanding halfway through the month. It laid the foundations for a 60-day ceasefire, as well as further negotiations on contentious issues including Iran’s nuclear ambitions[1].
It didn’t take long for tit-for-tat strikes to flare up, but by the end of June neither side appeared willing to re-escalate the energy-sapping conflict.
In response to the ceasefire, oil prices – often seen as a barometer of investor sentiment during conflict in the region – fell back to levels not seen since before the war started.
That was good news from an inflation perspective, with lower oil prices expected to reduce cost pressures over time.
Given the fragility of the ceasefire and the tinderbox nature of the Middle East, investors were cautious not to celebrate prematurely. However, by the end of the month, it appeared that peace rather than warfare was indeed the preferred route ahead.
The Fed and the RBA held firm
Amid the focus on oil prices and inflation, two central banks opted to hold their respective interest rates.
In the case of the US Federal Reserve, the FOMC’s 12-voting members voted unanimously in favour of keeping the federal funds target range on hold at 3.5% to 3.75%[2].
It was the first time in 12 months that voting members were in total agreement. It was also the first meeting with new Fed Chair, Kevin Warsh, at the helm[3].
The Fed’s subsequent press release pointed to the ongoing resilience of the US economy: “Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little[4].”
Tellingly, it was Warsh’s overall hawkish tone that caught investors’ attention and which paved the way for a potential US rate hike before the end of 2026.
In an ironic twist, Donald Trump threw his support behind the Fed’s new direction of travel. He often berated Warsh’s predecessor, Jerome Powell, for not ushering in faster rate cuts. Financial markets much prefer it when the US President and the Fed Chair are not at each other’s throats.
Closer to home, the Reserve Bank of Australia (RBA) opted against a fourth consecutive rate hike, as its members voted unanimously to hold the cash rate target at 4.35%[5].
The RBA cited volatility in the Middle East for its decision to adopt a wait-and-see approach: “Global oil supply issues will take some time to resolve, maintaining upward pressure on global energy prices and inflation. At the same time, a period of prolonged uncertainty may also cause growth to be lower in Australia’s major trading partners and in Australia.[6]”
More tech tremors
In equity markets, there were bursts of volatility across the month as nervousness about the potential returns (or not) of AI investment returned.
A brief sell-off of tech stocks was another reminder that investor sentiment is sensitive when it comes to AI. The sector’s reliance on gargantuan amounts of debt to fuel its progress leaves it vulnerable to interest rate hikes. And as with any I.O.U, at some stage lenders will want to be paid back.
In June, the nervousness amongst investors was exacerbated by two developments. First, the new hawkish tone of the Fed that we mentioned earlier. Those leading tech and AI companies which have borrowed heavily (via debt markets) now potentially face a larger repayment plan than they might have been expecting.
Second, the announcement by SpaceX – Elon Musk’s tech and space adventure firm – that it would turn to bond investors on a massive scale to fund the next stage of its growth. Hot on the heels of a June IPO which made Musk the world’s first trillionaire[7], the company declared that it would issue c.$25 billion worth of bonds[8]. As they say, there’s no such thing as a free lunch and in the case of the AI leaders, the lunch tab is getting alarmingly large.
All of which helped fuel renewed chatter of a tech bubble bursting. At Helm Wealth, our view remains unchanged – it is almost impossible to predict a market bubble. Often, a bubble only truly reveals itself once it has burst.
In the case of the AI trade, there is no denying that a handful of tech stocks leave equity markets, particularly in the US, exposed to concentration risk. Valuations are also very high by historical standards.
On the flip side, it’s important to remember that some of the perceived benefits of widespread AI adoption – namely, improved productivity – appear to have merit. At the same time, we’re seeing a level of performance and corporate resilience in some industry leaders that suggests this nascent tech could last the course.
The core challenge for investors is that AI is taking all of us into uncharted territory, and at a record pace. It’s logical to expect investor exuberance to cool at some stage. It’s also logical to assume that not all investor bets will pay off. And it’s impossible to predict the future. This reinforces our belief in the power of diversification and in making sure our clients’ portfolios are appropriately invested across a range of assets, sectors, geographies, and durations.
Those investors who choose not to diversify are the ones most at risk should any bubble materialise. That’s as true today as it was yesterday, and as it will be in the future.
Europe melts
A brief word now on the record-breaking heatwave recorded across Europe in June.
In several countries, temperatures soared above 40 degrees Celsius, leading the head of the World Health Organisation, Tedros Adhanom Ghebreyesus, to link 1,300 excess deaths to the abnormally high temperatures[9].
In addition to the human tragedy, there is an economic toll that’s worth reflecting on for investors. A recent report by Allianz, the German insurance giant, suggested that extreme heat might cost Europe’s biggest economies up to $638 billion by the end of the decade[10].
As the real-time dangers of climate change showed their face in June, the United Nations University Institute for Water, Environment and Health, coincidentally published a report on the negative environmental impact of AI.
To quote a snippet: “By 2030, the global data centres powering artificial intelligence are projected to consume …nearly triple the combined annual electricity use of Pakistan, Bangladesh, and Nigeria…(and) Their associated water footprint will equal the basic annual domestic water needs of all 1.3 billion people in Sub-Saharan Africa…[11]”.
The overlapping trajectories of climate change, and modern-day industrialisation in the form of AI, make for an uncomfortable duo. Only time will tell how it all plays out, but if June is anything to go by, there are a number of compelling reasons why investment managers can ill-afford to ignore the events of last month.
A few final words
We’d like to thank everyone who dialled into our ‘Mid-Year Outlook’ client call. If you weren’t able to make it and would like to listen to the recording, then please do contact your Adviser.
As ever, we will update you if anything material happens between now and next month’s Market Insights article.
In the meantime, we will soon be publishing our Q2 2026 performance commentary reports. Please keep an eye on your NZX client portal for more information.
Sources and references
[1] Source: https://www.bbc.com/news/articles/c0jy7d7wzv4o
[2] Source: https://www.federalreserve.gov/newsevents/pressreleases/monetary20260617a.htm
[3] Source: https://www.ft.com/content/76c16d57-8546-412d-9b76-0e55e6a79348#post-2aa526a9-17b1-4d3c-a251-3be6b494bf34
[4] Source: https://www.federalreserve.gov/newsevents/pressreleases/monetary20260617a.htm
[5] Source: https://www.rba.gov.au/media-releases/2026/mr-26-15.html
[6] Source: https://www.rba.gov.au/media-releases/2026/mr-26-15.html
[7] Source: https://www.reuters.com/business/media-telecom/spacex-ipo-makes-elon-musk-worlds-first-trillionaire-2026-06-11/
[8] Source: https://www.cnbc.com/2026/06/23/spacex-debt-bond-market-ipo.html
[9] Source: https://www.bbc.com/news/articles/cn4d2vv935lo
[10] Source: https://www.allianz-trade.com/en_global/news-insights/economic-insights/Too_hot_to_grow_economic_costs_extreme_heat.html
[11] Source: https://unu.edu/inweh/news/environmental-cost-of-AIs-Enrgy-use-carbon-water-and-land-footprints
Photo credit: Richard Vanlerberghe for Unsplash