Software Index

State of the Market

In June, equity markets continued to demonstrate a notably improved sentiment. Global indices showed resilience, recovering from the “liberation day” tariff announcements, with the MSCI All Country World Index reaching new highs. Market concerns about trade-related economic contraction have largely diminished, particularly as domestic legal challenges to the tariff regime gain traction. Additionally, US-China trade negotiations have shown promising developments, suggesting continued trade relations between the nations, albeit with elevated barriers.

Market optimism has been reinforced by corporate earnings guidance. Despite subdued expectations for 2025 due to tariff uncertainties, companies maintain a positive outlook for 2026. This forward-looking confidence has particularly benefited the IT sector, contributing to the broader market’s positive sentiment.

Credit markets have garnered significant attention, particularly regarding treasury auctions. Following Moody’s downgrade of US sovereign debt in late May, a 20-year auction saw notably weak demand. This tepid response, coupled with the progression of the “Big Beautiful Bill” through the US House, suggests growing concerns about US debt sustainability. While subsequent auctions have shown improved demand, long-term treasury yields continue to serve as a crucial barometer of investor confidence in the government’s ability to address mounting debt challenges.

Economic indicators have remained relatively steady. May’s unemployment rate held at 4.2%, with private sector growth, particularly in healthcare and hospitality, offsetting government sector job losses. The Consumer Price Index saw a modest 0.1% increase, reaching 2.4% annually, with food and shelter costs being the primary drivers.

While markets have found some stability following recent volatility, several key factors will shape the summer outlook. Investors remain focused on upcoming Federal Reserve decisions, congressional debt-ceiling negotiations, evolving trade discussions, and the continuing impact of the AI revolution.