Market Overview
Global equity markets retreated in June, as cooling enthusiasm for artificial intelligence (AI) and concerns about the economic fallout from the war in Iran dampened risk appetites.
June was marked by signs of fatigue in the monthslong, AI-driven rally that had propelled global stock markets higher, as concerns re-emerged about the lavish spending by technology companies to build out AI infrastructure and whether it will lead to as much profit as hoped. With expectations mounting that a global rate-hiking cycle was looming, AI-linked stocks came under pressure on worries that the massive amounts of money that technology giants need to borrow were about to become more expensive. In a sign of the outsized influence AI-linked stocks had on market behaviour, eight of these stocks were among the top 10 contributors to the MSCI All Country World Index’s performance in June, adding 1.2% to the total return. Meanwhile, nine AI-linked stocks were among the top 10 detractors, subtracting 2.1% from the index’s total return.
Heightened volatility in the AI trade overshadowed news that the U.S. and Iran had reached a preliminary agreement to end their war and reopen the Strait of Hormuz to commercial traffic, sparking a strong relief rally across global stock markets. The market rally fizzled in subsequent days, as the prospect of a permanent peace deal remained elusive amid disputes about concessions, including the future of the strait, and sporadic military attacks launched by both countries.
The inflation shock triggered by the war continued to reverberate throughout the global economy during the month and was front and center in the minds of officials at key central banks as they deliberated over interest-rate policy paths. In the U.S., where the latest readings from closely monitored gauges of domestic inflation indicated that price growth in May had accelerated to multi-year highs, the Federal Reserve (Fed) held interest rates steady at its policy meeting in June, the first under new chair Kevin Warsh. However, the world’s most influential central bank underscored the need to contain high inflation by signaling that rate hikes were on the horizon, which suggested that monetary policymakers were skeptical that any peace deal would lead to a significant slowdown in inflation in the near to medium term. As of the end of the month, Fed-funds futures traders were pricing in a 66.9% likelihood that the Fed would raise interest rates in September, according to the CME’s FedWatch Tool. The yield on the benchmark 10-year U.S. Treasury note ended June at 4.47%, 3 basis points (bps) higher than a month earlier.
Across the Atlantic, the European Central Bank (ECB) increased interest rates by 25 bps in June and warned that high inflation in the eurozone would likely persist into the first half of 2027, as surging energy prices were also putting upward pressure on the cost of food, as well as other goods and services. Traders were pricing in one more 25-bp rate hike by the end of the year. The ECB’s latest policy decision marked the end of seven consecutive policy meetings in which it stood pat on interest rates and was the first rate hike the ECB had delivered since September 2023. The ECB’s latest action proved to be an outlier among other major central banks on the Continent, as the U.K.’s Bank of England, Sweden’s Riksbank, Switzerland’s Swiss National Bank, and Norway’s Norges Bank all held borrowing costs steady, with each adopting a wait-and-see approach in order to get a more complete picture of the inflationary risks hanging over their domestic economies. The yield on the 10-year German Bund, Europe’s principal safe-haven asset, ended June at 2.86%, 8 bps lower than a month earlier.
Meanwhile, in Japan, which imports 95% of its crude oil from the Middle East, the Bank of Japan (BOJ) raised interest rates to a 31-year high with a 25-bp hike in a preemptive move to contain domestic inflation that was expected to accelerate past the Japanese central bank’s 2% target. Elsewhere in Asia, China’s central bank stood pat on benchmark lending rates for the 13th consecutive month.
The conclusion of the latest earnings season painted an encouraging picture of how company profits have held up despite stiff macro headwinds, according to data from FactSet. In the U.S., 85% of the companies in the S&P 500 Index topped consensus estimates, outperforming the long-term average of 67%. The first-quarter earnings growth rate increased 28.9% from a year earlier. In Europe, 53.3% of the companies in the STOXX 600 Index posted better-than-expected earnings, below the 54% that do so in a typical quarter. The first-quarter earnings growth rate increased 11.5% from a year earlier. In Japan, 62.8% of the companies in the TOPIX posted positive earnings surprises, surpassing the 57% beat rate over the past four quarters. The earnings growth rate for the January–March period increased 38.1% from a year earlier. In Hong Kong, 42.8% of the companies in the Hang Seng Index registered better-than-expected earnings, lagging the 54% beat rate over the past four quarters. The first-quarter earnings growth rate decreased 16.7% from a year earlier.
Against this backdrop, equity markets in the developed and developing worlds both receded in June, with the former outperforming the latter. In the U.S., the S&P 500 Index fell and underperformed, as index heavyweight AI stocks came under pressure amid concerns about stretched valuations and growing expectations that the Fed would soon raise interest rates. Notably, the so-called “Magnificent 7” group of mega-cap Big Tech stocks recorded an aggregate decline of nearly 9.0% in the month. Across the Atlantic, the STOXX 600 Index recorded a modest gain, as Europe’s limited exposure to major AI stocks buoyed the index’s overall performance. In Japan, the TOPIX underperformed on concerns that the BOJ would soon embark on an aggressive rate-hiking campaign. Meanwhile, in the developing world, Taiwan’s TAIEX and Korea’s KOSPI both rose, thanks to resilient sentiment for chip stocks, the flagship constituents for both indexes.
Communication services was the worst-performing sector in June, as shares of several index heavyweight technology companies fell on concerns about capital expenditures to build out AI infrastructure. Health care was the best-performing sector, as several U.S. drugmakers reported strong earnings results.
Outlook
Our outlook at the beginning of 2026 anticipated elevated uncertainty, and this view was reaffirmed in early March with the outbreak of war in Iran. The conflict has already had a profound effect on oil and other commodity prices, interest rates, and a wide range of financial assets. There continues to be great uncertainty surrounding both the duration of the conflict and its eventual resolution.
The most immediate financial market effects have been the surge in fuel and other commodity prices, along with an increased risk of shortages in key inputs for agricultural and manufacturing activity. While near-term pressure on this front has subsided recently, the fragile state of negotiations and significant importance of the region to global supply maintain this as a key economic risk likely for the remainder of this year with important implications for economic activity, inflation and interest rates.
Unsurprisingly, the Midstream Energy sector has been a significant contributor to portfolio performance since the outbreak of the conflict and remains among the strongest sector contributors year to date. Recent developments have reinforced the importance of energy security and the critical infrastructure required to supply global energy demand. Unlike upstream and downstream energy businesses that may experience greater sensitivity to commodity prices and refining margins, midstream companies benefit primarily from fixed-fee, high-visibility revenue streams tied to essential infrastructure assets. As governments and markets increasingly prioritize energy security and supply reliability, we expect these characteristics to remain supportive for the sector.
Defensive utilities have been the largest contributor to year-to-date performance in both absolute and relative terms versus the benchmark. It is perhaps unsurprising that one of the most defensive sectors within our infrastructure universe has outperformed amid heightened uncertainty. We continue to view utilities as a core allocation while volatility persists. At the same time, the sector is benefiting from powerful secular trends, including electrification and rising electricity demand associated with technological innovation, data centre development, and electrified transportation. We expect these structural drivers to support sustained investment in power infrastructure and provide resilience even in the face of conflict-driven economic weakness.
Communication services have also provided stability, with largely resilient—and in some cases exceptional—year-to-date total returns among our holdings. In our view, the sector should retain its defensive appeal given generally undemanding valuations, ongoing industry consolidation, and continued exponential growth in global data creation and transmission needs. This dynamic also applies to telecommunication tower REITs, in our view, which have recently exhibited greater sensitivity to higher interest rates (along with growth concerns) than we believe is fundamentally warranted. Should slower economic growth eventually lead to lower long-term interest rates, this dynamic could become a meaningful tailwind for the sector.
Transportation infrastructure remains the area most exposed, in our view, both to the direct impact of higher fuel costs and to potential slowing in global economic activity affecting trade flows, port volumes, and rail and ground transportation demand. That said, our experience has often shown that abrupt disruptions affecting critical transportation infrastructure can create attractive investment opportunities. Energy price shocks and cyclical slowdowns tend to be temporary, whereas the value of these assets is ultimately driven by long-life cash flows and supported over time by energy price normalisation, lower interest rates, and economic recovery.
In sum, while the outbreak of war introduces new risks and uncertainties into an already complex investment landscape, it also reinforces the defensive characteristics that make infrastructure securities an important component of diversified investment portfolios.
The current environment also underscores several of the key secular investment themes that the Caldwell-Lazard CorePlus Infrastructure Fund is designed to emphasize, including energy transition (encompassing both renewable development and energy security) and the strengthening of global supply chain resilience and efficiency.
We believe the portfolio remains well positioned to capitalize on these opportunities across real asset infrastructure businesses as well as key enabling industries—including materials, services, and technologies—that both support and benefit from continued investment in critical infrastructure.
The information contained herein provides general information about the Fund at a point in time. Investors are strongly encouraged to consult with a financial advisor and review the Simplified Prospectus and Fund Facts documents carefully prior to making investment decisions about the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.
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Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in certain non-domestic countries may be less liquid, more volatile, and less subject to governmental supervision than in one’s home market. The values of these securities may be affected by changes in currency rates, application of a country’s specific tax laws, changes in government administration, and economic and monetary policy. Emerging markets securities carry special risks, such as less developed or less efficient trading markets, a lack of company information, and differing auditing and legal standards. The securities markets of emerging markets countries can be extremely volatile; performance can also be influenced by political, social, and economic factors affecting companies in these countries.
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Published on July 16, 2026.