Executive Summary

Global financial markets delivered mixed results during June 2026 as investors balanced resilient corporate earnings and continued artificial-intelligence investment against persistent inflation, higher interest-rate expectations and uncertainty surrounding the Middle East conflict. US equities retreated modestly after their exceptional April and May recovery, while European markets generally outperformed and several Asian markets consolidated following substantial earlier gains. The S&P 500 declined approximately 1.0%, while the MSCI Europe Index gained around 3.1%.

The most significant macroeconomic development was an improvement in the Middle East energy outlook. Expectations of an agreement involving the United States and Iran increased during June, while plans emerged for restoring traffic through the Strait of Hormuz. Oil prices declined substantially as markets reduced the extreme supply-risk premium that had dominated March and April. The Bank of England noted that Brent crude had fallen towards approximately $79 per barrel immediately ahead of its June meeting, compared with an average of around $100 since its April forecast.

The Federal Reserve maintained its target range at 3.50%-3.75% at its 16-17 June meeting. Inflation remained elevated, with staff estimating total PCE inflation at approximately 4.1% in May and core PCE inflation around 3.4%. Economic growth and employment nevertheless remained sufficiently strong for policymakers to avoid immediate tightening.

The June meeting also demonstrated that the Federal Reserve had moved substantially away from the easing bias that characterised late 2025. A number of policymakers believed that higher rates could become appropriate if inflation remained persistent, while others continued to consider eventual reductions possible if energy and tariff effects faded. The Committee unanimously maintained rates.

The European Central Bank became the first major Western central bank to respond directly to the 2026 energy-driven inflation shock with higher interest rates. On 11 June, the ECB raised all three key rates by 25 basis points, taking the deposit facility rate to 2.25%, the main refinancing rate to 2.40% and the marginal lending rate to 2.65%.

The Bank of England maintained Bank Rate at 3.75% by a 7-2 majority. Two Monetary Policy Committee members voted for an increase to 4.00%. UK CPI inflation had fallen to 2.8%, but policymakers remained concerned that higher energy costs could generate second-round effects within wages and prices.

Fixed-income markets remained under pressure from the possibility of higher-for-longer policy rates. US Treasury yields had risen approximately 20 basis points between the April and June Federal Reserve meetings, while credit conditions remained relatively accommodative for larger corporations but more restrictive for households and smaller businesses.

Digital assets experienced another difficult month. Bitcoin fell below $60,000 during early June before recovering part of the decline, reinforcing the increasingly cautious environment surrounding speculative assets.

Key Themes During June

• US equities consolidated following exceptionally strong April and May gains.
• European equities outperformed the United States.
• The S&P 500 declined approximately 1.0%.
• The ECB increased its deposit rate to 2.25%.
• The Federal Reserve maintained rates at 3.50%-3.75%.
• The Bank of England maintained Bank Rate at 3.75% by a 7-2 vote.
• Inflation remained elevated despite declining energy prices.
• Prospects for reopening the Strait of Hormuz improved.
• AI investment continued to support corporate earnings and capital expenditure.
• Bitcoin and broader digital assets remained under pressure.

Global Economic Overview

The global economic environment became somewhat less threatening during June as energy prices declined from the extreme levels reached earlier in the year. However, inflation remained substantially above target in several major economies and central banks became increasingly concerned that supply-driven price increases could become embedded within broader wage and pricing behaviour.

United States

US economic activity remained resilient. Federal Reserve officials reported that GDP continued to expand at a solid pace, consumer spending remained supportive and business investment continued to benefit significantly from expenditure on data centres, advanced computing equipment and software.

The labour market also stabilised. Unemployment remained approximately 4.3% in May, while payroll employment had strengthened compared with the weakness observed earlier in the year. Wage growth moderated to approximately 3.4% year-on-year.

US Inflation

Inflation remained the principal challenge. Total PCE inflation was approximately 3.8% in April, while Federal Reserve staff estimated that it increased to around 4.1% in May. Core PCE inflation was estimated at approximately 3.4%.

Price pressure reflected several independent forces, including previous tariffs, higher energy and transportation costs associated with the Middle East conflict and strong demand for AI-related equipment and electricity.

Federal Reserve

The Federal Reserve unanimously maintained the federal funds target range at 3.50%-3.75%. Policymakers generally agreed that employment conditions were stable and that economic activity remained sufficiently strong to allow patience.

The more important development was the changing policy debate. Several participants considered that there was a case for higher rates, although they supported maintaining the existing range during June. Others believed inflation could moderate sufficiently to justify stable or eventually lower rates.

The Federal Reserve therefore entered the second half of 2026 without a clear directional bias. Future policy would depend heavily upon whether energy, tariff and AI-related price pressures proved temporary or persistent.

Artificial Intelligence and US Growth

AI investment increasingly became a macroeconomic rather than solely a technology-sector phenomenon. Federal Reserve officials noted continued substantial expenditure on data centres, high-technology equipment and software, helping support business investment and broader economic growth.

This investment could ultimately increase productivity and economic capacity, but in the near term it also added demand for electricity, construction, semiconductors and specialist equipment, contributing to inflationary pressure in selected markets.

Eurozone

The eurozone remained more vulnerable to the Middle East energy shock than the United States because of its greater dependence upon imported energy. The ECB nevertheless concluded that inflation risks had become sufficiently persistent to justify an interest-rate increase.

On 11 June the ECB raised its deposit facility rate to 2.25%. It also revised its baseline projection for 2026 headline inflation to approximately 3.0%, with core inflation expected to average approximately 2.5%.

Growth projections were reduced, with the ECB forecasting approximately 0.8% economic growth for 2026. This illustrated the difficult combination of higher inflation and weaker real activity.

United Kingdom

UK CPI inflation remained at 2.8% in May, unchanged from April and below the Bank of England's previous short-term forecast. Food, goods and services inflation generally surprised to the downside.

The labour market continued to loosen and broader economic activity remained subdued. These factors helped offset concern about the potential inflationary effects of energy prices.

Bank of England

The Monetary Policy Committee voted 7-2 to maintain Bank Rate at 3.75%. Two members preferred an increase to 4.00%.

The Bank emphasised that energy prices had declined but remained above pre-conflict levels. Mortgage rates, corporate borrowing costs and other financial conditions also remained tighter than before the Middle East conflict, providing some restraint on domestic inflation.

Japan

Japan continued to face competing forces from imported inflation and domestic economic uncertainty. The Bank of Japan remained in a gradual normalisation process, with markets continuing to anticipate the possibility of additional tightening later in 2026.

China

China remained supported by accommodative monetary policy, advanced manufacturing and technology exports. The wider Asian technology sector continued benefiting from global demand for semiconductors and AI infrastructure, although weaker energy-importing economies remained exposed to higher input costs.

Global Outlook

June reduced the immediate probability of a severe global stagflation scenario but did not restore the environment that existed before the Middle East conflict. Inflation remained above target, interest-rate expectations had shifted higher and energy security continued to influence business and government investment decisions.

Equity Markets

Equity markets consolidated during June following the exceptional rebound of April and May. Regional performance diverged, with European markets generally stronger and US technology shares experiencing some profit-taking. Invesco data indicated that the S&P 500 declined approximately 1.0% while the MSCI Europe Index gained around 3.1%.

United States

The S&P 500 declined approximately 1.0% during June but remained substantially higher for the second quarter following the powerful recovery in April and May.

Federal Reserve minutes indicated that the S&P 500 had gained almost 6% between the April and June meetings, with higher earnings expectations accounting for a significant proportion of the increase.

Technology and Artificial Intelligence

Technology remained one of the strongest structural areas of the market, but June produced greater valuation discipline following the extraordinary gains recorded during April and May.

Corporate investment in AI showed little evidence of slowing. Federal Reserve officials reported that companies continued announcing capital-expenditure plans exceeding previous expectations, particularly within data centres, software and advanced computing equipment.

The investment case increasingly depended upon whether strong earnings could justify elevated valuations despite rising interest rates and unusually high capital requirements.

Financials

Financial shares benefited from resilient economic activity and the prospect of higher-for-longer interest rates. Investment-banking and leveraged-loan activity also remained relatively robust.

However, investors remained attentive to signs of stress within private credit and lending to lower-quality businesses.

Europe

European equities performed strongly relative to the United States, with the MSCI Europe Index gaining approximately 3.1%.

The ECB rate increase initially created concern for rate-sensitive sectors, but banks benefited from higher interest-rate expectations while defence, infrastructure and selected industrial businesses remained supported by public expenditure.

United Kingdom

UK equities benefited from their comparatively high exposure to financials, defensive companies and internationally diversified businesses. The domestic economic outlook remained subdued, but inflation data were less threatening than in the eurozone or United States.

Japan

Japanese equities consolidated after exceptional gains earlier in the quarter. Technology and industrial businesses remained supported by global AI investment, although higher domestic bond yields and expectations of further monetary tightening limited valuations.

Asia-Pacific

Asian technology exporters remained important beneficiaries of the global AI investment cycle. Federal Reserve analysis noted that several high-income Asian economies continued to experience strong exports of advanced technology equipment.

Emerging Markets

Emerging-market equities generally gave back part of their extraordinary second-quarter advance during June. Nevertheless, the asset class completed the quarter with gains of approximately 24%, its strongest quarterly performance since 2009, supported heavily by semiconductor and technology-hardware exposure.

Indicative June Performance

Fixed Income Markets

Fixed-income markets remained challenging during June as central banks became increasingly focused on inflation rather than economic weakness. The ECB delivered an outright rate increase, while Federal Reserve and Bank of England policymakers discussed scenarios involving future tightening.

US Treasuries

The US 10-year Treasury yield had increased approximately 20 basis points between the Federal Reserve's April and June meetings and roughly 50 basis points since the beginning of the Middle East conflict.

Stronger economic data, elevated inflation and expectations that policy rates could remain high for longer all contributed to the move.

European Government Bonds

European government bonds faced direct pressure from the ECB's 25-basis-point increase. The deposit rate rose to 2.25%, marking a significant reversal from the easing cycle of 2024 and 2025.

Longer-term yields also reflected higher projected inflation and substantial government borrowing requirements for defence and infrastructure.

UK Gilts

UK rates remained well above pre-conflict levels. The Bank of England noted that two-year overnight-index-swap rates were approximately 70 basis points above pre-war levels, while two-year fixed mortgage rates had increased by around 80 basis points.

Corporate Credit

Corporate-credit markets remained relatively resilient. Federal Reserve analysis showed solid corporate-bond issuance and narrowing spreads during parts of the intermeeting period, supported by strong earnings and demand for AI-related financing.

Leveraged Loans

Leveraged-loan issuance increased to a robust pace as companies continued to access financing despite elevated benchmark yields.

Private Credit

Private credit attracted greater scrutiny. Federal Reserve officials reported that gross inflows to business-development companies had slowed considerably during the second quarter and that redemption requests appeared to be increasing.

The development reinforced concerns regarding liquidity mismatches, valuation frequency and the ability of weaker borrowers to absorb persistent high interest costs.

Foreign Exchange

Currency markets were driven primarily by changing interest-rate differentials and improving expectations surrounding the Middle East conflict.

US Dollar

The dollar strengthened modestly during the period surrounding the Federal Reserve's June meeting as expected US policy rates moved higher relative to several other developed economies.

Euro

The ECB's rate increase provided support to the euro by widening the expected interest-rate differential against currencies whose central banks remained on hold.

Sterling

Sterling remained supported by expectations that Bank Rate could stay at 3.75% or potentially rise if energy-driven inflation persisted. The two votes for a June increase reinforced that possibility.

Japanese Yen

The yen remained sensitive to expectations surrounding additional Bank of Japan tightening. A narrowing gap between Japanese and overseas interest rates offered medium-term support, while Japan's dependence upon imported energy remained a source of uncertainty.

Chinese Renminbi

The renminbi remained closely managed as Chinese monetary policy continued to prioritise domestic growth and financial stability.

Emerging-Market Currencies

Emerging-market currencies produced mixed returns. Falling oil prices benefited some energy-importing economies, while a stronger dollar and elevated US rates remained headwinds for countries dependent upon external financing.

Commodities

Commodity markets experienced another major reversal during June as expectations of an eventual settlement in the Middle East reduced some of the extraordinary energy-security premium embedded in prices.

Oil and Energy

Brent crude had averaged approximately $100 per barrel between the Bank of England's April forecast and its June meeting. Immediately before the June decision, announcements surrounding a possible Middle East agreement pushed Brent towards approximately $79 per barrel.

The decline represented considerable relief for energy-importing economies but did not completely reverse the earlier shock. Oil remained above the approximately $66 level prevailing before the conflict intensified.

Natural Gas

UK wholesale gas also declined as peace expectations improved, falling towards approximately 100 pence per therm from an average around 116 pence following the April forecast.

Gold

Gold remained volatile as improving geopolitical sentiment reduced safe-haven demand while persistent inflation and government-debt concerns continued to provide structural support.

Copper and Industrial Metals

Industrial metals continued to benefit from electricity-grid, defence and artificial-intelligence investment. However, some metals remained above pre-conflict levels because transportation and energy costs had increased.

Fertiliser and Agricultural Inputs

Fertiliser and other energy-intensive commodities remained more expensive than before the Middle East conflict, maintaining some inflationary pressure within global agriculture and food production.

Digital Assets

Digital assets remained one of the weaker major investment categories during June as high interest rates, a stronger dollar and continued deleveraging reduced speculative demand.

Bitcoin

Bitcoin fell below $60,000 during early June for the first time since late 2024 before recovering part of the loss. The decline extended the weaker trend that had emerged after the record prices reached during 2025.

The asset remained highly sensitive to institutional flows, liquidity conditions and real interest rates.

Ethereum

Ether also remained under pressure as investors reduced exposure to higher-risk digital assets. Performance continued to lag the strongest conventional equity markets.

Institutional Development

Institutional use of blockchain technology continued independently of cryptocurrency performance. Tokenised funds, stablecoins, settlement networks and digital custody remained areas of active development.

Quantum Security

Attention also began to increase around the long-term threat posed by quantum computing to existing blockchain cryptography. The issue remained primarily a future infrastructure challenge rather than an immediate market risk, but developers increasingly considered migration towards quantum-resistant security standards.

Risk Considerations

• Bitcoin traded below $60,000 during the month.
• High real yields remained a significant headwind.
• Institutional adoption did not prevent large drawdowns.
• Tokenisation continued independently of speculative crypto markets.
• Post-quantum security emerged as a longer-term infrastructure issue.

Private Equity

Private-equity conditions remained constructive during June, supported by resilient public markets and solid corporate earnings. However, persistent high interest rates continued to constrain leverage and increase the importance of operational value creation.

Deal Activity

Technology infrastructure, healthcare, industrial services, financial services and energy-related assets remained active. Businesses exposed to the AI investment cycle continued to attract particularly strong buyer interest.

Financing

Public credit markets remained accessible and leveraged-loan issuance strengthened, providing additional financing options for larger sponsor-backed companies.

Private lenders continued competing aggressively for strong transactions but faced slower inflows and increasing redemption requests within some structures.

Artificial Intelligence

AI infrastructure remained one of the strongest private-market themes. Data centres, power systems, semiconductor suppliers and specialist software continued receiving substantial investment.

Underwriting increasingly needed to distinguish between durable contracted demand and capacity constructed primarily in anticipation of future growth.

Energy

The substantial decline in oil from earlier crisis levels reinforced the importance of underwriting energy-related assets using normalised commodity assumptions rather than temporary geopolitical prices.

Exits

Strong second-quarter public equity performance remained supportive of IPO and strategic-sale activity. Federal Reserve officials noted that US IPO activity appeared positioned to accelerate, with proceeds increasingly used to finance AI infrastructure investment.

Secondaries

Secondary markets continued to provide liquidity for institutional investors and access to mature assets whose value creation was less dependent upon new leverage.

CE Global Private Equity Observations

• Strong public markets supported exit activity.
• High interest rates continued to limit prudent leverage.
• AI infrastructure remained one of the most competitive themes.
• Private-credit liquidity required increasing scrutiny.
• Operational earnings growth remained central to returns.

Artificial Intelligence & Technology

Artificial intelligence remained one of the most powerful drivers of global investment during June. Federal Reserve officials repeatedly identified AI-related capital expenditure as an important source of US economic growth, corporate financing activity and even selected inflationary pressure.

Data-Centre Investment

Investment in data centres continued at an exceptional pace. Large technology companies remained committed to expanding computing capacity despite higher interest rates and energy costs.

Semiconductors

Advanced processors, high-bandwidth memory and networking equipment remained central to the investment cycle. Strong exports from technology-heavy Asian economies demonstrated the international nature of the AI supply chain.

AI and Inflation

An increasingly important development was AI's effect on the broader economy. Federal Reserve staff noted that exceptional demand associated with the AI buildout was contributing to price pressure within technology products, electricity and related capital equipment.

Productivity

Policymakers also recognised the opposite long-term possibility. Greater AI adoption could eventually increase productivity, expand potential economic output and reduce production costs, although these benefits were expected to occur with a delay.

Enterprise Adoption

Businesses continued integrating AI into software development, administration, research, customer service and financial analysis. The emphasis increasingly moved from experimentation towards measurable productivity and revenue generation.

Technology Risks

• AI capital expenditure remained exceptionally large.
• Demand itself may be contributing to inflation in electricity and technology equipment.
• Semiconductor supply chains remain geographically concentrated.
• High interest rates increase the required return on infrastructure projects.
• Long-term productivity benefits remain difficult to quantify.

Sector Spotlight

AI Power Infrastructure

June's sector spotlight examines the electricity infrastructure required to support the continuing expansion of artificial intelligence and data centres.

Electricity Demand

Modern AI computing clusters require exceptional quantities of electricity. The rapid increase in data-centre construction is therefore creating new demand for generation, transmission and distribution infrastructure.

Grid Connections

Access to power increasingly represents one of the most important constraints on data-centre development. Sites with secured grid capacity can command significantly greater strategic value than otherwise comparable locations without committed connections.

Generation

Technology companies increasingly consider multiple sources of generation, including natural gas, renewables and nuclear power, to provide the reliable capacity required for large-scale computing.

Transformers and Switchgear

Transformers, switchgear, cables and substations remain critical bottlenecks. Manufacturing lead times for specialised electrical equipment can significantly exceed conventional data-centre construction schedules.

Energy Storage

Battery storage can provide grid balancing, backup supply and support for renewable generation. However, large AI facilities generally require additional sources of dependable long-duration power.

Cooling

Higher-density processors require sophisticated cooling systems, including increasingly widespread use of liquid cooling. This creates opportunities within pumps, heat exchangers, control systems and specialist engineering.

Private-Market Opportunities

• Grid connections and substations
• Transformer and switchgear manufacturing
• On-site generation
• Energy storage
• Liquid-cooling infrastructure
• Power-management software

Principal Risks

The sector requires substantial capital and faces planning, regulatory and construction risks. Projects based upon speculative AI demand rather than contracted customer requirements may become vulnerable if computing efficiency improves faster than expected.

Investment Perspective

AI power infrastructure offers exposure to the artificial-intelligence investment cycle without depending solely upon which processor or software provider ultimately dominates. Businesses supplying essential electrical and cooling equipment across multiple customers may offer particularly attractive risk-adjusted opportunities.

Regulatory Update

June's regulatory environment was dominated by monetary-policy divergence, energy security, private-credit liquidity and the expanding infrastructure requirements associated with artificial intelligence.

Federal Reserve

The Federal Reserve unanimously maintained rates at 3.50%-3.75%. Minutes showed that some policymakers could support higher rates if inflation remained persistent, while others continued to see scenarios in which eventual easing would become appropriate.

European Central Bank

The ECB raised its three key rates by 25 basis points, taking the deposit facility rate to 2.25%. Businesses with euro-denominated financing therefore needed to update funding assumptions following the reversal of the earlier easing cycle.

Bank of England

The Bank of England maintained Bank Rate at 3.75%, with two members supporting a rise to 4.00%. UK businesses continued to face borrowing costs substantially above those prevailing before the Middle East energy shock.

Private Credit

Slowing inflows and increasing redemption requests within some private-credit vehicles reinforced the importance of matching investor-liquidity terms with the underlying liquidity of private loans.

Artificial Intelligence

AI governance continued to expand alongside adoption. Companies increasingly needed formal controls around model access, data use, human oversight, cybersecurity and business continuity.

Energy Infrastructure

The Middle East conflict and rapid growth in data-centre electricity demand both strengthened regulatory attention on grid resilience, generation capacity and strategic energy infrastructure.

Compliance Priorities

• Stress-test financing against stable and rising policy rates.
• Update euro-denominated borrowing assumptions following the ECB increase.
• Review private-credit liquidity and redemption structures.
• Continue implementation of AI governance frameworks.
• Assess power and energy dependencies within digital infrastructure.
• Maintain disciplined private-market valuation procedures.

Looking Ahead

Markets entered July with inflation still elevated, European monetary policy tightening and US equities consolidating after an exceptional second-quarter recovery. The central question was increasingly whether declining energy prices would reduce inflation sufficiently to prevent further rate increases.

Federal Reserve

The June Federal Reserve meeting confirmed that policymakers were no longer committed to an easing trajectory. Several officials considered scenarios in which policy tightening would become necessary if inflation remained elevated.

Markets would therefore monitor June and July inflation data closely for evidence that energy and tariff effects were beginning to fade.

European Central Bank

The ECB's June rate increase represented an important change in the international monetary-policy cycle. Further increases would depend upon whether inflation remained above target and whether second-round effects became visible within wages and services.

Bank of England

The Bank of England entered July with Bank Rate at 3.75%. The 7-2 June decision demonstrated that support for tighter policy had increased, although falling energy prices and weakening domestic activity could reduce the need for an immediate increase.

Middle East and Energy

Implementation of any peace arrangement and reopening of the Strait of Hormuz remained crucial. Sustained normalisation of energy flows could significantly improve the global inflation outlook, while renewed disruption could rapidly reverse the decline in oil and gas prices.

Artificial Intelligence

AI investment remained one of the most important supports for global economic activity. Investors would continue assessing whether strong earnings and productivity improvements justified the extraordinary expenditure being committed to data centres and computing infrastructure.

Corporate Earnings

Second-quarter earnings would provide greater evidence regarding the impact of energy costs, tariffs and high financing rates. AI-related capital expenditure and forward guidance would remain particularly important.

Private Credit

Increasing redemption requests within selected private-credit structures warranted continued attention. The key issue was whether these developments remained isolated liquidity-management challenges or signalled broader deterioration in credit quality.

Digital Assets

Bitcoin's fall below $60,000 during June reinforced the continued sensitivity of digital assets to monetary policy and investor liquidity. A durable recovery would likely require improved institutional flows and a less restrictive real-rate environment.

Private Markets

Improved exit markets and resilient earnings remained supportive, but financing conditions were no longer expected to become materially easier in the near term. Operational growth and cash generation therefore remained more important than leverage expansion.

CE Global Private Equity Perspective

June marked another important transition in the 2026 investment environment. The immediate energy crisis became less severe, but its consequences remained visible through inflation, higher financing costs and a more restrictive approach from central banks.

The ECB's decision to raise rates demonstrated that investors should no longer assume that the global monetary-policy cycle is moving consistently towards easier conditions. In the United States and United Kingdom, policy remained unchanged but the debate had clearly shifted towards the possibility of higher rates if inflation proved persistent.

CE Global Private Equity believes this environment favours companies capable of producing genuine earnings growth without relying upon cheap debt or multiple expansion. Infrastructure, healthcare, cybersecurity, industrial services and businesses supporting artificial-intelligence development remain attractive areas.

The AI investment cycle continues to create opportunities far beyond conventional technology companies. Electricity generation, grid equipment, cooling, networking and specialist engineering are increasingly essential components of the digital economy and may offer greater diversification than direct exposure to highly valued software or semiconductor companies.

Private-credit conditions deserve particular attention. High interest rates can continue to expose weaker borrowers even where public equity markets remain strong, while investment vehicles offering relatively frequent liquidity against long-duration private loans require careful structural analysis.

CE Global Private Equity continues to favour moderate leverage, recurring cash flow, pricing power and businesses with multiple routes to value creation. The first half of 2026 demonstrated how quickly assumptions surrounding energy, inflation and interest rates can change, reinforcing the importance of portfolios that do not depend upon a single macroeconomic outcome.

This market review is provided for general information and discussion purposes only. It does not constitute investment, legal, tax or other professional advice, nor an offer or solicitation to purchase or sell any security, financial instrument or investment product. Market values can rise or fall, and past performance is not a reliable indicator of future results.