WeeklyWatch – Two indexes: one hot, one cold
2nd June 2026
Key Takeaways
- A record high for US stocks in June which was boosted by a 19% drop in oil prices over the period.
- Additional catalysts included strong corporate earnings updates and an increasing pool of AI beneficiaries.
- Multi-year highs were reached for US Treasury yields during May but then eased following apparent peaks in the Iran tensions.
Stock Take
Double digit returns registered by S&P
Hopes that the US and Iran may finally reach a deal and continued AI optimism resulted in US markets reaching new highs last week. It’s the ninth consecutive weekly rise for the S&P 500 – its longest streak since 2023. The index is now trading at more than 10% above levels from before the Iran war started.
Negotiators helped the two countries reach a tentative agreement on Thursday. This included allowing for an extended 60-day ceasefire, but this requires a final sign-off. Over the weekend, Trump suggested that more changes will be needed before he makes an agreement.
US equities have been fairly unscathed by the conflict, but this hasn’t been the case for all markets. Further missile exchanges between the US and Iran on Thursday resulted in a fall in the FTSE 100, pushing the UK index slightly into the red at the end of the week. The performances of the FTSE 100 and S&P 500 have been in stark contrast to each other – the S&P is up more than 10% and the FTSE 100 is down more than 4%, both in the same period.
What’s clear is that the US market has some advantage over the UK equivalent within the current climate. The US is a net energy producer which means that it’s more insulated than the UK from energy shocks linked to the conflict, as an example.
One of the other significant differentiators is the market composition – more specifically, the dominance of the tech sector within the US. Before the Iran conflict, investors voiced major concerns about the high investment levels going into AI. Now, these fears seem to have subsided and some tech companies have seen massive gains over recent weeks. One such company is Dell, which surged more than 30% last Friday after strong results and an ever-improving outlook for its AI server sales.
But it’s not all green pastures. The US is also facing significant inflationary pressures. Federal Reserve Governor Christopher Waller (one of the voices previously advocating for lower interest rates) recently called for the removal of the ‘easing bias’ from Federal Reserve policy statements.
Waller spoke in Frankfurt at the end of May, adding:
“That doesn’t mean, however, that I think we should be considering rate increases in the near future… But I can no longer rule out rate hikes further down the road if inflation does not abate soon, and that is especially true if measures of inflation expectations, some of which have risen lately, show signs of becoming unanchored.”
Clouded decisions for Europe
While the US seems to be ruling out a sudden increase in interest rates, the picture is very different elsewhere. Reuters polling predicts that the European Central Bank will increase interest rates by 0.25% later in June. This is as a result of the economic bloc continuing to struggle with the effects of weak output, low consumer confidence and the inflationary impact of higher energy prices.
However, the bank will need to be cautious as they consider interest rates. Higher interest rates reduce demand, which impedes economic growth. Many European economies are struggling with anaemic growth, meaning the central bank will have to be careful to get the balance right and not push things too far.
Similar questions will be asked of the Bank of England (BoE). UK consumers have so far been protected from some of the energy shock by the energy price cap. This is revised on a quarterly basis and limits the amount charged by gas and electricity companies for their energy. The full effects of the Iran conflict haven’t materialised completely, but Ofgem revealed last week that the price cap will rise by 13% from 1st July. This increase also adds to growing inflationary pressures and will heavily cloud the BoE’s upcoming decisions. The bank is due to meet on 18th June to make a decision on interest rates.
Additionally, it was revealed that the number of babies born in England and Wales fell again last year. According to the Office for National Statistics, 585,396 were born in 2025 which is down from the 594,667 from 2024. Furthermore, this was the lowest number recorded since 1977. England and Wales are already facing issues with costs of elderly care and pensions; a falling birthrate will only create further future fiscal problems for the government.
A relaxation for bonds
In better news for the government, bond yields relaxed across many markets for the second consecutive week. This reflects the optimism that the Iran conflict might not have prolonged inflationary shocks and tensions may have finally peaked. However, this is subject to change and it should be borne in mind that even though bond yields are generally below the level they were at two weeks ago, they’re still above levels seen at the start of the year.
Wealth Check
Pension withdrawals increasing
More people are taking money out of their pensions to get ahead of April 2027 when unused pots will be counted as part of an estate for inheritance tax (IHT) purposes.
It’s been reported that hundreds of thousands of UK pension savers are cashing out their pension pots in full ahead of the proposed changes coming into effect next year. Savers have historically used pensions to pass on family wealth to beneficiaries due to pensions being exempt from IHT.
However, this could mean that more people could be paying more tax than needed. The lump sum allowance (the amount a pension saver is allowed to take tax-free) is typically 25% of the pension pot, to a maximum of £268,275. Any withdrawals above this level are taxed at the individual’s marginal tax rate.
By withdrawing a pension in one go, more people could be pushed into higher tax bands, triggering unnecessary tax bills.
Government estimates suggest that bringing most unused pension wealth into scope for IHT from the 2027/28 tax year could have a significant impact. Approximately 10,500 more estates are expected to become liable for IHT, with a further 38,500 likely to pay more. On average, affected estates could see their IHT bill rise by around £34,000.1
As always, this is where taking expert advice shines, helping you find the best approach for you in planning for a secure future.
April sees IHT receipts fall
HMRC registered £0.7 billion in IHT receipts for April 2026, a decrease of £65 million compared with the same period last year.2
The government have pointed to high receipts in April 2025 as the reason for the decline.
The short-term dip isn’t expected to be too much of an issue, with the government expecting revenues to increase over the long term which will be boosted by increased wealth transfers, higher asset values and the continued freeze in income tax thresholds until the 2030/31 tax year.
The levels and bases of taxation and reliefs from taxation can change at any time. Tax relief is dependent on individual circumstances.
Sources
1UK government (2025). Inheritance Tax on pensions: liability, reporting and payment – Summary of responses. Available at: https://www.gov.uk/government/consultations/inheritance-tax-on-pensions-liability-reporting-and-payment/outcome/inheritance-tax-on-pensions-liability-reporting-and-payment-summary-of-responses (Accessed: June 2026).
2UK government (2026): HMRC tax receipts and National Insurance contributions for the UK (monthly bulletin). Available at: https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk/hmrc-tax-receipts-and-national-insurance-contributions-for-the-uk-new-monthly-bulletin (Accessed: June 2026).
In the Picture
The Korean stock market (KOSPI) has underperformed in the global market for many years. But it’s now more than doubled since 2025. The growth has been boosted by a small number of tech companies that are integral to the AI supply chain. By removing just two of the key players in the space (electronics giant Samsung and semiconductor manufacturer SK Hynix) the index growth is more than halved.
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SJP Approved 01/06/2026