The downward trajectory of global equity markets continued in June as central banks displayed a willingness to hike rates aggressively in the near term to fight inflation. This hard stance increased concerns of a swift contraction in global economic activity.

The US Fed delivered a 75bp rate hike in June, the largest rise since 1994, after May's CPI accelerated at the fastest rate since 1981 (8.6%). Chair Powell signalled another large hike in July to fight inflation "expeditiously." Likewise in Australia, the RBA surprised markets with the largest rate hike in 22 years (50bp) to bring the cash rate to 0.85%.

Small resources retracted by 22% on weaker commodity prices and shrinking demand concerns. The price of copper, a 'bellwether' for the economy, dropped below $US8000 for the first time in almost 18 months and is now down 17% year to date. Developers and explorers were sold off more heavily than producers, albeit no one was immune.

As a slew of earnings downgrades and profit warnings started to build momentum across the market, outperforming in the month were defensive portfolio holdings. Litigation financer Omni Bridgeway (+5%) highlighted the benefits of being uncorrelated to the broader economic environment at present, as well as announcing the launch of an 8th Fund.

With signs of economic fragility proliferating, investors finished the month speculating how quickly central bankers will change their tune. Last week, the closely watched Atlanta Fed's GDPNow estimate of real GDP was slashed to -2.1% in the second quarter, highlighting the prospect that the US economy may already be in recession. As a result, bond markets are now trimming their expectations for future rate hikes and investors are betting the deteriorating consumer and business confidence will be enough for central bankers to call a pause or slow their hiking cycle.