Monthly Market Report: May 2024

Markets Rebound in May

Prepared by Brandon Yee, CFA, CAIA, and Thomas Connelly, CFA, CFP


Developed Markets Rise

In the month of May, international developed stock markets returned 3.82 %. Europe ex UK and the US recorded returns of 5.23% and 4.73%, respectively. Japan and Canada lagged other markets for the month. International developed markets are up 18.48% over the past year. Europe ex UK’s stock market is up 19.97% over the past year. European equities may benefit from easing ECB monetary policy and a pickup in industrial activity.


Emerging Markets Continue to Rally

Broader emerging markets posted a 1.05% return for the month. China and India recorded returns of 2.40% and 0.71%, respectively. Brazil and Korea lagged other markets for the month. Emerging markets are up 5.04% YTD and 14.67% over the past year. India’s economy continues to experience robust activity. While China’s economy continues to be weighed down by a shaky real estate sector, economic activity outside of this industry are rebounding. Near historic low valuations relative to the U.S. and international markets may help emerging market investors going forward.


Information technology and Utilities Outperform

Global information technology and utilities recorded returns of 8.79% and 7.65%, respectively, in May. Consumer discretionary and energy lagged other sectors this month. The energy and materials sectors have attractive medium-term fundamentals. Recessionary concerns may be a short-term headwind.


Growth Outperforms

In May, value underperformed growth in the large-cap space and the small-cap space. Momentum recorded a return of 5.67%. Value stocks across the world continue to trade at large discounts relative to growth stocks. Forward earnings assumptions may be too optimistic for growth companies, particularly those in the information technology sector.


Value Stocks Continue to Rally in International Markets

In the international developed markets, value outperformed growth in the large-cap space but underperformed in the small-cap space for the month. Momentum recorded a return of 1.05% while small-cap emerging market stocks posted a return of 0.55%. Small-cap and mid-cap emerging market stocks are up 16.61% over the past year.


Savers Benefitting from Higher Interest Rates

In May, the three-month Treasury bill index returned 0.48%. From the beginning of 2022 through the end of May 2024, the annualized interest rate on the 90-day Treasury bill increased from 0.08% to 5.46%. Savers and retirees are now getting paid much more interest. Real interest rates are positive with the CPI increasing by 3.36% over the past year through the end of April.


Fixed Income Investments Rebound

The returns of deflationary hedges were mostly positive for the month. The Bloomberg Barclays U.S. Agg Bond Index returned 1.70% for the month. Long-term government bonds recorded a return of 2.85% as interest rates decreased. Short-term municipal bonds were down for the month. Lower credit-quality fixed income like high yield and leverage loans are up for the year but may experience some stress if interest rates remain high.


Gold Bullion Continues to Climb

Inflation-sensitive investment returns were mostly positive for the month. U.S. natural gas and infrastructure were up 12.06% and 6.34%, respectively, in May. WTI crude oil was down -4.85% for the month. The Bloomberg Commodity index posted a return of 1.76%. Gold bullion is up YTD with a 12.98% return. As geopolitical risks increase and become more interconnected, gold bullion may serve as a safe haven. Emerging market central banks have been steady buyers of gold bullion in recent years.


U.S. Dollar Mixed Over the Past Three Months

Over the past three months, the U.S. dollar appreciated against the Israeli Shekel, Swiss Franc, and Indian Rupee. Over the past year, the U.S. dollar strengthened against the Japanese Yen, Canadian dollar, and Chinese Yuan. The continuation of U.S. fiscal and trade deficits may weigh on the U.S. dollar in the medium-term to long-term. Gross federal debt to GDP stands at 120% and is forecasted to increase throughout the decade. In addition, the fiscal deficit is 6.27% of GDP at a time of economic expansion and low unemployment.

Brandon Yee, CFA, CAIA – Senior Research Analyst

Brandon conducts investment due diligence for Versant Capital Management, and designs and implements tools and processes to support the firm’s research. His background in biology and finance help him to look at challenges from multiple angles, resulting in unique and well-rounded approaches and solutions.


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