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5. June 2017 21:37
by Irene
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May 2017 - Market Commentary

5. June 2017 21:37 by Irene | 0 Comments

Another month laden with politics and elections on the news front. President Macron’s win in France was greeted well by the market and brought on what might be best described as a risk-on environment in Europe. In the UK the pre-election mood had been heating up and with it an increase in uncertainty on who will win the election. Sterling continued its rally at the beginning of the month, but was down later on with the news on a tighter outcome as suggested by opinion polls and ended the month down -0.5% against the Dollar. Developed Markets Equities (MSCI World) returned 2.1% in May in USD (2.7% in GBP).

United Kingdom

The markets looked quite rosy at the beginning of May when polls showed a comfortable lead for the Conservatives in the June election. When that majority began to tighten later on in the month, Sterling weakened somewhat, but the FTSE 100 still managed to rally 4.9% for the month. Consumer spending was reported upwards, although GDP growth was revised down as were the manufacturing and services sectors.

Europe

The Eurozone saw a good run in equities boosted by the French election outcome that did not upset the apple cart, a further decrease in the unemployment rate to 9.3%, and increase in consumer confidence. Progress on bailout talks around Greek debt did also help, with Greek equities returning 9% in EUR. On the other hand, there are concerns of a possible early election in Italy this autumn, with potentially more euro-sceptic parties winning ground.

United States

Despite the economy still waiting for Trumponomics to happen in the form of tax cuts and political stimulus, the rally in the United States continued. The US market saw a broad-based higher earnings trend, resulting in a record level of the S&P 500 at more than 2,430 and a 1.4% return for the month in USD (1.9% in GBP). The employment rate for May fell to 4.4% and an increase in the flash May PMI Composite index, pointing to continued growth.

Emerging Markets

Generally a more risk-on feeling globally was supportive for Emerging Markets with the MSCI Emerging Markets returning 3% in USD (3.6% in GBP). Eastern European equities did well amid the wider improved European outlook. At the bottom of the spectrum though were Brazilian equities with another round of corruption allegations and increased political risk. China was downgraded by Moody’s amid an increased corporate debt pile.

Fixed Income

Global bonds were stronger across the risk spectrum in May, except for inflation-linked bonds with inflation slowing down slightly in a few regions. Investment-grade and Emerging Markets bonds on average did well.

Commodities

Commodities did not fare so well in May. Brent crude was down -2.8% amid oversupply concerns and Gold was more or less flat for the month, returning 0.3%. Commodities on average produced a negative return, which in turn led to the slowing down of inflation that we had also seen filtered through for inflation-linked bonds.

Market Returns Overview

Source: Markit, Twenty20 Investments, as of 31 May 2017, all returns in GBP.

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