Global markets rode a wave of optimism in May, with positive data calming fears of overheating in the US economy. This boosted investor confidence in other regions, leading to strong performance for riskier assets. Global equities rose over 2.5% for the month, while global bonds also performed well, though gains were slightly dampened by a strengthening pound. Markets still anticipate rate cuts later this year, but the timing may differ between the US, UK, and Europe.
US equities enjoyed a stellar May, particularly tech stocks. NVIDIA, a leading AI chip designer, surged over 9% after exceeding expectations with its first-quarter earnings report. This impressive showing, featuring a 262% revenue increase and a planned stock split, highlighted the company's financial strength and contribution to US large-cap earnings.
The UK market recovered well following a brief recession in late 2023. The first quarter of 2024 saw a 0.6% GDP growth, and financial markets remained calm despite the announcement of an early general election in July. While the election could bring a new political landscape, drastic fiscal changes are unlikely due to limited budgetary room for any party in power.
Market-wise, the tech-heavy Nasdaq Composite continued its dominance with a 2.4% rise (14.5% year-to-date) and a new intraday high. Large-cap stocks also performed well, reaching record highs and rising 1.4% (12.8% year-to-date). However, small-cap stocks lagged behind with a -2.1% decline (0.6% year-to-date). Growth stocks significantly outperformed value stocks, with the growth index rallying by 2.7% (16.1% year-to-date) compared to a -0.8% decline (6.8% year-to-date) for the value index.
European markets gained momentum after the ECB's first interest rate cut in five years. The MSCI Europe ex UK Index increased by 1.6% (11.7% year-to-date). The euro remained stable against the dollar, closing the week at 1.08 USD for 1 EUR.
The UK market saw muted performance, with large caps ending slightly down at -0.2% (8.8% year-to-date) and mid-caps declining by -0.8% (6.0% year-to-date). The pound held its ground against the dollar, closing at 1.27 USD for 1 GBP.
Japanese markets were mixed. Large-cap stocks fell -0.6% (17.7% year-to-date) and small-caps dropped -1.0% (10.2% year-to-date). A modest yen rally to 156.8 JPY per dollar (up from 157.3 JPY) posed challenges for exporters. However, positive data and a rise in household spending offered some optimism.