May general market comments

“If you don’t give a doggone about it” – James Brown, 1977.

As is often the case, the market tried to frustrate the majority and please the minority. After a turbulent April and amid the Q1 earnings season, it would have been tempting to reduce risk and heed the old adage, “Sell in May and go away”. What a mistake that would have been! At the beginning of May, the right decision for risk assets was to “not give a doggone about it”, as James Brown would say. These assets performed strongly (more on this later). This reversal was triggered by the satisfactory results reported by most companies so far, but also by recurring jitters around tariffs and hopes for a less radical stance from the White House.

In this context, the MSCI World added 5.69% in May, the tech-heavy Nasdaq leading the charge with a whopping 9.04% return; the European Stoxx 600 fared well (+4.02%), like the MSCI Emerging Markets and the Japanese Topix respectively up 4.00% and 5.03%. Interestingly, all major indices are now in positive territory on a year to date basis (S&P, Stoxx, Nasdaq 100, Emerging Markets, Topix), barring the Chinese CSI300 (down 2.41%). This spectacular rally in equities logically favoured Growth versus Value: the MSCI World Growth soared by 8.58%, versus “only” +2.71% for the MSCI World Value. Even more interesting, if you didn’t give a doggone about tariffs when the mess started, you would be up 18.7% since the 8th of April by simply holding the MSCI World!

In fixed income, fates diverged between Government and credit: the former had a so-so month with yields on the rise, 24 basis points for the 10 year US and 6 basis points for the 10 year Bund, but the latter performed extremely well, in line with risk assets in general, highlighted by the Itraxx Crossover adding 2.80%, just for the month of May.
Finally, another sign that investors embraced a risk-on attitude is the very strong returns recorded by both Oil (+4.43%) and the Bitcoin (+10.84%).

How things play out from now on remains a big question mark: US markets are still expensive, and the economy has little chances to shoot up to the upside, while geopolitics remain shaky.

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