Market Pulse: May 2024 Market Review

Stock indices have quickly recovered the ground lost in a turbulent April, as inflation data stabilised after a streak of hotter than expected readings.


Market Rebound: All three US indices have closed at record highs once more, as interest rates have receded.

Performance Highlights: The Dow Jones Industrial Average is eyeing 40,000 and the S&P 500 had logged 23 all time high closes this year.


Sector Performance

Best Performers: The Energy sector (+5.8%) continued its strong performance from April, with oil prices holding steady due to ongoing supply concerns related to the Middle East conflict. Healthcare (+4.2%) also saw gains as investors sought defensive sectors during periods of uncertainty.

Worst Performing Sectors: Consumer Discretionary (-1.8%) remained under pressure, with inflation and rising interest rates dampening consumer spending. Technology (-1.5%) also struggled as some investors adopted a "wait-and-see" approach, awaiting the outcome of the US Presidential election.


Geopolitical and Central Bank Updates

Geopolitical Tensions Persist: The Israeli-Palestinian conflict remained unresolved, but no major escalation occurred, providing some relief to the market.

Central Bank Cautious Optimism: While no major policy changes were announced, some central banks hinted at a willingness to hold interest rates steady if inflation data continues to show signs of cooling.


Headlines and Market-Moving Events

Historic Equity New Highs: 100 days in and US developed markets are up circa 10%. Historically, such gains in the first half of the year, only serve to preview similar returns in the second half of the year too.

Trade Wars: Chinese stock indices edged lower, as the Biden Administration raised tariffs on Chinese EV’s and other products.

On the Campaign Trail: In the UK, Chancellor Jeremy Hunt, despite precarious economic conditions, promises tax cuts, Biden’s polling is struggling due to inflation and the ANC in South Africa is shaping up for a historic loss as its majority slips away.


Performance in Other Asset Classes

Fixed Income: German 10 year bonds trade circa 2.45%, the US hovering around 4.38%, as the ECB suggest any rate cut in June will not likely be followed in July.

Currencies: With CPI out of the range, currencies will likely drift for the remainder of the month, whilst expectations for Bank of Japan rate hike grow.

Commodities: Copper has risen to another record, with Bitcoin closing above 66,000. It’s not just an EV story, but the drive for AI chips that has caused the frenzy. Precious Metals: Gold prices moderated a little with a firmer US Dollar, but steady at 2380 USD. Whilst many central banks point to softer economic data, and hence rotating away from the risk of rate rises, silver dominated the news cycle making new all time highs.


Overall

Markets are making new highs, and essentially it is earnings driven. It seems barely believable that just a year ago, Nvidia the chip maker, shocked the marketing by guiding 11bn USD of sales in the next quarter. Well a year on, they have just made 28bn USD of sales. AI is not a flash in the pan, and is catalysing earnings improvements beyond the Magnificant 7.

General disclosure:This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Aria Capital Management or any of its related companies to participate in any of the transactions mentioned herein. This material may contain estimates and forward-looking statements, which may include forecasts and do not represent a guarantee of future performance. This information is not intended to be complete or exhaustive and no representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. The opinions expressed are subject to change without notice. Reliance upon information in this material is at the sole discretion of the reader. Investing involves risks. Past performance does not guarantee future results. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

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