News

May continued the trend of the past couple of months, posting positive results in general. The U.S. led the way in the global equity markets while global interest rates continued their decent toward all-time record low yields. International equity markets meaningfully lagged the U.S. as various external forces again made U.S. capital markets more attractive on a relative basis. As the month drew to a close, much of the market narrative began to focus on the June 14-15 FOMC meeting and the June 23rd British referendum vote. Japan meanwhile looks likely to delay next spring’s scheduled 2% increase in the consumption tax in a bid to stimulate their lackluster economic growth. Globally, notable events during the month included a challenging emerging market equity environment, conclusion of Q1 U.S. earnings season, and an ongoing conversation among global policy makers regarding how to stimulate growth and inflation.

Emerging market equities fell sharply (-3.7%) with the exception of India (+1.9%) and Greece (+11.4%). Greece averted a near term default as European authorities adopted the IMF’s “plan” to again kick the problem down the road. India’s reform minded government continued to attract capital investment as more infrastructure improvements were slated to improve one of the world’s largest populous. First quarter earnings season concluded in May, posting an unsettling fourth consecutive quarterly decline. Poor quarterly earnings and some hawkish rhetoric found in the April FOMC meeting minutes drove the S&P 500 down to 2040 in mid-May, testing some key technical support levels. By late May, futures markets were pricing in as high as a 32% likelihood of June rate hikes. Those levels quickly dissipated in the first few days of June after a dismal jobs report on June 3rd indicated many challenges remain to inflation and growth looking forward. U.S. GDP forecasts for the second quarter have been revised upwards in general, with the Atlanta Fed forecasting a slightly more robust 2.8%, up from less than 2% at the end of April.