May 2023 | Monthly Economic Update
Source: Zephyr Style Advisor
Better than feared corporate earnings and lower inflation report led market volatility lower and returns higher after the previous month’s bank crisis aftershock in developed markets. International developed equities led major regions with a gain of 2.9%, followed by US equities with a gain of 1.6%. Emerging market equities struggled, declining 1.1% as China fell 5.2% for the month.
Within US equity sectors, top performers included notable rebounds in financials and energy, gaining 3.2% and 3.3%, respectively. Tech-related, communication services sector maintained leadership of 3.8% for the month and for the year. Cyclical sectors, including industrials, consumer discretionary, and materials fell into negative territory. Across size and style, larger companies beat small-sized companies, and value-oriented companies beat growth.
Fixed income markets were positive in April as rates fell modestly, and investors anticipate the potential final interest rate hike in the upcoming May FOMC meeting. Despite mixed economic data coming out and recession fears still looming, credit led the way over government bonds in April, with high-yield bonds performing best with a gain of 1.0%. Government and longer-duration bonds performed less favorably despite their leadership to start the year, but still positive for the month.
Commodities continue their 2023 struggle with another decline in April, falling 0.8%. Results within commodities were mixed, with precious metals in positive territory while industrial metals and energy were negative. Despite volatility cooling off in April, gold still gained 1.0% as the US Dollar fell 0.5%, with concerns ongoing over the US debt ceiling. Lastly, REITs were in positive territory globally, primarily driven by apartments and residential real estate.
The global 60/40 index rose 1.1% in April, with global equities outperforming global bonds. For the month, allocations to equities, bonds, REITs, and gold helped, while commodities hurt. Year-to-date results reflect the same trend, with gold and equities leading the way.
Source: Zephyr Style Advisor
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The Monthly Riddle
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LAST MONTH’S RIDDLE: I have branches but no fruit, trunk, or leaves. What am I?
ANSWER: A bank
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