Monthly Market News May 2024 – Market Trends

Alexandre Gauthy - Economist

Equity markets rose in May, following their April decline. The US indices were once again driven by technology companies, while the performance of the rest of the market was more modest. The dollar retreated due to weakening US economic momentum. Our expert, Alexandre Gauthy, analyses the market trends from May 2024.

Equity markets: the return of the "Magnificent 7"

Last month, global equities delivered positive returns. U.S. and European equities outpaced other regions, including emerging marketsemerging markets and Japan.
The main US stock indexes rose in May, rebounding from a weak month of April. The S&P500 and Nasdaq recorded five consecutive weeks of gains before pulling back in the last week of the month. Big tech stocks again posted strong performances, with more than half of the S&P 500's rise in May attributed to Nvidia (+26.8%), Apple (+12.9%), Microsoft (+6.8%) and Alphabet (+6.0%). Other stocks that performed well in May included small caps and semiconductors.

Finally, it's worth mentioning that after eliminating the "Magnificent 7," the combined earnings growth rate for the rest of the S&P 500 is -1.80%.

Bond markets: rates are falling again

The price of US government bonds rose across the curve in May, despite a slight weakness later in the month due to concerns about the large issuance of US government bonds. Several economic data indicated that the disinflationary trend remains intact. The April inflation report was largely in line with expectations. Another price index (PCE) released later in the month showed core inflation slowing, with the annual figure hitting its lowest level in the past three years. Third, the April jobs report was slightly weaker than consensus expectations, particularly in terms of the evolution of average hourly earnings.

Central banks: no big news

The focus of the market on the Fed remained significant, although there was no major change in policymakers' expectations for holding rates until the end of the second half of the year. The Fed's rhetoric leaned toward caution: several Fed members advocated more patience before the central bank can be confident enough that it will reach the 2% inflation target. Several speakers (including Powell) have noted that further rate hikes are highly unlikely.

Currencies: the dollar ends the month lower

The dollar fell after four consecutive months of gains. The divergence in the evolution of long-term rates between the United States and the euro area was a negative factor for the dollar, which depreciated by 1.7% against the euro over the month. The Swedish krona appreciated by almost 3% against the euro thanks to the improvement in leading indicators in Sweden, despite the fact that the central bank lowered its key rate in May and expects 2 more cuts by the end of the year. The Norwegian krone strengthened by more than 4% against the euro on comments from the central bank, which sees no urgency to cut rates.

Commodities: Gold rises, while oil declines

Gold advanced for the third month in a row, closing the month up more than 1%. The fall in the dollar and the fall in long-term interest rates in the United States have supported the price of gold. Oil prices fell again in May, losing 7%. In early June, the price of WTI oil fell back below USD 75 per barrel, due to OPEC+'s decision to gradually reduce its oil production cuts from October. This announcement was not anticipated by the market.

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