Did you sell in May and go away? According to DB, doing so would have so far produced mixed results.
Equities generally did better than fixed income with May easily being the most volatile month for core rates this year. Despite the ongoing intra-day volatility China equities were still one of the best performing markets in May and notably outperformed what was a fairly poor performance for broader EM. The Dollar appreciated over 2% against major currency pairs so there were some key discrepancies between local currency and Dollar based returns in May.
DB's full observations, first on returns in local currency terms:
First up we take a closer look at local currency returns. The month was particularly positive for the Nikkei and Shanghai composite as total returns for the month were +5.3% and +4.0%, respectively. Away from Asia, FTSEMIB (+3.6%), the Stoxx 600 (+1.8%), and the S&P 500 (+1.3%) also made it into our top ten list of best performers. Select commodities also did well with Silver (+3.7%) and Wheat (+2.1%) recording their best performance in 3-4 months. Oil was mixed this time round with WTI (+1.1%) outperforming relative to Brent (-2.8%). On the other side of the returns scale, EM featured heavily with bourses in Brazil, Russia and Hong Kong down -6.2%, -4.2% and -2.2%, respectively. Russia reversed its gains last month while Brazil is likely being clouded by recessionary concerns. Fixed income markets had a volatile month in May as 10yr yields of Treasuries, Bunds and Gilts experienced an intra-month range of 28bp, 42bp and 32bp respectively. Core yields finished off the highs in May but returns were still -1.1% and -0.3% for Bunds and Treasuries. The volatility in core rates dampened European and US Credit returns with the more rate sensitive IG generally underperforming HY. Sterling credits performed better though as total returns were supported by modest gains in Gilts, helped by the removal of the election uncertainty.
If we take a look at Dollar based returns, the picture is slightly different with Shanghai Composite (+4.0%) outperforming the Nikkei (+1.3%) given the weakness in Yen. The weakness in EUR also trimmed some of the gains off European indices with Stoxx600 actually finishing the month modestly negative on the $ basis. The weakness in EM currencies against the Dollar also compounded the weakness in various EM equity benchmarks with the BOVESPA and MICEX down 11% and 5.5% respectively. That said, the Micex remains one of the top performers year to date on a $ basis given the strength of the RUB. Indeed in $ terms, the Shanghai Composite (+43%) remains the top performing market this year followed by the MICEX (+29%) and the Hang Seng (+17%). The Nikkei (+14.5%) and the FTSEMIB (+14.2%) are not too far behind. Wheat (-19.1%), BOVESPA (-12%) and Corn (-12%) are the worst performers to date on a $ return basis.