Skip to main content
logo
  • Funds

    Fund Explorer

    • Search our funds

    Capabilities

    • Equities
    • Multi-Asset
    • Alternatives
    • ETF Capabilities

    Fund Information

    • Fund news and announcements
    • Regulatory updates
    • Capacity management
    • Asset test
    • Belgian TIS
  • Investment Themes
    • Sustainable investing
    • Income
    • Multi-Asset Solutions
    • Strategic Beta
    • Fixed income investing
    • Investing in China
    • Women & investing
    • Market volatility
  • Insights

    Market Insights

    • Guide to the Markets
    • Guide to Alternatives
    • On the Minds of Investors
    • The Weekly Brief
    • Investment Principles
    • Investment Outlook
    • Monthly Market Review
    • Insights App
    • ESG Explained

    Portfolio Insights

    • Bond Bulletin
    • Monthly Strategy Report
    • Asset Allocation Views
    • Fixed Income Views
    • Equity Views
    • Factor Views
    • Emerging Market Debt Strategy
    • Long-Term Capital Market Assumptions
    • Global Alternatives Outlook
    • ETF Perspectives

    Webconferences

    • Webconferences
  • Library
  • About Us
  • Contact Us
  • Role
  • Country
  • Search
    Search
    Menu
    1. Monthly Market Review

    • LinkedIn Twitter Facebook

    Monthly Market Review

    Review of markets over May 2022

    01-06-2022

    Max McKechnie

    Investors had to stomach a difficult first quarter and those hoping the arrival of spring would herald a sea change will have been disappointed. Markets did at least end the month broadly flat but there was significant intra-month volatility. The key macro risks of war in Ukraine, tightening monetary policy and Covid restrictions in China remain, and markets lacked a clear catalyst for a change in sentiment.

    After a painful April, investors gained some respite with the MSCI All Country World rising by 0.2% in May. This was complimented by positive global bond returns of 0.3%. Value stocks were the best performing asset class returning 2.2% over the month.  

    Commodities continued to perform well returning 1.5% over the month with oil and wheat prices continuing to rise. Growth stocks continued to struggle off the back of valuation compression and several high-profile earnings warnings. Real estate was the worst performing asset class as leading indicators suggested the US and UK housing markets are starting to slow.

    A large weighting to the energy sector continued to benefit UK equities. The FTSE 100 remains the only positive equity market year-to-date with returns of 1.5%. 

    Exhibit 1: Asset class and style returns

    Source: Bloomberg Barclays, FTSE, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. DM Equities: MSCI World; REITs: FTSE NAREIT Global Real Estate Investment Trusts; Cmdty: Bloomberg Commodity Index; Global Agg: Barclays Global Aggregate; Growth: MSCI World Growth; Value: MSCI World Value; Small cap: MSCI World Small Cap. All indices are total return in US dollars. Past performance is not a reliable indicator of current and future results. Data as of 31 May 2022.

    Europe

    The war in Ukraine continued with no sign of resolution. While there have been calls for a diplomatic solution the current redlines laid out by both sides seem incompatible. Europe decided to embargo Russian seaborne oil, which raises the risk that Russia might retaliate by further reducing the supply of gas to Europe. Gas prices for winter futures contracts held steady at elevated levels. 

    Labour markets continued to tighten. UK unemployment fell to the lowest level since 1974, while eurozone unemployment is now the lowest on record. This supported an acceleration in wage growth in both economies, but with inflation very high, real wages remained negative. 

    Other economic data was more downbeat. The UK May business surveys softened markedly with services particularly weak. This was coupled with the lowest consumer confidence reading on record and a contraction in March GDP of -0.1% month on month. The Bank of England raised the UK base rate to 1.00% in May, and with headline inflation at 9.0% year on year (y/y), it is likely they will raise rates by 25 basis points (bps) again in June. They will be mindful though that with the consumer outlook weakening the risks to the economic outlook have risen. On the plus side, the Chancellor’s package of measures to help with rising energy bills will provide significant support to lower income households. The squeezed middle will remain rather squeezed though. 

    European consumer confidence, while still low, improved in May and business surveys were resilient. This should give the European Central Bank more confidence in raising rates in the face of inflation at 8.1% y/y. President Lagarde clarified the bank’s position indicating a first rate hike was likely in July, along with an end to asset purchases early in Q3 2022 and an exit of negative rates by the end of Q3 2022.

    Exhibit 2: World stock market returns

    Source: FTSE, MSCI, Refinitiv Datastream, Standard & Poor’s, TOPIX, J.P. Morgan Asset Management. All indices are total return in local currency, except for MSCI Asia ex-Japan and MSCI EM, which are in US dollars. Past performance is not a reliable indicator of current and future results. Data as of 31 May 2022.

    US

    Having previously signalled its intent to ‘walk the walk’ on inflation, the Federal Reserve (Fed) increased rates by 50bps in May. Having been pre-warned in April, this hike was in line with market expectations and so did not prompt a jump in US yields. The market is now pricing another two sequential 50bps hikes in June and July. Excluding a deterioration in the outlook it is likely the Fed will deliver these. Messaging from the Fed evolved over the month. Initially Chairman Powell adopted a more hawkish tone stating the Fed wouldn’t hesitate to raise rates beyond neutral and signalling that it was willing to accept an increase in the unemployment rate from its historically low 3.6% to achieve its inflation target. Headline inflation came in above expectations but fell marginally to 8.3% y/y. Over the month, risks to growth increased and as the month ended messaging from the committee became more mixed. This introduced volatility into the market towards the end of the month as it struggled to decide what the path for future rate hikes beyond July is. 

    Exhibit 3: Fixed income government bond returns

    Source: Bloomberg Barclays, BofA/Merrill Lynch, J.P. Morgan Economic Research, Refinitiv Datastream, J.P. Morgan Asset Management. Global IL: Barclays Global Inflation-Linked; Euro Gov.: Barclays Euro Aggregate Government; US Treas: Barclays US Aggregate Government - Treasury; Global IG: Barclays Global Aggregate - Corporates; US HY: BofA/Merrill Lynch US HY Constrained; Euro HY: BofA/Merrill Lynch Euro Non-Financial HY Constrained; EM Debt: J.P. Morgan EMBIG. All indices are total return in local currency, except for EM and global indices, which are in US dollars. Past performance is not a reliable indicator of current and future results. Data as of 31 May 2022.

    China

    China continued to grapple with the Omicron variant. Shanghai spent most of May in lockdown, though as the month progressed some reopening occurred. Officials announced a gradual general reopening will take place over June. Outside of Shanghai, outbreaks forced Beijing and Tianjin to tighten restrictions. Chinese credit growth slowed during May as banks, concerned about the worsening economic situation, cut back on loan issuance. In response, the People’s Bank of China put pressure on them to increase loan issuance and cut a key mortgage reference rate by 15bps to support house prices. For western countries though the good news was that Chinese exports surprised to the upside at 3.9% y/y. 

    Exhibit 4: Fixed income sector returns

    Source: Bloomberg Barclays, Refinitiv Datatsream, J.P. Morgan Asset Management. All indices are Bloomberg Barclays benchmark government indices. All indices are total return in local currency, except for global, which is in US dollars. Past performance is not a reliable indicator of current and future results. Data as of 31 May 2022.

    Conclusion

    May failed to provide the catalyst that markets are waiting for. Central banks are continuing to grapple with inflation. But they are now even more conscious of rising growth risks, which remain higher in Europe than the US. Labour markets remain tight but with real wage growth negative the squeeze on consumers remains. Margins started to come under pressure, particularly in consumer facing companies and pricing power is likely to be a key driver of relative equity performance moving forward.

    Exhibit 5: Index returns for May 2022

    Source: Bloomberg Barclays, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Data as of 31 May 2022.

    More Insights

    Guide to the Markets

    The Guide to the Markets illustrates an array of market and economic trends using compelling charts, providing you the building blocks to support conversations with your clients.

    Download the latest Guide

    On the Minds of Investors

    Drawing on the depth and breadth of our market and economic expertise, we offer timely macro insight into today’s big investment themes, to enable more confident portfolio decisions.

    Views on today’s key investment themes

    The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions. 

    For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programs are marketing communications and are not in scope for any MiFID II / MiFIR requirements specifically related to investment research. Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research.

    This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

    J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.

    To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://am.jpmorgan.com/global/privacy.

    This communication is issued by the following entities:

    In the United States, by J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both regulated by the Securities and Exchange Commission; in Latin America, for intended recipients’ use only, by local J.P. Morgan entities, as the case may be. In Canada, for institutional clients’ use only, by JPMorgan Asset Management (Canada) Inc., which is a registered Portfolio Manager and Exempt Market Dealer in all Canadian provinces and territories except the Yukon and is also registered as an Investment Fund Manager in British Columbia, Ontario, Quebec and Newfoundland and Labrador. In the United Kingdom, by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other European jurisdictions, by JPMorgan Asset Management (Europe) S.à r.l. In Asia Pacific (“APAC”), by the following issuing entities and in the respective jurisdictions in which they are primarily regulated: JPMorgan Asset Management (Asia Pacific) Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited, each of which is regulated by the Securities and Futures Commission of Hong Kong; JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), this advertisement or publication has not been reviewed by the Monetary Authority of Singapore; JPMorgan Asset Management (Taiwan) Limited; JPMorgan Asset Management (Japan) Limited, which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia, to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Commonwealth), by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919). For all other markets in APAC, to intended recipients only.

    For U.S. only: If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance.

    Copyright 2022 JPMorgan Chase & Co. All rights reserved.

    J.P. Morgan Asset Management

    • Terms of use
    • Privacy policy
    • Cookie policy
    • Accessibility statement
    • Sitemap
    • Investment stewardship
    Decorative
    J.P. Morgan

    • J.P. Morgan
    • JPMorgan Chase
    • Chase

    Copyright © 2022 JPMorgan Chase & Co., all rights reserved.