Skip to main content
logo
  • Funds

    Fund Explorer

    • Search our funds

    Capabilities

    • Fixed Income
    • Equities
    • Multi-Asset
    • Alternatives
    • Liquidity
    • ETFs

    Fund Information

    • Fund news and announcements
    • Regulatory updates
    • Capacity management
  • Investment Themes
    • Sustainable investing
    • Fixed income revival
    • Market volatility
    • Investing in China
  • Insights

    Market Insights

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

    Portfolio Insights

    • Portfolio Insights Overview
    • Fixed Income Insights
    • Multi-Asset Solutions Strategy Report
    • Asset Allocation Views
    • Equity Views
    • Factor Views
    • Long-Term Capital Market Assumptions
    • Global Alternatives Outlook
    • ETF Perspectives

    Webconferences

    • Webconferences
  • Library
  • About Us
    • Diversity, Equity and Inclusion
    • Corporate and Social Responsibility
  • Contact Us
  • Role
  • Country
  • Search
    Search
    Menu
    1. Monthly Market Review

    • LinkedIn Twitter Facebook

    Monthly Market Review

    Review of markets over May 2023

    01-06-2023

    Tilmann Galler

    The divergence between the service and manufacturing sectors widened in May, painting a mixed picture of the global economy. The US services flash Purchasing Managers’ Index (PMI) business survey for May rose to a 13-month high of 55.1 and both the eurozone and UK services flash PMIs remained above the 55 level, with anything above 50 indicating expansion. This momentum was supported by robust labour markets. Unemployment remained at or near historic lows in the eurozone (6.5%), UK (3.9%) and the US (3.4%) and wages are growing strongly.

    In contrast, the situation in manufacturing is much worse. The eurozone manufacturing PMI business survey fell to 44.6 in May, its lowest level in three years, and US and UK manufacturing PMI readings were also below the important 50 mark, signalling a contraction in activity.

    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 2023.

    Commodity markets also experienced some weakness. Oil ended the month down about 40% from the same time last year. Due to steep energy prices last year, negative base effects mean that the energy component is likely to contribute to a further cooling of headline inflation in the current quarter. Price declines in industrial metals were also particularly pronounced in May, which is likely a reflection of lacklustre global demand for goods and a weakening of commodity intensive activity in China.

    However, core inflation remained stubbornly high in Europe and the US and the prospect of sustained strong wage growth has fuelled investor concerns that central banks could tighten further, leaving peak policy rates higher than initially expected. Against this backdrop, yields on bonds rose, leading to a return of -2% for global bonds, while developed market stocks fell about 1%.

    US

    In the US, the debt ceiling impasse between Democrats and Republicans generated headlines over May. By the time of writing though, a deal to lift the ceiling had passed through the House of Representatives and looks very likely to secure the support of the Senate. Despite the drama, equities were relatively resilient with the S&P 500 rising by 0.4%. By month-end the VIX Index, which measures volatility for the S&P 500, traded below 18 which is at the lower end of the post pandemic range.

    US inflation temporarily bounced in April, with headline and core CPI (consumer price index) both rising 0.4% month-on-month, roughly in line with expectations. This brings the yearover-year gains to 5.0% and 5.5%, similar to last month’s readings but down sharply from last summer’s peaks of 8.9% and 6.6% respectively. The April increase reflected higher gas and used vehicle prices, both of which have already reversed, suggesting this rise is only a temporary pause on the road to lower inflation levels and should precede much more favourable readings in May and June.

    On growth, recent data has been generally comforting. April saw somewhat stronger-thanexpected auto sales, housing starts and employment numbers, suggesting that real GDP is continuing to grow in the second quarter.

    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 2023.

    Equity market leadership in the US is very narrow. The largest ten names in the S&P 500 have accounted for nearly all the index’s year-to-date return. Large tech companies outperformed the broader market, backed by strong earnings reports and growing investor expectations about the future potential of AI. In May, growth stocks outperformed value by 6.9 percentage points.

    Eurozone

    The April eurozone inflation data confirmed that headline inflation was up 0.1% to 7.0% year on year, due to a 3.3% increase in energy price inflation. Meanwhile, core inflation came down 0.1% to 5.6% year on year as a rise in services inflation was offset by a move down in core goods price inflation. Also, food price inflation declined 1.9% to 13.5% year on year, the first significant decline in about two years.

    Against this inflation backdrop, the European Central Bank delivered an expected 25 basis point hike, raising the deposit rate to 3.25%. The central bank said the forceful transmission of past rate hikes into tighter monetary and financing conditions justified the change to a slower pace of hikes. Markets currently expect two further rate hikes to a terminal deposit rate of 3.75%. The latest bank lending survey showed a further tightening of credit standards and a pronounced weakness in credit demand.

    Consumer confidence barely improved versus the previous month and the back-to-back monthly falls in car registrations pointed to a continued weakness in goods demand in the region. After a strong run since October, Europe ex-UK equites fell 2.1% over the month. Some better than expected inflation prints helped euro bonds outperform in May.

    Exhibit 3: Fixed income sector 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 2023.

    UK

    The Bank of England voted to hike rates by 25 basis point to 4.5%, in a 7-2 vote. The Bank retained existing forward guidance, highlighting that “if there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required”.

    The April inflation report was not well received by investors. Headline CPI fell from 10.1% year on year to 8.7%, but it was significantly above expectations of 8.2%. Even more concerning was the acceleration of the core CPI component from 6.2% year on year to 6.8%. Core CPI is now at its highest rate since March 1992. Markets re-priced rate expectations to a peak rate of 5.5%.

    This pushed yields higher and Gilts ended the month as one of the worst performers among government bonds. UK equities were hit by weak commodity prices. The FTSE All-Share Index fell 4.6% for the month, underperforming its peers.

    Exhibit 4: Fixed income government bond 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 2023.

    Asia

    After the end of zero-Covid and a strong first quarter, Chinese macro data for April indicated a slowdown in activity. Imports dropped 7.9% and industrial production grew only 5.8% year on year. This year’s April numbers were measured against last year’s depressed data, recorded during the Shanghai lockdown. The decline in the property market accelerated, with property investments in April falling 6.2% year on year in comparison to a 5.8% drop in March. Chinese equities underperformed the MSCI Asia ex-Japan Index, which returned -1.8 % as Korean and Taiwanese tech stocks outperformed in May.

    In Japan, Q1 real GDP rose by 1.3% year on year, driven by strong private consumption and nonresidential investment. April CPI also accelerated further with the BoJ’s key inflation measure (ex. fresh food and energy) rising 4.1% year on year, the biggest rise since 1981. Investors are getting increasingly optimistic that Japan is on the way out of the deflationary stagnation of the past. The TOPIX returned 3.6% outperforming other large developed equity markets.

    Exhibit 5: Index returns for May 2023

    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 2023.

    0903c02a81fb9235

    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
    jpm_am_web_exp-icon_OTMOI_b200_card_850x240

    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 programme 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 programme explores the implications of current economic data and changing market conditions. For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programmes 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 programmes, 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 a reliable indicator 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 2023 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 © 2023 JPMorgan Chase & Co., all rights reserved.