Review of markets over May 2018Contributors Tilmann Galler, Global Markets Insights Strategy Team
Markets were again plagued by volatility in May, largely due to heightened political risk. The US administration’s approach to global trade, North Korea and Iran remain uncertain, while Italy’s new populist government added to market concerns. Risk-off sentiment contributed to a significant rise in the value of the US dollar, which strengthened 2% vs. a basket of major currencies.
Despite the noise, the macro backdrop is still relatively supportive. The ongoing strength of global growth was evident in corporate earnings reports. Moreover, inflation remains benign, and so any interest rate normalisation looks set to be gradual. Therefore, despite significant intra-month swings, developed world equity markets rose over the month by more than 1% and broad fixed income markets were down around 1%.
Exhibit 1: Asset Class and style returns (local currency)
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