InvestNow News – 12th June – QuayStreet – May Monthly Market Update
INTERNATIONAL MARKETS
Risk on!
The benchmark MSCI World Index (NZD) rose 4.4%, building on last month’s rally. The defining theme for the month was the return of growth. Over the course of the month, the market moved from pricing in reflation to pricing in the combined impact of reopening and stimulus on growth. In the US, equities were buoyed by comments from several influential US Fed governors. St. Louis Fed President Bullard declared the recession in the US was over, and a sharp Q3 GDP snapback was at hand; while NY Fed President Williams said the Fed was not done with using more unconventional monetary policy easing. Adding to positive sentiment, head epidemiologist Dr Fauci now sees a good chance of a vaccine being developed by November or December and that a second wave “isn’t inevitable”.
With the “risk on” investment environment gaining traction, Gold’s ‘safe-haven’ outperformance began to wane as the month progressed, whilst on the flipside, industrial-related commodities began to perform well. Oil was the standout, staging one of its best monthly rallies in a decade, outperforming other commodities and all sharemarkets. Crude’s performance reflected more than just the expected impact on demand of the economic recovery in the second half of the year. The rally was supercharged by supply side adjustments as OPEC and other major oil producers quickly curtailed production.