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May 2024 market review: International
US growth slowed but remained strong during May 2024, while core inflation accelerated above expectations.
Global market performance:
The risk-on soft-landing narrative dominated markets in May. Equities around the world recovered from the April sell-off, with both equities and bonds rallying throughout the month. Regionally, US assets outperformed their global peers: the S&P 500 and MSCI Europe rallied by 4.8% and 2.3%, respectively. Tech (+7.9%) led global equity sectors. US Treasury yields fell 18bps as CPI disinflation resumed. The US dollar declined, and the euro (and most G10 currencies) gained against the dollar. In commodities, silver rallied by 14.2%, while the Brent oil price (-7.1%) was one of the worst performing in the asset class due to moderating demand.
US economic outlook and Fed policy:
US growth slowed but remained strong, while core inflation accelerated above expectations. The Fed signalled patience and optimism and suggested that the next move would likely be a rate cut, not a hike. Fed Chair Powell maintained his view that the Fed’s policy stance is restrictive and that labour markets are moving toward better balance. He outlined three scenarios: a path where inflation remains persistent, and they “hold off on rate cuts;” a path where they regain confidence that inflation is coming down and they cut, and a path of unexpected weakening in the labour market that prompts cuts.
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