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Tilney Market Commentary

Welcome to our latest market and economic update, which looks back over the month of May 2020.


Global equity markets continued their recovery over the month of May following earlier stimulus packages, with a notable increase in risk appetite amongst investors as the global growth rate of Covid-19 cases continued to slow and the global economy gradually started to re-open.

Against this backdrop there were positive returns from developed market equities over the month. Commodity markets were also strong performers, with energy prices notably higher on a pick-up in demand and agreed cuts to oil supply from the OPEC+ producer group.

Within fixed income markets, credit spreads continued to tighten and high yield outperformed. In currency markets, sterling was weaker over the month as the UK and EU negotiators made little progress on trade talks.


In the latest chart of the month, we highlight the continued outperformance of the super six global companies – Facebook, Apple, Alphabet, Amazon, Netflix and Microsoft (FAAANM).

Analysis by Minack Advisors and others in the market has highlighted the dominance these companies now have over the US equity market, with Minack concluding that “the exceptional performance of the US equity market doesn’t rely on the US economy, or on Fed policy, or on fiscal stimulus. It relies on a handful of companies”.

The result of their superiority is the significant multiples they now trade on and the spectacular market performance of the FAAANM cohort. For example, the market capitalisation of the S&P500 Index has increased by US$6 trillion since the start of 2015, of which the super six contributed US$4 trillion.

As a collective they are a market in themselves. The market capitalisation of the super six is now larger than any non-US equity market aside from China.

Please see the May Market Pulse on our website for further analysis.


  • As the performance chart highlights, May was another positive month for developed market equities after March’s dramatic falls. Despite the challenging outlook for company earnings, investors are clearly anticipating that we will see a sharp recovery in 2021 and that the huge liquidity injections by global central banks will support and inflate financial assets.
  • Leading the pack on a total return basis over the month were US equities again, with the MSCI USA index returning +5.2% in local currency terms and +7.3% in sterling terms. As highlighted in the Chart of the Month, the outperformance of the US equity markets continues to be largely driven by a small number of online companies and is not necessarily linked to the health of the US economy, which has also experienced a drop in activity linked to Covid-19. At the sector level, there were broad gains over the month, but energy and financials were amongst the laggards.
  • European equities delivered positive returns for investors in May supported by improved investor sentiment, political progress on a €750 billion EU Recovery Fund and a pick-up in economic activity as a number of European countries begin re- opening. On a total return basis, the MSCI Europe ex UK index returned +4.2% in local currency terms and +7.9% for sterling investors over the month. Returns were positive across most continental bourses over the month, with the German DAX notably strong. At the sector level, European banks were amongst the main laggards over the month.
  • UK equities also performed positively in May despite the clear economic challenges linked to Covid-19 and the uncertainty hanging over Brexit negotiations. Unsurprisingly, the latest GDP and employment data does not paint a pretty picture, but there remains hope that the Government’s unprecedented furlough scheme will aid an economic recovery later this year and in 2021. Against this backdrop, UK large caps (+3.1%) marginally underperformed UK mid-caps (+3.7%) and smaller companies (+3.3%) for a second successive month. At the sector level, banks and energy continued to be amongst the laggards given the pressures on company revenues and dividends. Meanwhile industrials, materials and technology companies outperformed over the month.


  • Asian and Emerging Market equities lagged their developed market peers in May, as further civil unrest in Hong Kong weighed on Chinese equities. The headline MSCI Asia Pacific excluding Japan and MSCI Emerging Markets indices generated total returns of -0.3% and +0.8% respectively in local currency terms over the month. For sterling investors this resulted in returns of +1.7% and +2.8% respectively.
  • In local currency terms, Brazilian and Russian equities were both notable outperformers amongst the emerging markets. Indian and Chinese equities were weaker, with the mainland Shanghai Composite returning -0.1% and Hong Kong’s Hang Seng index returning -6.3%.
  • Japanese equities rallied strongly over the month of May, supported by a reported increase in domestic and foreign buyers of stocks and the accommodative policies of the Bank of Japan. The MSCI Japan index returned +6.7% in local currency terms over the month and +8.1% for sterling investors.


  • The outperformance of risk assets was also reflected in the performance of fixed income markets in May where credit spreads continued to shrink. High yield bonds were the notable outperformers over the month, with the ICE BofA Global High Yield Index returning +4.7% in US dollar terms and +6.8% for sterling investors. Sterling corporate bonds were also marginally positive over the month returning +0.9% on a total return basis.
  • Within government bond markets, the unveiling of a proposed European Recovery Fund was positive for Italian and Spanish debt over the month, but German bunds were down -1.3% in local currency terms. After strong returns so far in 2020, UK gilts and US treasuries were largely flat over the month on a total return and local currency basis.


  • After a positive month in April, sterling was weaker over the month of May as negative interest rates were openly debated by policymakers and negotiators signalled that little progress has been made between the UK and European Union on its future relationship. In sterling terms, the euro returned +3.6%, the Japanese yen returned +1.3% and the US dollar returned +2.0%.
  • May was a stronger month for a number of emerging market currencies, reflecting the risk on environment and partial recovery in largely commodity-dependent countries such as Russia.


  • Global commodity markets delivered positive returns for investors over the month of May as the global economy slowly started to re-open and risk appetite returned to markets. The two headline indices, the Bloomberg Commodity and the S&P GSCI, returned +4.3% and +16.4% on a total return basis in US dollar terms over the month. In sterling terms, the returns were +6.5% and +18.7% respectively.
  • As highlighted in previous months, the main driver of the performance differential is the S&P’s higher weighting to the energy sub-sector, which rallied strongly over the month on a pick-up in demand and as the OPEC+ producer group announced cuts to the supply of oil.
  • May was also another positive month for the precious metals sub-sector, with gold and silver remaining in demand against the backdrop of continued central bank stimulus.


  • The delayed data for UK commercial property returns over the month April provided investors with more negative data and returns. The latest IPD data recorded a fall of -1.8% in capital values over the month, while income remained stable at +0.4%.
  • However, with few transactions taking place to accurately reflect market valuations and most open-ended property funds currently suspended, the outlook for UK commercial property remains uncertain. In particular, there are clear challenges to offices and the already weak retail sector.


The value of your investments, and the income derived from them, can go down as well as up, and you can get back less than you originally invested. Any indication of past performance or quoted yields is not an indicator of future returns. Before investing in funds, please check the specific risk factors on the key features document or refer to our risk warning notice, as some funds can be high-risk or complex, or can be susceptible to risks particular to the geographical area or industry sector in which they invest. Gold, technology and other focused funds can suffer as the underlying stocks can be more volatile and less liquid. Underlying investments in emerging markets are generally less well regulated than the UK. There is an increased chance of political and economic instability and the market(s) can be less liquid.

The property market can be illiquid; consequently, there can be times when investors will be unable to sell their holdings. Property valuations are subjective and a matter of judgement.

Any research or analysis contained in this document has been undertaken by us for our own use and may be acted on in that connection. The contents of the document are based on sources of information believed to be reliable; however, save to the extent required by applicable law or regulations, no guarantee, warranty or representation is given as to its accuracy or completeness. The document may include forward-looking statements which are based on our current opinions, expectations and projections. It is provided to you only incidentally, and should not be considered a personal recommendation or advice to invest. Any opinions expressed are subject to change without notice.

Issued by Tilney Investment Management Services Limited (Reg. No: 02830297), which is authorised and regulated by the Financial Conduct Authority. Financial services are provided by Tilney Investment Management Services Limited and other companies in the Tilney Group, further details of which are available at

© Tilney Group Ltd 2020

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