Here’s the latest review of monthly market performance from James, plus an interview exploring some standout stocks in May.

Global markets have continued their upward trajectory in the last month amidst hopes that the conflict in the Middle East is nearing a resolution.

Developed equity markets gained 4.75% during May, boosted by another strong month for US equities, in particular the technology sector. However there were larger gains among emerging markets, which rose 9.7% during the month, led by Korean stocks measured by the KOSPI index which amassed over 28%.

The price of Brent crude oil dropped back below $100 per barrel towards the end of the month. The FTSE 100 was among the weaker performing equity indices due to its oil exposure and it returned less than 1% during the month. However UK gilts, or government bonds, performed well during the month amidst weak jobs data and lower than expected inflation; the Consumer Prices Index fell to 2.8%, its lowest level since last March.

Full round-up of May market performance

In the UK, the FTSE 100 index gained 0.74% while medium and smaller companies, measured by the FTSE 250 ex IT index and the FTSE Small Cap ex IT index respectively, rose 4.16% and 3.73%. In the US, the S&P 500 USD index amassed 5.23% while in Europe the Eurostoxx 50 EUR index picked up 3.92%. Japanese stocks measured by the Topix JPY index went up 6.24%.

Emerging markets had another strong month as the MSCI Emerging Markets index rallied 9.69% in local currency terms, led by the Korean Kospi index which surged 28.51%. However some emerging markets were negative; Chinese equities measured by the MSCI China CNY index fell 3.17% while Indian stocks measured by the Nifty 50 INR index slipped 1.87%. Latin American equities measured by the MSCI Latin America local currency index dropped 3.72%.

In the fixed income market, UK government bonds, measured by the FTSE Gilts All Stocks index, rose 1.85% with long dated (over 15 years to maturity) gilts jumping 3.36%. Sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, returned 1.91%. In the high yield market, the ICE Bank of America Sterling High Yield index increased 0.71%.

In the commodities market, the S&P GSCI USD index, which consists of a basket of commodities including oil, metals and agricultural items, lost 7.61%. Brent crude oil futures slumped 16.86% during the month. In the precious metals markets, the S&P GSCI Gold and Silver indices returned -1.25% and 2.79% in USD respectively, while in the agricultural markets corn and wheat futures declined 3.87% and 2.12% in USD respectively.

In currency markets, it was a mixed month for the pound as it depreciated 1.09% versus the US dollar and 0.49% against the euro but gained 0.59% versus the Japanese yen.

Transcript

Leo Hallam

Courtiers Head of Asset Management, James Timpson, is here to talk us through what’s been happening in markets and throughout the world in May.

James, hello.

James Timpson

Hi Leo, and it’s more good news, I’m pleased to say global markets have had another positive month in May. And this is amidst the optimism that hopefully this conflict in the Middle East is going to be resolved.

Leo

You say hopefully – it’s been backwards, forwards, backwards, forwards. Have markets been up, down, up, down in response?

James

Yes, in particular the oil price. Towards the end of last month, the oil price fell back below $100 per barrel and equity markets reacted positively to that. So, equity markets have done well. The MSCI World Index (the big index tracking the global developed equity market) was up almost 5% last month, led by particular strength in the U.S. There’s been a bit of resurgence in those big AI stocks, but global markets in general have done well – in particular emerging markets.

The MSCI Emerging Markets Index was up almost 10% last month, and this was led by Korea. The Kospi index, which tracks Korean stocks, was up almost 30% last month, following a 30% increase the previous month. Korean stocks have been doing really well.

Leo

How engaged is Courtiers within the funds in these emerging markets and particularly Korean stocks?

James

We like to invest in emerging markets (EM), and Korea actually makes up almost half of our EM portfolio. One of the biggest Korean stocks we hold is Samsung – a big name in electronics and because technology and AI has done so well lately, Samsung being part of that chain is up 164% year to date. And something else on Korea actually – because Korea has done so well lately, it’s actually become bigger than the UK market. Korea is now bigger than the UK. and so the lines are really starting to blur on what’s the difference between a developed market and an emerging market.

Leo

That’s a development in itself.

James

Exactly.

Leo

So, massive returns for Samsung. Does that mean it’s still value?

James

That’s a good point, actually. If Samsung’s price does continue to appreciate and appreciate, then at some point it will no longer flag as value on our quants model. Now, that doesn’t necessarily mean it’s an instant sell…the analysts could take a look at Samsung and say, well, actually, there’s still a lot of value in there.

Leo

The reason you don’t buy growth is because they’re so inflated to buy, but you’ve gone in cheap to buy Samsung, so why wouldn’t you keep it?

James

When we first bought Samsung, it was really cheap, and even though it’s done really well lately, that’s not to say it’s suddenly become a really expensive growth stock. Its underlying fundamentals may have also increased with its price, in which case it could still be a value stock.

Leo

Bringing it back to home for a moment, news has been a lot to do with UK politics / FTSE falls. Is all the FTSE movement to do with the UK politics alone or are there other determining factors?

James

Politics may have something to do with it, but it’s worth bearing in mind that the FTSE 100 does have a couple of really big oil companies in it. And the oil price fell just over 15% last month. So those oil companies would have reacted negatively to that.

Leo

Did the whole BP fiasco have any impact on Courtiers funds?

James

No, we do not invest directly in BP, although we do have exposure to the FTSE 100. At most we’d have had a small amount of indirect exposure.

Leo

So you’ve not lost any sleep at night over that.

James

No, no, not at all, and even though the FTSE 100 underperformed last month, it was still a good month for medium and smaller companies. They both did quite well. UK gilts also performed well as well, partly because of inflation coming in lower than expected. but also weaker jobs data, which tends to push rates downwards rather than upwards.

Leo

Thanks, James. Now I want to fly away from the UK. High…dwarf all the other companies in the world with SpaceX’s biggest ever IPO.

James

It’s going to be huge. SpaceX later this month is going to be launching its initial public offering, and that is where it makes some of its shares public. Up until now, SpaceX has been a private company, but after this IPO, it will have shares publicly available to trade on the stock market. It’s going to be the biggest IPO in world history, dwarfing the previous biggest, which was Saudi Aramco, I believe. And even though it’s the biggest ever, it’s still only a small fraction of SpaceX’s shares being floated publicly – about $75 billion worth are going to be publicly traded…only a small fraction of the $1.77 trillion valuation that’s being placed on SpaceX.

After the IPO, SpaceX will be part of the NASDAQ index. The NASDAQ will actually have to change some of their rules to accommodate its listing. SpaceX won’t yet be part of the S&P 500 index because that has much stricter rules for inclusion. You have to have at least 50% of your shares floated, for instance, and 12 months of being publicly traded.

Courtiers won’t have any exposure to SpaceX following the listing, and I dare say that it’s not going to come up on our value screens either. That valuation does look rather toppy to me, so I doubt we’ll be investing in it anytime soon.

Leo

With images of twinkles in the distance, one you saw not so long back was Signify, the lighting company I asked you about in our last update. How has it been doing?

James

Yes, I promised I’d look into it. Signify is a stock that’s in the Courtiers Global (ex-UK) Equity Income Fund and the Ethical Value Equity (EVE) fund, and it’s done really well lately. It’s up 15% in the last two months. It’s listed in the Netherlands, and it sells lighting products. Recently Signify was included in the Dow Jones Best-in-Class World Index for the ninth consecutive year, which means it’s in the top 10% of its industry for sustainable practices.

Hopefully that’s been illuminating for you.

Leo

I can’t beat that James, so we’ll leave it there. Talk next month.

James

Thank you.