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Courtiers Comments on May 2016 Markets

| Market Commentary | By James Timpson

The London mayoral election took place in May and Labour candidate Sadiq Khan overcame his Conservative rival Zac Goldsmith to succeed Boris Johnson as the Mayor of London. Khan received 44.2% of first preference votes, and secured victory when the second preference votes were added. The election turn-out of 45.6% was the highest ever for the London mayoral vote.

The mystery surrounding the origins of the Bitcoin may have been lifted as Australian entrepreneur Craig Wright publically identified himself as Satoshi Nakamoto, the creator of the digital currency. Wright’s claims, made eight years after Nakamoto first published a paper on the technology behind the Bitcoin, have been backed up by its core development team while others seek further proof. Many companies accept Bitcoin as a valid means of payment, including Microsoft and Dell.

In Brazil, after a lengthy debate, the Senate voted to suspend President Dilma Rousseff and begin an impeachment trial against her. Among her alleged misdeeds are the manipulation of government accounts to hide a shortfall in the budget and involvement in a corruption scandal at Brazilian oil giant Petrobras. The Brazilian equity market has been highly volatile as a result of the suspension and the Bovespa index fell by more than 10% during the month.

The final countdown is underway ahead of the EU referendum. Last month the Bank of England issued a warning that Britain’s economy would slow sharply, and may even fall into recession, if the country voted to leave the EU. The opinion polls indicate that British voters are fairly evenly split. The referendum takes place on 23rd June.

May was a positive month for developed markets. The FTSE 100 index rose +0.31%, while the FTSE 250 (ex IT) index grew +2.92 and the FTSE Small Cap (ex IT) index gained +0.39%. In the US, the S&P 500 index climbed +1.80%. European equities, measured by the Eurostoxx 50 index, shifted +2.88% and in Japan the Topix index increased +2.93% over the course of the month.

Emerging market returns were more mixed. The MSCI EM (Emerging Markets) index declined -0.79%. Chinese equities, represented by the MSCI China index, dropped -0.61% while Latin American equities, measured by the MSCI EM Latin America GR index, fell -6.01%. Indian equities had a brighter month, as the IISL Nifty index surged +3.95%.

Bond returns were mostly positive. In the UK market, the FTSE Gilts All Stocks index lifted +1.75% with long dated (over 15 years to maturity) bonds rising +3.43%. In the corporate market, European corporate bonds, measured by the Markit iBoxx Euro Corporates index, returned +0.27% and sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, improved by +1.15%. High yield returns were also positive, as the Bank of America Merrill Lynch Euro High Yield index and the Bank of America Merrill Lynch Sterling High Yield index posted gains of +0.09% and +0.79% respectively. Emerging Market sovereign debt, measured by the JP Morgan EMBI Global index, slipped -0.30%.

The commodity markets had a varied month. The S&P GSCI index, which consists of a basket of commodities including oil, metals and agricultural items, rose +2.22%. Brent blend oil, measured by the Oil Price Brent Crude PR index, climbed +3.24%. The prices of gold and silver, measured by the S&P GSCI Gold and Silver indices, plummeted by -5.82% and -10.22% respectively. In the agricultural markets, corn returned +3.32% while wheat fell by -4.91%.

In the currency markets, the US dollar appreciated +0.65% against the pound while the euro and the yen both depreciated against the pound by -2.17% and -2.90% respectively.

James Timpson CFA, BSc (Hons), IMC

Analyst

(All the above returns are reflected on a local currency basis i.e. they do not factor in any relevant currency movements. Unless accompanied by PR (Price Return), they do include income).

Warning – the views expressed by Courtiers in this summary and any video and video transcripts, are reached from our own research. Courtiers cannot accept responsibility for any decisions taken as a result of reading this document, watching the featured video or reading the video transcript and investors are recommended to take independent professional advice before effecting transactions. The price of stocks, shares and funds, and the income from them, may fall as well as rise. Past performance is not necessarily a guide to future returns.

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