May marked another decent performance for financial markets in spite of concerns regarding inflation. Commodities continued to show persistent strength across the asset class, with silver and gold being the top-performing assets as investors looked to precious metals as an inflation hedge, while oil is still the best performer on a YTD basis as investors look towards societies reopening. Cryptocurrencies were the biggest losers in May however, seeing a massive slump as authorities struck a distinctly negative tone towards them in multiple countries, as reported by Deutsche Bank.
May 2021 Performance Review
“Commodities had another strong month in May, with silver as the best performing thanks to an +8.1% advance, followed by gold which rose +7.9%. Precious metals such as gold have long been seen as an inflation hedge, so the fact that inflation expectations have moved higher in recent months has proven supportive for such assets. Other commodities including copper (+4.4%), Brent (+3.1%) and WTI (+4.3%) all posted gains of their own. Nevertheless, one segment within commodities that didn’t perform so strongly were agricultural prices, which fell back after their astonishing surge in April, including noticeable falls for corn (-11.3%) and wheat (-10.6%).”
“Cryptocurrencies were best avoided in retrospect, with one of the biggest stories this month being a major collapse in their price. While a number of more negative tweets from Elon Musk contributed to the decline, the main cause has been the increasingly negative tone from authorities across multiple countries towards crypto-assets. In turn, this is raising questions as to their long-term viability and has put strong downward pressure on valuations. As a result, Bitcoin plummeted by -35.4% in May, marking its worst month since November 2018, and other cryptocurrencies including Ethereum (-5.9%), XRP (-37.0%) and Litecoin (-31.6%) similarly fell back.”
“Equities put in a decent performance, with the S&P 500 and the STOXX 600 reaching new all-time highs during May. Nevertheless, US equities were a relative underperformer compared to other regions, with the S&P 500 only up +0.7% on a total returns basis, while the NASDAQ (-1.4%) had its first monthly decline since October. European indices more generally posted decent returns, with the STOXX 600 (+2.7%) and the DAX (+1.9%) rising, but Greece’s Athex (-1.6%) was actually the worst performer on our entire leaderboard this month.”
“Speaking of sovereign bonds, they’ve remained at the bottom of the YTD leaderboard after a fairly flat performance this month. US Treasuries are still down -3.4% so far this year, even with a modest +0.4% gain in May, while gilts are at the bottom of the YTD leaderboard with a -6.4% return. More broadly, European government bonds underperformed the US and the UK in May, with bunds down -0.2%, and it was the same story in credit as well.”
“In the FX sphere, May marked the second monthly decline for the dollar as it weakened another -1.6%. Sterling was one of the main winners among the developed markets however, up by +2.8% against the dollar as it closed at its highest level since 2018. Emerging market currencies had a positive month on the whole, strengthening +2.0%, though the Turkish Lira weakened for a 4th month running against the US dollar with a further -2.3% decline.”
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