Major global equity markets rose for the month of May. Shares listed in the United States (US) continued to produce strong returns with company quarterly earnings reports outperforming analysts’ expectations. The value of the Australian Dollar (AUD) rose against major foreign currencies, decreasing overseas investment returns when measured in Australian dollar terms. Australian and international fixed interest markets posted positive returns.

The Board of the Reserve Bank of Australia (RBA) met on 6 May and voted to leave the cash rate target unchanged at 4.35% for the fifth consecutive month. Its May Statement on Monetary Policy noted: “Recent data confirm that inflation continues to moderate but more gradually than expected. Services inflation has peaked but remains high. Domestic cost pressures remain elevated and conditions in the labour market have eased by less than anticipated. Taken together, this information suggests that the labour market is tighter than previously thought.” 

A week later, Federal Treasurer, Jim Chalmers, delivered the Australian annual Federal Budget, forecasting a $9.3 billion surplus for 2023/24 – the first back-to-back surplus in nearly two decades. Notable budget initiatives to tackle cost-of-living pressures included a tax cut to all 13.6 million Australian taxpayers, a $3.5 billion energy bill relief scheme for households and businesses, as well as waiving $3 billion in student debt for three million Australians. Other initiatives included funding an additional $16.5 billion in infrastructure projects, $22.7 billion towards making Australia become a renewable energy superpower and $1.1 billion to pay the superannuation on Government-funded Paid Parental Leave.

Meanwhile in the US, the Government announced it would be imposing higher tariffs on China to protect American workers and businesses.  The White House stated: “…for too long, China’s government has used unfair, non-market practices. China’s forced technology transfers and intellectual property theft have contributed to its control of 70, 80, and even 90 percent of global production for the critical inputs necessary for our technologies, infrastructure, energy, and health care—creating unacceptable risks to America’s supply chains and economic security.” Certain steel and aluminum products will see a tariff increase from 0-7.5% to 25% in 2024, semiconductors will increase from 25% to 50% by 2025, electric vehicles will increase from 25% to 100% in 2024, and lithium-ion EV batteries will increase from 7.5% to 25% in 2024. There will also be tariff increases on solar cells, ship-to-shore cranes and medical products throughout 2024-2026. 

On 31 May, former President Donald Trump (and likely Republican nominee for the 2024 presidential election) was found guilty on all 34 counts relating to falsifying business records surrounding payments to an adult film actress in the lead up to his 2016 presidential campaign. This is the first conviction of a former (or sitting) President in US history. Trump will be sentenced by Judge Juan Merchan on 11 July. The outcome of the verdict is likely to be appealed by Trump. Initial reactions by political commentators suggest the verdict will have only a minor impact on the result of the 2024 election.

Equities

All major developed foreign equity markets rose in May with developed markets (excluding Australia) returning 4% on a local currency basis (and 2.0% in Australian Dollars reflecting the rise in the Australian Dollar). The best performing major foreign equity market was the United States S&P 500 returning 5.0% (in local currency terms) in May, whilst the worst performing major foreign equity market was the Japanese Nikkei 225 Index which returned 0.2%.

The Australian stock market (S&P/ASX 200 Index) returned 0.9% for the month, with six industry sectors experiencing positive returns and five industry sectors experiencing negative returns. Information Technology was the standout performing sector, returning 5.4%. The weakest sector was Communications, returning -2.6%.

In overseas developed share markets, ten sectors produced positive returns for the month, with only one sector producing a negative return. The best performers were Information Technology, Utilities and Communication Services, returning 8.5%, 7.1% and 6.2% respectively. The worst performing sector was Energy, returning -0.2%. 

Bonds

Currencies

Commodities