Monthly market roundup – May 2024

by InvestEngine

Welcome to the latest edition of our monthly market roundup. May was dominated by inflation coming closer to target for some regions of the world, no changes in interest rate policies and strong gains in financial markets.

In this month’s segment off the beaten track, we explore more AI mishaps, respectable accounting errors and the performance of pension funds in the UK.

Inflation – close but not close enough

Headline UK inflation came in at 2.3% in April, thanks to a 12% drop in household energy bills. Pricing pressures in the service sector which is most closely linked to the growth of the domestic economy remain at 5.9%.

Over in the US, inflation eased to 3.4%, with healthcare, housing and durable goods prices declining, however much like the UK, services inflation remains sticky.

European inflation remains steady at 2.4% for April with the greatest contributions coming from services and food.

Interest rates remain unchanged

Whilst the Bank of England, the Federal Reserve and the European Central Bank have chosen to leave rates unchanged.

The path to interest rate cuts looks to be different across geographies as inflation remains sticker in some economies rather than others.

UK inflation was due to hit the magic 2% target in May, this was not the case however which has pushed back interest rate expectations from June’s meeting.

Source: Bloomberg

Source: Bloomberg

Over in the US, the notion of a ‘higher for longer’ interest rate environment continues as disinflation continues but it remains higher than expected.

A strong month for equities

Stocks continued to rise in May with the United States leading the pack increasing by 3.12%. Gains in the UK have been more modest with the FTSE 100 finishing higher by 2.03%.

Both geographies contributed to an increase of the MSCI All-countries World of 2.24%.

The positive performance in developed markets has helped mitigate the decline of -1.17% in emerging markets for the month.

Bond yields broadly unchanged

Bond yields for May have remained largely unchanged with 2-year and 10-year gilts finishing at 4.4% and 4.3% respectively.

Source: Bloomberg

Sterling rallies

Sterling has recovered from the losses in April to deliver a 2% rise versus the US Dollar in May, finishing the month at $1.2742. Increases with the Euro were more modest, with the currency increasing to €1.1744.

Off the beaten track

Google’s Artificial (Un)Intelligence

Google continues to explore AI search tools and that is not without some odd, unhelpful and inaccurate results.

On one encounter when trying to make pizza sauce, Google AI has confidently told one user to add ‘about 1/8 cup of non-toxic glue’ to prevent the sauce from sliding off the pizza. A measure many Italians would possibly not endorse.

Google has maintained that generative AI remains a large priority for the firm but with billions of queries coming in daily, there are bound to be some errors and misinformation.

GameStop is back as a meme trader resurfaces sending the stock higher by more than 70%

The GameStop and AMC saga seems a long way away from the pandemic entertainment that sent several Reddit investors triggering a short squeeze in 2021.

However, Keith Gill (also known as ‘Roaring Kitty’) drew an army of day traders who cheered each other sending the stock soaring as much as 110%, causing trading to be halted multiple times.

The result of such a rally caused losses approaching $1 billion for short sellers.

Data source: Bloomberg and Investengine

All returns are expressed in total return basis in GBP.


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