In May 2020, we saw another positive month for most investments in response to further government and central bank support, helped by the loosening of lockdown restrictions. However, political factors, such as the continued Brexit negotiations, Intra-EU tensions, and the small matter of November’s US election continued to play on investors’ minds.
The UK government announced that the Job Retention Scheme, which around 80% of firms have used[1], has been extended to October. The UK Purchasing Managers Indices (PMIs), which show industry trends across Services, Manufacturing, and Construction, indicated a sharp decline in activity during recent months, with retail sales also falling month on month by 18.1% - the largest decline since records began in 1996.
Looking at the US, the unemployment rate reached 14.7% and retail sales experienced a drop of –16.4% month on month - the largest decline on record since this data set was released in 1992. Unsurprisingly, the majority of other economic data released last month reflects a difficult period for US economic activity.
The Eurozone saw a similar story to the UK, with a decline in economic activity indicated by both PMIs and retail spending. As parts of the Eurozone have seen a slowing in the spread of coronavirus, many countries have been able to tentatively loosen their restrictions. The economic outlook of this will be determined by how quickly a safe reopening is possible in the face of this pandemic.
Stock Markets
In May, global stock markets followed April’s positive run with most regions gaining strongly. Despite the bad economic news, investors celebrated governments’ actions for another month meaning bad news equalled good news for share prices.
Japanese shares were the top performing investments, ending the month up a whopping +8.35%, and the Eurozone also saw gains finishing at +4.94%. It’s worth noting that both these markets depend heavily on global trade. The FTSE 100, representing the UK’s largest public companies, ended up +3.36% in May, and in the US, the S&P 500 was one of the strongest performers, closing up +4.76%.
Other markets saw little change with Asia ex-Japan down -0.32%, and Emerging Markets gained just +0.79%.
Currency
The pound weakened during May, ending the month lower against the euro (-3.39%), Japanese yen (-1.42%), and the US dollar (-2.03%).
This came as the Bank of England signalled it was at least open to considering negative interest rates, something it had previously ruled out. Similarly, investor attention was looking ahead to the next round of Brexit talks between the EU and the UK.
Other investments
Our other investment types told a similar story to share prices.
As economic data declined sharply, returns managed to march higher as investors look ahead to the economic recovery and were lifted by continued government support. The result saw all of our investment types deliver positive returns. Bonds closed the month up 0.80%, property up 1.84%, and shares gained by 3.78%.
Summary with Plan details
As you would expect, the performance of Wealthify Plans in May was positive. Plans that hold more shares delivered slightly more returns than Plans that hold more bonds, reflecting global stock market performance.
Our Investment Team continue to actively monitor the financial markets and their impact on your Plan, and as always, we are ready to act in your best interests to events as they unfold.
- https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/furloughingofworkersacrossukbusinesses/23march2020to5april2020
- Data from Bloomberg
The figures shown are based on a medium-risk (Confident) investment Plan.
Please remember the value of your investments can go down as well as up, and you could get back less than invested. Past performance is not a reliable indicator of future returns.
