Noteworthy Developments:
Global markets advanced during May as resilient economic data, strong corporate earnings (especially in the US), and broad-based enthusiasm around artificial intelligence supported risk assets. The CAD weakened by 1.6% vs. the USD.
Global Equities:
Global equities advanced during May, with the MSCI ACWI Index gaining 6.9% as resilient economic data, improving investor sentiment, and continued strength in technology supported risk assets. US large-cap equities (S&P 500) rose 7.0%, while international developed equities gained 4.8% and emerging market equities advanced 11.5%. Foreign currency movements (CAD weakening vs. the USD) boosted returns for Canadian investors.
The S&P 500’s strong performance was largely driven by the 21.7% gain in the technology sector. Unlike in recent months, all subsectors within US technology performed well with semiconductors and software stocks both delivering 22.9% returns. Emerging markets (+11.5%) performed best with Korea (+37%) and Taiwan (+17.8%) equities driving gains. These markets are especially highly levered to large semiconductor companies whose earnings have materially benefitted from the AI infrastructure buildout. International developed market equities also posted gains, although they lagged other major regions as investors favored higher-growth markets with greater exposure to technology-related sectors.
Both growth and value stocks advanced during the month, with growth (+9.0%) outperforming value (+4.9%). Sector performance reflected continued enthusiasm around artificial intelligence and digital infrastructure investment, with information technology (+19.9%) leading gains. Consumer discretionary (+4.5%) and healthcare (+3.4%) posted modest gains, while more defensive sectors lagged, including consumer staples (-0.6%) and utilities (-3.4%). Energy (-4.5%) declined alongside lower oil prices.
Fixed Income:
Fixed income appreciated nicely with the BOFA Canada Broad Market Index gaining 1.4%. Canadian government bonds advanced 1.2%, as declining sovereign yields across the curve supported price appreciation. Yield declines were most pronounced in intermediate maturities, where rates fell approximately 10–17 basis points during the month. Corporate bonds and provincial and municipal bonds also performed well, gaining 1.3% and 1.6%, respectively.
Alternatives:
Hedge funds extended gains during May, with the HFRX Global Hedge Fund Index advancing 3.4% (+1.7% in USD). Convertible arbitrage (+5.1%) strategies performed best, while equity hedge (+4.4%) and macro (+3.7%) also delivered outsized monthly returns.
Manager Comments:
Linden: (+4.8%). Benefitted from reductions in credit spreads and high realized volatility associated with AI names. Also, the Fund participated in several new convertible offerings at favorable terms.
Starboard: (+7.7%). Benefitted from idiosyncratic appreciation in key positions driven by earnings results and corporate events.
CAD May Market Commentary
Noteworthy Developments:
Global markets advanced during May as resilient economic data, strong corporate earnings (especially in the US), and broad-based enthusiasm around artificial intelligence supported risk assets. The CAD weakened by 1.6% vs. the USD.
Global Equities:
Global equities advanced during May, with the MSCI ACWI Index gaining 6.9% as resilient economic data, improving investor sentiment, and continued strength in technology supported risk assets. US large-cap equities (S&P 500) rose 7.0%, while international developed equities gained 4.8% and emerging market equities advanced 11.5%. Foreign currency movements (CAD weakening vs. the USD) boosted returns for Canadian investors.
The S&P 500’s strong performance was largely driven by the 21.7% gain in the technology sector. Unlike in recent months, all subsectors within US technology performed well with semiconductors and software stocks both delivering 22.9% returns. Emerging markets (+11.5%) performed best with Korea (+37%) and Taiwan (+17.8%) equities driving gains. These markets are especially highly levered to large semiconductor companies whose earnings have materially benefitted from the AI infrastructure buildout. International developed market equities also posted gains, although they lagged other major regions as investors favored higher-growth markets with greater exposure to technology-related sectors.
Both growth and value stocks advanced during the month, with growth (+9.0%) outperforming value (+4.9%). Sector performance reflected continued enthusiasm around artificial intelligence and digital infrastructure investment, with information technology (+19.9%) leading gains. Consumer discretionary (+4.5%) and healthcare (+3.4%) posted modest gains, while more defensive sectors lagged, including consumer staples (-0.6%) and utilities (-3.4%). Energy (-4.5%) declined alongside lower oil prices.
Fixed Income:
Fixed income appreciated nicely with the BOFA Canada Broad Market Index gaining 1.4%. Canadian government bonds advanced 1.2%, as declining sovereign yields across the curve supported price appreciation. Yield declines were most pronounced in intermediate maturities, where rates fell approximately 10–17 basis points during the month. Corporate bonds and provincial and municipal bonds also performed well, gaining 1.3% and 1.6%, respectively.Alternatives:
Hedge funds extended gains during May, with the HFRX Global Hedge Fund Index advancing 3.4% (+1.7% in USD). Convertible arbitrage (+5.1%) strategies performed best, while equity hedge (+4.4%) and macro (+3.7%) also delivered outsized monthly returns.
Manager Comments:
Linden: (+4.8%). Benefitted from reductions in credit spreads and high realized volatility associated with AI names. Also, the Fund participated in several new convertible offerings at favorable terms.
Starboard: (+7.7%). Benefitted from idiosyncratic appreciation in key positions driven by earnings results and corporate events.
Sign up to get Bitterroot Capital Insights delivered to your inbox