Noteworthy Developments
Global equities, as represented by the MSCI ACWI Index, rallied strongly by 5.8% during May, with all major regions performing strongly.
Global Equities
Global equities appreciated by 5.8%, with US large-cap equities (S&P 500) up 6.3%, international developed equities up 4.6% and and emerging market equities up 4.3% in USD terms.
The strong S&P 500 performance was driven by a) continued improvement in investor sentiment that the ultimate effect from tariffs would be manageable in terms of corporate earnings and consumer strength, b) strong performance by the Magnificent Seven (11.9%) driven by continued high earnings growth, c) broader resumption of the AI trade as AI demand remains extremely robust, and d) benign inflation reports with no detrimental effects from tariffs thus far. International developed and emerging markets strong equity performance was largely driven by improved sentiment surrounding tariffs.
Globally, growth stocks (8.3%) significantly outperformed value stocks (3.2%). Technology, communication services, and industrial sectors (10.4%, 8.8%, and 8.2%) performed best while health care and consumer staples sectors (-3.5%, and 1.4%) performed worst.
Fixed Income
The US Aggregate Bond Index was down 0.7%, with declines driven by increasing bond yields. US government bonds were down 1.0% as bond yields increased by 25bps to 30 bps across the curve. Investment grade corporate bonds were flat as price increases from tightening spreads were offset by increasing base rates. High-yield bonds were up 1.7% with positive contributions from high coupon rates and significant spread tightening partially offset by increases in base rates. Leveraged loans were up 1.5% with strong performance driven by high current income coupled with spread tightening.
Alternatives
The HFRX Global Hedge Fund Index was up 1.2%, with most strategies delivering positive performance. Long/short equity (2.6%) and convertible arbitrage (2.1%) strategies performed best while global macro / trend following hedge funds performed worst at -0.4%.
Manager Comments
Alphadyne: 2.5%
Outperformed the HFRX Index (1.2%) and recovered some of April’s MTM losses with strong performance across many relative value trades.
Lancaster: 7.8%
Outperformed the MSCI Europe Index (4.7%) with the outperformance driven by the Fund’s cyclically oriented positions, which rallied strongly following the walk back of Trump’s draconian Liberation Day tariffs.
USD May Market Commentary
USD May Market Commentary
Noteworthy Developments
Global equities, as represented by the MSCI ACWI Index, rallied strongly by 5.8% during May, with all major regions performing strongly.
Global Equities
Global equities appreciated by 5.8%, with US large-cap equities (S&P 500) up 6.3%, international developed equities up 4.6% and and emerging market equities up 4.3% in USD terms.
The strong S&P 500 performance was driven by a) continued improvement in investor sentiment that the ultimate effect from tariffs would be manageable in terms of corporate earnings and consumer strength, b) strong performance by the Magnificent Seven (11.9%) driven by continued high earnings growth, c) broader resumption of the AI trade as AI demand remains extremely robust, and d) benign inflation reports with no detrimental effects from tariffs thus far. International developed and emerging markets strong equity performance was largely driven by improved sentiment surrounding tariffs.
Globally, growth stocks (8.3%) significantly outperformed value stocks (3.2%). Technology, communication services, and industrial sectors (10.4%, 8.8%, and 8.2%) performed best while health care and consumer staples sectors (-3.5%, and 1.4%) performed worst.
Fixed Income
The US Aggregate Bond Index was down 0.7%, with declines driven by increasing bond yields. US government bonds were down 1.0% as bond yields increased by 25bps to 30 bps across the curve. Investment grade corporate bonds were flat as price increases from tightening spreads were offset by increasing base rates. High-yield bonds were up 1.7% with positive contributions from high coupon rates and significant spread tightening partially offset by increases in base rates. Leveraged loans were up 1.5% with strong performance driven by high current income coupled with spread tightening.
Alternatives
The HFRX Global Hedge Fund Index was up 1.2%, with most strategies delivering positive performance. Long/short equity (2.6%) and convertible arbitrage (2.1%) strategies performed best while global macro / trend following hedge funds performed worst at -0.4%.
Manager Comments
Alphadyne: 2.5%
Outperformed the HFRX Index (1.2%) and recovered some of April’s MTM losses with strong performance across many relative value trades.
Lancaster: 7.8%
Outperformed the MSCI Europe Index (4.7%) with the outperformance driven by the Fund’s cyclically oriented positions, which rallied strongly following the walk back of Trump’s draconian Liberation Day tariffs.
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