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.
Global Equities:
Global equities advanced during May, with the MSCI ACWI Index gaining 5.2% and all regions delivered strong performance. US large-cap equities (S&P 500) rose 5.2%, while international developed equities gained 3.1% and emerging market equities advanced 9.7%. The S&P 500’s strong performance was driven by a 19.8% gain in the technology sector. Unlike in recent months, all subsectors within US technology performed well with semiconductors and software stocks both delivering 22% returns.
Emerging markets (+9.7%) performed best with Korea (+35%) and Taiwan (+16%) 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 (+7.3%) outperforming value (+3.2%). Sector performance reflected continued enthusiasm around artificial intelligence and digital infrastructure investment, with information technology (+17.9%) leading gains. Consumer discretionary (+2.8%) and healthcare (+1.7%) posted modest gains, while more defensive sectors lagged, including consumer staples (-2.2%) and utilities (-4.9%). Energy (-6.0%) declined alongside lower oil prices.
Fixed Income:
Fixed income markets posted positive returns during May, with the US Aggregate Bond Index gaining 0.3%. US Treasuries advanced 0.1%, with coupon income offset by price declines associated with higher bond yields across much of the intermediate portion of the curve.
Credit markets outperformed government bonds. Investment grade corporate bonds gained 0.8% while high yield bonds (0.5%) and leveraged loans (0.5%) also performed well with strong performance, supported by coupon income and modest spread tightening as corporate earnings remained strong.
Alternatives:
Hedge funds extended gains during May, with the HFRX Global Hedge Fund Index advancing 1.7%. Convertible arbitrage (+3.5%) strategies performed best, while equity hedge (+2.8%) and macro (+2.1%) also delivered outsized monthly returns.
Manager Comments:
Linden: (+3.2%). 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: (+6.0%). Benefitted from idiosyncratic appreciation in key positions driven by earnings results and corporate events.
USD 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.
Global Equities:
Global equities advanced during May, with the MSCI ACWI Index gaining 5.2% and all regions delivered strong performance. US large-cap equities (S&P 500) rose 5.2%, while international developed equities gained 3.1% and emerging market equities advanced 9.7%. The S&P 500’s strong performance was driven by a 19.8% gain in the technology sector. Unlike in recent months, all subsectors within US technology performed well with semiconductors and software stocks both delivering 22% returns.
Emerging markets (+9.7%) performed best with Korea (+35%) and Taiwan (+16%) 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 (+7.3%) outperforming value (+3.2%). Sector performance reflected continued enthusiasm around artificial intelligence and digital infrastructure investment, with information technology (+17.9%) leading gains. Consumer discretionary (+2.8%) and healthcare (+1.7%) posted modest gains, while more defensive sectors lagged, including consumer staples (-2.2%) and utilities (-4.9%). Energy (-6.0%) declined alongside lower oil prices.
Fixed Income:
Fixed income markets posted positive returns during May, with the US Aggregate Bond Index gaining 0.3%. US Treasuries advanced 0.1%, with coupon income offset by price declines associated with higher bond yields across much of the intermediate portion of the curve.
Credit markets outperformed government bonds. Investment grade corporate bonds gained 0.8% while high yield bonds (0.5%) and leveraged loans (0.5%) also performed well with strong performance, supported by coupon income and modest spread tightening as corporate earnings remained strong.
Alternatives:
Hedge funds extended gains during May, with the HFRX Global Hedge Fund Index advancing 1.7%. Convertible arbitrage (+3.5%) strategies performed best, while equity hedge (+2.8%) and macro (+2.1%) also delivered outsized monthly returns.
Manager Comments:
Linden: (+3.2%). 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: (+6.0%). Benefitted from idiosyncratic appreciation in key positions driven by earnings results and corporate events.
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