Global stock markets ended the month with their worst performance in two years. A flight to safety pushed the U.S. 10-year Treasury yield to an all-time low of 1.58%. The S&P 500 index fell 6.27%. This was the index’s eighth worst May in history, and its worst performance since its 8.20% loss in May 2010. But that year the returns for the index actually totaled 15.06%. Currently, the S&P is down 7.66% from its April 2nd high, but it remains 5.16% ahead YTD with dividends included.
The foreign developed (MSCI EAFE Index) stock market fell 12.09%. The emerging stock market (MSCI EEM Index) dropped 11.67%. Year-to-date total returns for the MSCI EAFE and EEM indexes are negative by 3.79% and 1.1% respectively.
U .S. real estate securities (Dow Jones Wilshire Reit) fell 4.85%, Gold (DJ UBS Gold index) declined 6.14%, Commodities (DJ AIG Commodity Index) dropped 9.13%, Bonds (Barclays Aggregate I/T Index) gained 0.43%, and Inflation Protected Securities spiked 1.79%. YTD returns for U.S. real estate securities are + 7.52%. Gold is down 0.64%. Commodities are down 8.72%. Bonds are up 2.0%% and Inflation Protected Securities are up 4.52%.
With the current difficulties in Europe, with expectations for lower growth in China, with the budget impasse here in the U.S., not to mention rising global stock market volatility, the year-to-date returns are not nearly as dire as one might have anticipated. In fact, the pessimism engulfing the markets may well dissipate soon enough.
European leaders might soon agree on a course of action that would offer hope for recovery in the most troubled of its member countries. The EU financial system might garner the support of common institutions. And the United States may find ways to assist the EU, in spite of fiscal pressure and congressional resistance to extending foreign aid. The U.S. stock market might gain stability from a new consensus on bank regulation. And though weak, the current hiring trend might sway the Federal Reserve to put out yet another stimulus package. Finally, consensus might be reached on a domestic budget package that would advance economic recovery. As for China, word of re-igniting growth through faster construction of railroads, schools, clinics and other infrastructure sounds promising.
In conclusion, we are facing difficult times here and abroad. But the means to recovery are tangible.