Market Review – May 2024

Richard Wallis

Head of Research & Investment


In May, global equity markets rose due to investor anticipation of interest rate cuts and strong corporate earnings. Developed markets outperformed emerging markets, though both saw gains. Fixed income markets ended the month slightly higher.

CR = Capital return; LC = Local currency

Source: Lipper for Investment Management

Past performance is not a reliable indicator of future performance


  • Equities: The FTSE 100 reached a new record high, led by financials and industrials, though it underperformed the mid-cap FTSE 250. The FTSE 250 was boosted by bid activity and support from domestically focused sectors, driven by the UK economy’s return to growth and declining inflation.
  • Interest Rates: The Bank of England (BoE) kept its interest rate unchanged at 5.25%, with increasing speculation of a rate cut in June. This decision came as the BoE highlighted encouraging news on inflation but indicated the need for more evidence of sustained low inflation before reducing rates, with future economic data releases being monitored closely.
  • Economic Growth: The UK economy grew by 0.6% quarter-on-quarter in the first quarter of the year, the fastest pace since late 2021. Growth was driven by the service sector and manufacturing, while construction declined. The ONS noted that the economy had exited a shallow recession. For the month of March alone, the economy grew 0.4%, well above the forecasted 0.1% expansion, driven again by the service sector.
  • Unemployment: Unemployment rose to 4.3% in the three months to March, the highest since mid-2023, although the Office for National Statistics continued to highlight the increased volatility in the survey responses due to the smaller sample sizes and that the estimate should be treated with additional caution. Wage growth remained strong, with regular pay excluding bonuses growing by an unchanged 6% year-on-year compared with the previous period, surpassing expectations of a small decline. When adjusted for inflation, annual regular pay growth was 2%.
  • Inflation: The Consumer Price Index (CPI) fell to 2.3% in April, the lowest since July 2021, though the decline was smaller than anticipated. The drop was primarily due to lower energy prices, despite increases in motor fuel, mobile phone bills, and rents. Core inflation, which excludes food, energy, alcohol and tobacco prices, fell to 3.9%, also a smaller fall than expected.


  • Equities: The S&P 500 recorded strong gains in May, driven by expectations of interest rate cuts later in the year and positive earnings updates. The information technology, utilities, and communication services sectors led the gains, while the energy sector was the only one to suffer a loss, impacted by declining oil prices.
  • Interest Rates: The US Federal Reserve held its interest rate steady at in the 5.25%-5.5% range, whilst indicating that although still leaning towards rate cuts it may still be some time before there are reductions due to persistent inflation concerns. The Fed emphasised the need for more progress towards its 2% inflation target before considering rate reductions.
  • Economic Growth: The US economy grew at an annualized rate of 1.3% in the first quarter, slower than the initial estimate of 1.6% and significantly below the previous quarter’s 3.4% growth. The revision was due to lower consumer spending, particularly on durable goods, despite upward revisions in business investment and government spending.
  • Inflation: The CPI rose by 0.3% in April, below the previous month’s increase and forecasts. Major contributors were shelter and gasoline prices, which were responsible for over 70% of the increase, while food prices remained stable overall. Core CPI, excluding food and energy, also rose by 0.3%, with an increase in services inflation and a further decline in core goods prices.


  • Equities: European markets, represented by the FTSE World Europe ex UK Index, rebounded from losses in the previous month and hit record highs in May. The gains were driven by expectations of an interest rate cut in June, which helped lift investor sentiment.
  • Economic Growth: The Eurozone economy grew by 0.3% quarter-on-quarter in the first quarter, recovering from the recession of the previous two periods. Among the major economies, Germany, France, and Italy saw modest growth, while Spain posted a robust 0.7% increase. Year-on-year, the Eurozone economy expanded by 0.4%.
  • Inflation: Eurozone inflation remained unchanged at 2.4% year-on-year in April. While non-energy industrial goods saw a slowdown in price rises, food, alcohol, and tobacco prices increased at a faster pace. Energy prices fell at a slower pace compared with March.  Core inflation, which excludes energy, food, alcohol, and tobacco prices, fell for the ninth consecutive month from 2.9% to 2.7, but was slightly above the expected decline to 2.6%.

Asia and Emerging Markets

  • Japan: Japan’s economy contracted by 2% annualized in the first quarter, worse than the expected 1.5% fall. The weak yen negatively affected consumer spending, and private consumption declined for the fourth consecutive quarter. Business spending also decreased, partly due to disruptions at major companies like Toyota.
  • Asian Markets: The MSCI Asia ex Japan Index rose in May, supported by gains in China, Taiwan, Singapore, and Malaysia. These gains outweighed the losses in South Korea, which underperformed due to specific economic challenges.
  • Emerging Markets: The MSCI Emerging Markets Index underperformed developed markets but still recorded a small rise in May. Gains in Asia and Emerging Europe were partially offset by losses in Brazil, which led to Latin America’s overall underperformance.


Fixed Income

UK fixed income markets posted small gains in May, despite some declines in the latter half of the month due to disappointing inflation data. Corporate bonds outperformed government bonds, with spreads between the two tightening.


This update is intended to be for information only and should not be taken as financial advice.

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