U.S. and International Equities

The month of May proved to be mixed for the U.S. major market indexes. Last month’s top performer, the Nasdaq composite, was May’s laggard. International developed markets (MSCI EAFE) outperformed emerging markets (MSCI EM) last month as well.

Energy Powers Ahead

Energy completely reversed course with a very strong May after April’s showing as the worst performing sector. West Texas Intermediate’s (WTI) strong May performance helped drive the sector’s advance.  WTI crude has more than doubled over the past year. Financials had a s

The amount of negative yielding debt is shrinking and that’s a good sign that the global economic recovery is well underway. While negative yielding debt became prevalent in many non-U.S. countries after the Global Financial Crisis of 2008/09, the amount had surged to over $18 trillion due to the accommodative monetary policies adopted immediately after the COVID-19 shutdowns. As economies recover though and with the eventual normalization of monetary policy, interest rates have started to move higher and now many developed non-U.S. countries have bond yields at multi-year highs.

As seen in the LPL Research Chart of the Day,

U.S. and International Equities

The major US markets were higher this week, as market participants took concerns about inflation in stride.  US small caps (Russell 2000) equities were the best performing US asset class this week and continue to lead as we approach mid-year.  Going forward, LPL Research believes the early-stage bull market along with young economic expansion could continue to help small caps. Markets overseas finished higher, with the emerging market equities (MSCI EM) outperforming the developed markets (MSCI EAFE).

Earnings, Earnings, Earnings

S&P 500 Index earning

In terms of whether economic data is either beating or missing economists’ forecasts, it appears conditions may now be a bit better overseas. Driven by some improving COVID-19 trends, the economic backdrop has improved overseas, while high economic expectations have proved to be a more formidable hurdle here in the U.S. This improvement has helped to steady the foundation in many non-U.S. equity markets, and has caused us to improve our outlook for developed non-U.S. stocks.  We believe the improving COVID-19 trends in Europe could be particularly sticky as vaccine distribution becomes more widespread.

For several year