After falling in April, May was, overall, a positive month for equity, albeit with some volatility and a weaker finish. The month started off strong, with markets fueled by optimism about potential interest rate cuts from the U.S. Federal Reserve (ironically due to an apparently softening US economy) and a fairly robust corporate earnings season. However, as the weeks progressed, persistent inflation concerns and mixed economic data tempered the initial enthusiasm, leading to a more subdued performance towards the end of the month.

In Australia, the S&P/ASX 300 gained 0.9%, with the S&P/ASX 100 rising 1.0% and the Small Ordinaries remaining flat. The technology sector was the standout performer, surging 4.5%, while financials (+2.6%), utilities (+3.4%), and REITs (+1.9%) also outperformed. On the other hand, energy (-0.4%), consumer staples (-1.0%), and telecom (-2.8%) sectors posted declines.

Internationally, developed markets, as measured by the MSCI World ex-Australia index, rose 2.0% in AUD terms and 4.0% in hedged terms. The US S&P 500 was a notable performer, gaining 5.0% for the month, driven by strong corporate earnings and the ongoing AI-related boom. European markets also fared well, with the Euro Stoxx 50 climbing 2.4% and the German DAX rising 3.2%. However, emerging markets struggled, with the MSCI Emerging Markets index falling 1.8% in AUD terms.

In the fixed income space, Australian bonds delivered a modest 0.4% return, slightly outperforming global aggregate bonds, which rose 0.8%. Global credit (+1.3%) and high yield (+1.0%) also posted gains for the month. Listed property and infrastructure were among the best-performing asset classes, with global REITs rising 2.8% (unhedged) and 3.3% (hedged), and global infrastructure surging 4.3%.

Commodities had a mixed month, with gold rising 1.8%, while the broad S&P GSCI index fell 2.2%, largely due to a 6.0% decline in oil prices. The Australian dollar strengthened against the US dollar, appreciating by 2.8% over the course of the month.