May 2023 Commentary
Among the headlines in May was the U.S. debt ceiling and what it meant if no agreement was struck in Congress ahead of the June 5 deadline. The impact of a default on U.S. government debt would likely be unthinkable, possibly resulting in turmoil in financial markets and significant job losses across markets. On June 3, U.S. President Biden signed a bill that would suspend the debt ceiling to avert a default.
Meanwhile, the FOMC will meet again on June 13 and 14 to discuss the next move on the federal funds rate. Expectations from market analysts were mixed. After the FOMC meeting in May, the consensus was that we may have witnessed the final rate hike. However, strong employment data, persistent core inflation and general resilience in the economy may have altered some analyst expectations.
In May, the S&P 500® ended the month relatively flat, with a return of 0.25% after recovering from losses earlier in the month. At the same time, U.S. Treasuries, as represented by the iBoxx $ Treasuries, lost 1.25%.
The overall index retreated 0.77% in May, with declines observed across all rating and maturity segments. Losses were more pronounced in the high yield segment (down 3.41%) compared to investment grade bonds (down 0.37%).
Except for Singapore (up 0.46%), all other markets that make up the top seven largest in the index saw negative returns. South Korea (down 1.15%) and Indonesia (down 0.73%) were the worst-performing markets.
