Focusing on investment markets has provided a welcome distraction from obsessing with armchair epidemiology. It has been another extraordinary month for investors and three things have stood out.
There is an old investment saying of “Sell in May & Go Away”, which no one seems to have listened to this year as global stock markets extended the strong recovery seen since March (Source FE Analytics). Investors are focusing on two key themes; That lockdowns are slowly lifting and activity is picking up and the belief that stimulus packages from central banks and governments will prevent a deep and prolonged recession.
Japan was the pick of the major stock markets in May generating a return close to 7% (Source FE Analytics). Japan has a reputation for resilience and is not called a safe haven for nothing. The recent rally is sign of investors identifying the financial strength of many Japanese companies (and their balance sheets) as well as the relatively low valuations compared to some other developed markets.
Continuing on the theme of a push into safety, May witnessed the first ever auction of negative yielding Gilts. This means that some investors paid to lend the government money and will get back less at maturity than they invested! The UK has hereby joined the very special club of countries with government bonds with negative yields… Government bonds are traditionally a low risk component of an investment portfolio and this illustrates the price some investors are willing to pay for the security these assets provide.
The information in this post is not financial advice, it is provided solely to help you make your own investment decisions. If you are unsure about whether an investment is appropriate for you, please seek professional financial advice. You can find more information here.
When you invest you should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future return.