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Performance wrap up-May 2024

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The Bottom Line:  May was a strong month for stocks as well as bond market indices while sustainable investment funds recorded an average 3.7% gain.       

Notes of Explanation: Data as of May 2024. Only the top or bottom share classes are displayed in the case of mutual funds with multiple share classes. Source: Morningstar Direct and Sustainable Research and Analysis LLC.

May was a strong month for stocks as well as bond market indices, reversing April’s declines
May was a strong month for stocks as well as bond market indices, reversing April’s declines. All three major stock benchmarks, the S&P 500 Index, Dow Jones Industrial Average and the Nasdaq Composite, reached new all-time highs and recorded, by month-end, gains of 5.0%, 2.6% and 7.0%, respectively. Ten of the eleven S&P 500 sectors ended the month on a positive note. The Tech sector gained 10%, Utilities added 9% while the Energy sector, due to falling oil prices, declined 0.4%. At the same time, all mid- and small-cap sectors recorded positive results. While well short of its high as the index continues to lag, the small cap Russell 2000 index managed to post a gain slightly above 5.0% that edged out its large cap counterpart by six basis points.
The gain achieved by the S&P 500 was not in the form of a straight-line path
The gain achieved by the S&P 500 was not in the form of a straight-line path. Except for two trading days through May 21st, the S&P 500 moved steadily higher, benefiting from the strength in the performance of four mega tech stocks that reflected continued investor enthusiasm for the artificial intelligence boom. These included Nvidia, Apple, Microsoft and Alphabet that together accounted for more than half of the benchmark’s gain in May. Also contributing to May’s positive momentum were better than expected corporate earnings. Geo-political and US political considerations did not seem to weigh on markets.
The positive momentum achieved during the first three weeks of May, however, was interrupted during the last seven trading days of the month when the S&P 500 gave up almost 1% of its month-to-date gain. Economic data releases showed signs of disinflation, but not yet enough to satisfy the Federal Reserve Bank’s target. As a result, expectations for an interest rate cut were pushed back again to just a single one-quarter percentage-point cut this year. Also, softer than expected revised first quarter GDP numbers, weaker than expected job creation, and shakier retail sales led to worries about slowing consumer demand and decelerating economic growth.
Investment-grade intermediate bonds, as measured by the Bloomberg US Aggregate Bond Index, gained 1.7%, well above its monthly 10-year average
The Federal Reserve, meanwhile, expressed disappointment in the continued strength of inflation and noted that it would take longer to be certain of when it would reach the 2% inflation target before lowering interest rates. 10-Year Treasury yields, which ended April at 4.69%, declined by 18 basis points (bps) to end May at 4.51%. Two-year rates dropped by 15 bps to end May at 4.89%–reflecting a continuing inverted yield curve and recessionary fears. Against this backdrop, the Bloomberg US Aggregate Bond Index gained 1.7%, well above its monthly 10-year average.
Overseas benchmarks staged strong recoveries relative to April
Like US indices, overseas benchmarks staged strong recoveries relative to April. The MSCI ACWI ex USA gained 5.79% while MSCI EAFE added 7.07% and the MSCI Emerging Markets Index posted an increase of 3.4%.
Sustainable investment funds recorded an average gain of 3.7% in May
Against this backdrop, focused sustainable mutual funds and ETFs, a total of 1,491funds/share classes and $339.1 billion in total net assets, recorded a combined average gain of 3.7%. Only 45 funds/share classes or 3%, primarily municipal funds, recorded negative results in May. US equity funds added 4.3%, international equity funds gained 4.5% and taxable bond funds registered an average increase of 1.4%.
Performance results ranged from a low of -3.12% posted by the $115.2 million Eventide Exponential Technologies Fund C. The actively managed fund invests in companies that are participating in and benefitting from technologies, innovations, technology themes, or technology trends, using a values-based screening process to analyze all potential investments for the company’s ability to operate with integrity and create value for customers, employees, and other stakeholders by reflecting a set of ethical values that are inspired by the Christian faith and rooted in a biblical worldview. At the other end of the range is the passively managed thematic $50.7 million Global X Hydrogen ETF that provides exposure to companies that are positioned to benefit from further advances in the field of hydrogen technology. The fund recorded a gain of 27.97% in May.
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