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Sustainable mutual funds post an average decline of 1.05% in May 2023
US stocks posted a narrow increase in May, adding 0.43% according to the S&P 500 Index on a total return basis. This augmented the 9.65% year-to-date gain that was achieved against a backdrop of lower inflation, tight labor market and healthy consumer spending. The S&P 500 was in negative territory for much of the month…
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The Bottom Line: Technology heavy and growth-oriented sustainable mutual funds and ETFs registered strong performance results in May and extended their wide performance lead year-to-date.
US stocks posted a narrow increase in May, adding 0.43%, while bonds dropped 1.09%
US stocks posted a narrow increase in May, adding 0.43% according to the S&P 500 Index on a total return basis. This augmented the 9.65% year-to-date gain that was achieved against a backdrop of lower inflation, tight labor market and healthy consumer spending. The S&P 500 was in negative territory for much of the month but recorded gains during each of the last three trading days, perhaps due to the realization that a debt ceiling impasse may be resolved by the House of Representatives. That said, stock leadership was attributed to a very narrow list of growth-oriented technology stocks. In fact, the largest ten names in the S&P 500, supported by strong earnings reports and fueled by investor expectations regarding the future potential of AI, accounted for nearly all the index’s year-to-date total return. The Nasdaq 100 gained 7.73% in May. Growth stocks outperformed value-oriented equities while large cap stocks eclipsed small cap stocks.
Bonds, as measured by the Bloomberg US Aggregate Bond Index, recorded the second lowest monthly decline since the start of the year, giving up 1.09%, but still preserving its year-to-date gain of 2.46%.
Overseas, stocks and bonds didn’t perform as well. The MSCI ACWI ex USA Index registered a decline of 3.64%, Europe gave up 4.23% and the MSCI EM Index posted a drop of 1.68%. The Bloomberg Global Aggregate Bond Index posted a drop of 1.95%.
Four of six selected ESG indices outperformed their conventional counterparts
When compared to a selection of six sustainable securities market indices, four ESG indices outperformed their conventional counterparts in May while four ESG indices either outperformed or matched their conventional indices on a year-to-date basis. The two laggards in May included sustainable small cap stock as well as emerging market stock indices.¹
Mutual funds and ETFs registered an average decline of 1.05%
At the same time, sustainable mutual funds and ETFs, a total of 1,602 funds/share classes with $313.5 billion in assets under management, delivered an average decline of 1.05% in May, 4.21% year-to-date and a negative 0.71 basis points over the trailing twelve months. Only 25% of funds/share classes posted zero to positive returns in May. Equity funds registered an average decline of 1.25% in May while fixed income funds recorded a drop of 0.80%.
The top 10 funds added 5.74% while bottom 10 funds gave up 8.3%
The top 10 performing sustainable funds, including mutual funds and ETFs, posted an average gain in May of 5.74% and 17.72% year-to-date. These funds were dominated by holdings in technology and/or growth-oriented stocks. At the other end of the range, the 10 lagging funds in May registered average declines in May and year-to-date of 8.31% and 11.85%, respectively, due to holdings in beaten-down clean-energy stocks.
¹The indices include the MSCI USA ESG Leaders Index, MSCI USA Small Cap ESG Index, MSCI ACWI ex USA ESG Leaders Index, MSCI EAFE ESG Leaders Index, MSCI EM ESG Leaders Index and the Bloomberg US Aggregate ESG Focus Index.
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