As May finished, the S&P 500 managed to close the month a minuscule 0.22 points higher than where it ended April - but as usual, that does not tell anything like the whole story. May was another month where volatility reigned supreme.
Although the US index was broadly unchanged by the end, it still swung through a range of more than 10% during May and, at one point, touched its lowest point since March 2021. The final week saw many stock markets claw back some of their earlier losses leaving some traders wondering - and probably hoping - that a major low had been seen.
But others would say that this is still premature, and investor sentiment remains cautious at best. Geopolitical uncertainty remains with the Russian invasion of Ukraine continuing - although it continues to feel that investors' attention has been pulled away from that war and back to watching inflation and interest rates.
Next week, markets expect an interest rate rise from the European Central Bank. Some would say that central banks have been behind the curve when combating inflation - raising rates too slowly and not by enough.
The ECB is certainly the tortoise in that race and has yet to raise its base rate, but that may change next week. The euro has enjoyed a rare rally against the US dollar over the past couple of weeks, with perhaps the expectation of a rate rise providing something of a tailwind here. It will be interesting to see if this ends up being a case of “buy the rumor, sell the news” if the ECB does raise next week and we see that long euro downtrend resume as the sellers return.
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