May was a good month for returns from both equities and fixed income. Ongoing investor optimism about the economic outlook supported risk assets, with developed market stocks delivering returns of 4.5% over the month.

February proved to be a positive month for stock markets, as robust economic data and relatively strong earnings reports played significant roles in contributing to year-to-date gains.

After the year-end excitement, January presented a mixed bag for investors. Initially, equity markets surged due to robust activity data, but the Fed’s January meeting, marked by a hawkish tone, tempered performance.

The last months of 2023 provided some relief for investors, with both bonds and equities gaining. Data suggesting inflation is easing reinforced investors’ view that most developed market central banks have finished their monetary tightening cycles.

Navigating through October presented a series of challenges for investors as both equities and bonds experienced declines. Despite the ongoing resilience observed in the US economic activity throughout the year, the overall outlook points towards an imminent slowdown.

Investors went into the third quarter increasingly confident that a recession was unlikely this year, thanks in large part to a continued healthy job market and consumer spending. Following a robust rally however, the third quarter offered something of a reality check.

Over the summer, market volatility has increased (especially in August), reflecting renewed stress in the Chinese property market, weak Chinese macroeconomic data and an increase in sovereign bond yields.

After a strong run since October, Europe ex-UK equites fell 2.1% over the month. Core inflation remained stubbornly high in Europe and the prospect of sustained strong wage growth has fuelled investor concerns that central banks could tighten further.

Equity markets continued their rally and have now broadly recovered from the tumult in March. However, core inflation increase by 0.1 percentage points, meaning that markets think that the European Central Bank has more to do.