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Stocks continued rising in May, but at a more subdued pace than the prior month, even though we did begin to see a broadening out of the gains and a rotation from the ‘stay at home safety trade’ that had favoured defensive and technology stocks towards the ‘value-oriented’ cyclical stock groups that would benefit most from a ‘re-opening’ of the global economic. U.S. stocks jumped over 4% in May and, even though the tech-heavy Nasdaq Index lead the way with a 6.7% gain, the more broadly based Russell2000 Index also rose by 6.4%. Global markets rallied too with Japanese stocks up over 8% and Germany up over 6%. The biggest surprise in our view was Brazil, where the 8.5% gain in the Bovespa index seemed at odds with that country’s emergence as the new epi-centre of Covid19 infections. The only weak spots were in India (down 3.8%) and China (Shanghai down 0.3% and Hong Kong losing 6.8%). Canadian stocks also rallied, gaining 2.8% lead by further gains in technology stocks (primarily Shopfiy), more strength in the gold and base metals stocks and a recovery in the health care and consumer discretionary stocks on optimism about more store openings. Index heavyweight bank and energy stocks lagged the gains, though, despite the gain in oil prices and banks mostly keeping dividends intact.
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