May 2016 Investment Market Update
May was a strong month for portfolio performance as we saw gains across all asset class.
The S&P 500 returned 1.8% this month after improving U.S. economic data and comments from Federal Reserve officials signalled that a rate rise could come as soon as June.
The 7% pop in the price of oil also boosted markets specifically Canadian equities (+1%), preferred shares (+4%) and high yield bonds(+0.7%). Last Thursday the Organization of the Petroleum Exporting Countries (OPEC) met but did not formalize a consensus on production cuts. Continuing supply disruption has pushed the oil price back above $50 a barrel.
High yield bonds rebounded in 2016 after the drop in oil prices hurt the asset class last year. We expect the trend to continue into the second half of the year as interest rates remain low and the economy grows slowly. High yield bond valuations are still attractive even after the recent run-up.
REITs returned 0.9% in May, as near-term fundamentals remain positive and capital continues to flow into the sector. Unless there are economic growth surprises in Canada we expect REITs to hold its value.
May exhibited strong performance across all asset classes. As we enter June we remain vigilant of OPEC production limits, the effects of the disruption to the oil supply and the Federal Reserve meeting later this month.
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Neville Joanes is the Portfolio Manager & CCO at WealthBar. Neville oversees portfolio management and investment operations, ensuring that clients’ portfolios meet their objectives. He is dedicated to his goal of always delivering the best investment management to our clients. Neville is also a CFA® charter holder.