The month of May is, in any case, cursed. As per the old adage, investors should “Sell in May and Go Away.” And this May came across true to its ill-repute. Heightened trade tensions resulted in a global market bloodbath in the month.
The S&P 500 (down 6.6%), the Dow Jones (down 6.4%) and the Nasdaq (down 8.7%) were in red in May. All-world ETF iShares MSCI ACWI ETF ACWI lost 6.2%.
Let’s take a look at the key ETF events of the month.
Escalating Trade War: From China to Mexico
The month of May started with escalating U.S.-China trade war, while it ended on trade conflict with Mexico. President Donald Trump announced tariffs of 5% on all goods imported from Mexico in order to curb illegal immigration from Jun 10.
The Trump administration warned further that if Mexico does not bar “illegal migrants” heading to the United States, tariffs would go up to 10% by July, 15% by August, 20% by September and reach a permanent level of 25% by October.
At the start of the month, the Trump administration lifted tariffs on $200 billion worth of Chinese goods from 10% to 25% from May 10 and then banned Chinese firm Huawei Technologies and 26 of its affiliates from doing business with American companies (read: After China, US Hits Mexico With Tariffs: ETFs Under Threat).
Following the news, iShares MSCI Mexico Capped ETF (EWW - Free Report) lost about 3.6% on May 31 while China ETF Xtrackers MSCI China A Inclusion Equity ETF (ASHX - Free Report) was off 9.9% in May.
Global Market Bloodbath Led to Treasury Rally
Global economic threats sparked off recessionary calls. Risk-off trade sentiments gave a boost to treasury investing. Some key parts of the yield curve are inverted now. The 10-year U.S. treasury yield traded below that of the one-month, two-month, three-month, six-month and one-year last week (as of May 31, 2019). iShares 20+ Year Treasury Bond ETF (TLT - Free Report) was up 6.6% last month (read: 10-Year Yield Below One-Year: Play Leveraged Bond ETFs).
Agricultural ETFs Had a Bountiful Stretch
Agricultural commodities surged in May buoyed by bad weather conditions that wreaked havoc in the major growing regions of the crops, delaying the crop plantations. Teucrium Wheat (WEAT - Free Report) added about 12.6% in the past month.
Bitcoin Bounced Bank
Bitcoin, once a laggard, staged a healthy show in May, surging more than 50%. The bitcoin market faced its share of troubles from August 2018 to March 2019. So, many market watchers view the price rally as the end to the bear market. The rally happened despite SEC’s postponement of its decision on the VanEck/SolidX bitcoin (BTC) ETF proposal (read: Will Bitcoin's Solid May Rally Last? ETFs in Focus).
Oil Services Stocks Hit Hard
May was deadly for oil services stocks and ETFs. Oil prices treaded lower in the month with United States Oil Fund LP (USO - Free Report) losing about 13.8% on U.S.-China trade worries and higher inventory build-up. But the pain for oil services stocks was greater than the actual commodity. SPDR S&P Oil & Gas Equipment & Services ETF (XES - Free Report) was off 21.3%.
Market watchers are of the view that “shale producers are cutting back in a bid to conserve capital.” Less capital expenditure among exploration & production companies means “less drilling and fracking work for top oilfield services providers” (read: What Went Wrong With Oil Services ETFs in May?).
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