Equity markets worldwide rose for a fourth month, a rout in technology shares was erased and the Standard & Poor’s 500 Index reached a record in May as economic growth picked up and tensions between Ukraine and Russia eased.
The MSCI All-Country World Index jumped 1.8% and touched the highest level in more than six years. Emerging markets led gains in stocks as benchmark indexes in India, Russia, Hungary and Argentina jumped at least 8%. The S&P 500 added 2.1% as investors returned to technology stocks and sent Apple Inc. shares up 7.3%.
Forecasts for a rebound in U.S. growth in the second quarter and stimulus from central banks in Japan and Europe, along with higher-than-estimated corporate earnings, helped send the value of global shares to a record $64 trillion. Russia has pulled back most of its troops from the border with Ukraine, a U.S. defense official said on May 30, as government forces continued a campaign to wipe out separatist rebels.
“The market to some extent has built up expectations for a strong second half of the year,” Jim Russell, a senior equity strategist at U.S. Bank Wealth Management, which oversees $120 billion, said by phone from Minneapolis. “Many people entered May with Russia on their minds and with sluggish economic indicators on their minds, and it really hasn’t turned out that way.”
The S&P 500 climbed to an all-time high of 1,923.57 to end the month after shrugging off a report showing the U.S. economy contracted for the first time in three years during the first quarter. A pickup in receipts at retailers, stronger manufacturing and faster job growth indicate the first-quarter setback will prove temporary as pent-up demand is unleashed.
Federal Reserve policy makers said at their April meeting that the economy has strengthened after adverse weather took its toll. Central-bank stimulus has helped propel the S&P 500 higher by as much as 184% from its bear-market low in March 2009.
“I don’t think the market is trading irrationally right now, but a lot of people assume that given the bull market run we’ve seen, there should be a pullback,” Kevin Mahn, president and chief investment officer of Hennion & Walsh Asset Management in Parsippany, N.J., said in a phone interview. His firm oversees more than $600 million. “I point to the economic data that suggests I can make a more plausible argument for upside than a significant downside.”
Economic reports in the coming week include data on factory orders and car sales, as well as the government’s monthly payrolls report on June 6.
The S&P 500 has rebounded 5.9% since a selloff in small-cap and Internet shares spread to the broader market and dragged the gauge to a two-month low in April. The technology-heavy Nasdaq 100 Index climbed 4.3% in May to erase its declines during that period.
Netflix Inc. rallied 30% for the largest May gain in the S&P 500 and TripAdvisor Inc. climbed 20% as the Dow Jones Internet Composite Index rebounded after an almost 20% drop from a 13-year high. Tiffany & Co. soared 14% after profit beat analyst estimates.
Of the 492 companies in the U.S. benchmark equity gauge that have released earnings for last quarter, 74% have reported better-than-expected profit and 53% said revenue exceeded estimates in the period.
The S&P 500 is trading at 16.3 times estimated earnings. That’s below valuations from the market’s previous two peaks, when the ratio reached 16.7 in October 2007 and 26.3 in March 2000, according to data compiled by Bloomberg.
The Chicago Board Options Exchange Volatility Index (VIX), a gauge of volatility known as the VIX, slumped 15% for the month. The VIX has closed below 12 for five straight days, the longest streak since 2007.
The MSCI All-Country World Index finished the month about six points away from its all-time high reached in 2007.
Asian stocks rose for a third week, with the regional benchmark gauge capping its steepest monthly rally since September. The MSCI Asia Pacific Index posted a 3.2% gain for the month.
Equities in Europe have risen for seven consecutive weeks, the longest streak since August 2012, amid speculation the European Central Bank will introduce further stimulus. The Stoxx Europe 600 Index advanced 1.9% for the month, trading near the highest level since 2008. ECB President Mario Draghihas said policy makers are ready to ease monetary policy at their June 5 meeting if necessary.
The MSCI Emerging Markets Index surged 3.3% in the month for its biggest gain since October. Russia’s Micex (INDEXCF) Index rallied almost 10% in May for its biggest gain since 2011 and the ruble strengthened more than 2% versus the dollar amid easing concern about tensions with Ukraine.
President Vladimir Putin has refrained from escalating the crisis in Ukraine, following the country’s presidential election on May 25. Petro Poroshenko, who won the poll with more than 50% of the vote, has vowed to wipe out insurgents and re-establish order.
Treasuries are posting the biggest monthly gains since January as signs the world’s largest economy is failing to grow as anticipated leads investors to unwind bets for higher borrowing costs. The Bloomberg U.S. Treasury Bond Index (BUSY) rose 1.1% through May 29, pushing its gain for 2014 to 3.5%.
The Bloomberg Global Developed Sovereign Bond Index advanced 0.4% in May and is up 4.3% this year. All 26 bond markets from Hungary to Japan tracked by Bloomberg and the European Federation of Financial Analysts Societies gained during the month.
In currencies, the Bloomberg Dollar Spot Index rose 0.3% in May after a three-month slump. The Mexican peso, South Korean won and Canadian dollar rallied at least 1% versus the greenback.
The S&P GSCI Index of 24 commodities slid 0.4%. Wheat dropped 13% in May for its biggest loss since 2011 as weather reports turned favorable. Coffee, cotton and corn lost at least 8%, while West Texas Intermediate crude oil and aluminum jumped more than 2%.
Gold futures dropped 3.9% for the month, the most since December, as the U.S. equity rally and signs of easing tensions in Ukraine curbed demand for the precious metal as a haven. The metal has climbed 3.6% in 2014.