Surprise Resilience in the US Markets — Market Insights (May 2023)
Endowus Insights
Join our in-person China & HK Market Outlook event with Abrdn, Allianz Global Investors, and JPMAM. RSVP here

Surprise Resilience in the US Markets — Market Insights (May 2023)

15 Jun
15 Jun

Surprise in resilient lift of US markets

Endowus conducted a market outlook survey with more than 50 fund management companies at the beginning of the year. More than half of the respondents had expected emerging markets, China, and Asia to be the regions with the best investment opportunities in 2023. Less than 10% of the respondents picked the US. 

Chart: Best opportunities in equities in 2023, according to the Endowus market outlook survey of leading fund managers. Most of the respondents said emerging markets and China would bring the best opportunities this year, while less than 10% picked the US.

We are now halfway into the year, and 2023 has played out differently from expectations going into the year. The MSCI China Index has retracted about -8.4% while the S&P 500 has increased by 9.7%. Where is the US market drawing its strength from?

In the past few weeks, we’ve seen the fog lift from the US markets as the debt ceiling saga came to a conclusion (for now). The Federal Reserve has signalled that a pause in rate hikes may be coming, on the back of high-profile regional bank failures, and US inflation rising only at a 4% annual rate in May 2023, the lowest in the past 2 years. 

We have seen mixed signals in the US economy with solid numbers in spending and labour market data versus weakness in the survey data. However, the overall hard data of the economy and corporate earnings have been more resilient than previously expected.

The labour market, overall, has been solid, with the May US jobs report continuing to beat expectations as the US labour market added more jobs than previously anticipated. On top of that, the automotive and housing markets — which could have cooled down more quickly in response to rising rates — are showing signs of recovery. Car prices have generally remained high partly due to the supply issues that arose during the pandemic. Housing prices, which came down hard last year, have also started to recover amid lower inventory.

Chart: US employers added 339,000 jobs in May 2023. Source: US Bureau of Labor Statistics, The New York Times. Note: data is seasonally adjusted.

On the other hand, wage growth has slowed down. We are seeing that job growth in goods-producing industries in the US has visibly stalled while the services sectors continued to add jobs. This puts less pressure on the Fed to immediately resume its rate hike after the probable pause in June.

While US inflation continues to cool down, it still remains far above the Fed’s 2% goal, and we expect the Fed’s future decisions will continue to be data-dependent.

Chart: US inflation remains high - year-on-year percentage change in the Personal Consumption Expenditures Index (all items and excluding food and energy). Inflation has cooled down from the highs of 2022, but remains far above the Fed's 2% goal. Source: US Bureau of Economic Analysis, The New York Times.

Another reason the S&P 500 index has been strong this year is the strength of a handful of tech stocks that have seen stellar rallies on the back of the artificial intelligence (AI) euphoria

The generative AI application ChatGPT reached the 100 million mark in downloads in just two months, eclipsing the likes of TikTok. Big Tech stocks linked to the AI wave have been snapped up by investors, leading the Nasdaq 100 index to rise about 31% year-to-date. The top seven Big Tech stocks in the S&P 500 index have appreciated about 72% on average in the year-to-date period ended 31 May 2023, while the index itself rose a mere 9.7%.

Chart: 2023 year-to-date returns as of May, in US dollars, of indices and stocks. Including MSCI China, S&P 500, Nasdaq 100, Apple, Microsoft, Alphabet, Amazon, Tesla, Meta, Nvidia. Source: Endowus Research

Webinar replay: Does ChatGPT herald a new era for AI and tech investing?

Positioning your portfolio for the rest of 2023 

As a region, developed market equities have outperformed emerging market equities in the year-to-date period ended 31 May 2023, and China’s recovery has seemingly faltered. But, it is hard to predict whether that would continue to be the case for the rest of the year, given the challenges that the developed markets, especially the US, continue to face. 

Many experts chose fixed income as the asset class with the best risk-return profile at the beginning of 2023, and fixed income remains a core and important part of any investor’s portfolio. Investment grade debt has historically been able to protect investors in down markets, while high yield can help meet your income needs with higher-yielding coupons. Without timing the market, investors should look to their goals, risk tolerance level, and investment horizon to determine the right mix of asset classes for their portfolio. 

Even experts can get it wrong. That’s what this unusual year has shown. At Endowus, we continue to advocate investing in a globally diversified portfolio precisely for this reason — it is impossible to predict and time the markets and an investor would most likely be better off investing in the entire global market. 

Likewise with fixed income, taking into account risk-return preferences and trade-offs, investors should consider investing in a globally diversified fixed-income portfolio with exposure to multiple asset classes, including investment grade, high yield, and emerging-market debt.

Endowus offers globally diversified model portfolios that are curated and designed by our Investment Office for Hong Kong investors. The Endowus Global model portfolios are made up of equity and fixed-income funds and can make up the backbone of an investor’s overall strategy for general wealth accumulation needs. For more details, click here. Webinar replay: Navigating fixed income markets in 2023 with PIMCO

May market commentary

Global markets in May 2023 were marked by nervousness over the US debt ceiling drama. A deal between the Democrats and Republicans was finally reached in the last few days of the month, averting a potentially disastrous US technical debt default. The US labour market continues to show signs of strength as job growth numbers beat expectations. The Fed has signalled a possible pause in further tightening. There appeared to be a further bifurcation of performance between different sectors as technology and AI-related industries received a boost from the increased interest in AI. The S&P 500 index was about flat for the month while the Nasdaq 100 rose 7.7%.

In Europe, markets saw a weak May as recent economic reports indicated a weaker economy amid persistent inflation, even as several countries reported a slowdown in price increases. Germany is now in a technical recession as its gross domestic product (GDP) in Q1 2023 declined further after a negative quarter in Q4 2022. The European Central Bank (ECB) signalled possible further rate hikes to combat inflation, as did the Bank of England (BoE). The MSCI Europe Index was down by about 5.9%.

Japan was one of the best-performing countries for the month. Japanese stocks continued to enjoy positive momentum, driven by positive GDP growth in Q1 2023, strong domestic demand, and recovering tourism. The MSCI Japan Index rose 1.9% for the month.

Emerging markets ex-China eked out a positive gain of about 1.4%. But the region as a whole was dragged down by China as the latter declined 8.4% in May. China saw weaker-than-expected demand and economic data sparking a sell-off by disappointed investors.

Growth stocks, led by Big Tech, outperformed value stocks in May, while global large-cap stocks continued to outpace small-cap stocks.

Bond yields generally rose in the month, leading to negative returns for fixed income across most asset classes. The Bloomberg Global Aggregate Index retracted by about 2%. In most regions, investment-grade debt outperformed high yield. The US dollar continued to show strength against the G10 currencies.

The S&P GSCI — a benchmark for investment in the commodity markets — declined by about 6% as all the sectors within the index ended in negative territory in May.

Building a long-term resilient portfolio with Endowus Hong Kong

It is almost impossible to predict exactly how macro events would play out. However, spreading your investments across asset classes and geographies will help with diversifying your risk. With market volatility comes opportunities. If you have a long-term investing horizon, as many of us do, these developments may offer an opportunity through steady, regular investing in diversified and risk-adjusted portfolios.

With digital wealth platform Endowus, you can plan and manage your money — by investing in Best-In-Class Funds and globally diversified, low-cost model portfolios seamlessly.

Click here to get started on your investing journey with Endowus Hong Kong today.

Read more:


Risk Warnings

Investment involves risk. Past performance is not an indicator nor a guarantee of future performance. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Rates of exchange may cause the value of investments to go up or down. 

This article is not intended to be relied upon as a forecast or research or investment advice, and should not form the basis of any investment or other decisions. The information contained herein is not intended, and should not be construed, as any legal, tax, regulatory, accounting or financial advice. If you would like investment, accounting, tax or legal advice, you should consult with your own professional advisors regarding your individual circumstances and needs.

The information in this article may not be suitable for all investors. You are responsible for any action that you take or decision that you make in reliance on any content in this article, and you agree that Endowus HK Limited (“Endowus”) is not liable under any circumstances.

No invitation or solicitation

Neither the information, nor any opinion, contained in this article constitutes a recommendation, offer or solicitation  by Endowus or its affiliates to you to buy or sell any securities, collective investment schemes or other financial instruments or services, nor shall any such security, collective investment scheme, or other financial instruments or services be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction. 

This is not intended to be an invitation or offer made to the public to subscribe for any financial product or to enter into any transaction.

Accuracy of Information

Whilst Endowus has made reasonable efforts to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies or errors in any such information. Endowus does not warrant or represent that the information in this article is correct, accurate or reliable. 


Any opinion or estimate above is made on a general basis and none of Endowus, nor any of its affiliates, representatives or agents have given any consideration to nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Opinions expressed herein are subject to change without notice.  

Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this article are subject to market influences and contingent upon matters outside the control of Endowus and therefore may not be realised in the future. 

In presenting the information above, none of Endowus, its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances.

This article has not been reviewed by the Securities and Futures Commission of Hong Kong.

More on this Tag
No items found.
All you need to know about personal finance and investing
Please wait while we are submitting your email...
Thank you! Your submission has been received!
invalid email address

Table of Content