May 2017 Overview

Key drivers of performance during the month included:

  • Political uncertainty remained elevated despite a positive result in the French election.
  • A credit rating downgrade and a proposed bank tax weighed down Australian financials.
  • Falling commodity prices weighed on commodity linked corporate sectors. 

This environment proved favourable for portfolios with larger exposures to global listed equites and government bonds, while domestic equities underperformed.


Key factors impacting financial market performance during the month were:

Equity Markets

  • Global listed equity markets posted positive returns, outperforming Australian listed equities which posted negative returns.
  • International political uncertainty remained elevated over the month. President Trump’s dismissal of the head of the Federal Bureau of Investigation, coupled with a lingering Senate investigation into Russian involvement in the US election contributed to investor cautiousness.
  • In Europe, the political situation was mixed. The beginning of May saw a wave of optimism, with the reformist candidate, Emmanuel Macron, comfortably winning the run-off French presidential election. In contrast, the UK political situation looked more uncertain as the Conservative Party’s lead in the polls narrowed materially.
  • Australian equities posted negative returns. Banking stocks led the falls, with a proposed bank levy, coupled with a credit rating downgrade heightening already cautious sentiment.
  • Falling commodity prices also weighed on the Australian market, as iron ore slumped amid a build-up of steel inventories in Chinese ports.

Debt Markets

  • Government bond markets produced positive returns as heightened uncertainty supressed bond yields. Inflation linked bond markets were an exception to this, posting modest negative returns as expectations of future inflation fell.
  • Corporate bonds performed in line with other risk assets as the premium that investors demand for bearing this risk contracted modestly. Emerging market debt was an exception to this, with the risk premium remaining largely unchanged.


  • The Australian dollar fell modestly despite a fall in commodity prices.
  • Currency movements were driven by many of the same themes as risk assets. The Euro appreciated as the result of the French election became known, while the British Pound depreciated as expectations about the result of the upcoming election became less certain.