3 Markets That Crushed Portfolios in May – What You Need to Know Now!

Stocks

Stock	Price	52 Week Range	Marketcap	EPS	Dividend Yield	Chart (24H)	Sector	Employees	Last Updated
iShares 20+ Year Treasury Bond TLT	$85.72		9.40B	12.59	4.39%			0	3 seconds ago
iShares Core U.S. Aggregate Bon AGG	$97.84		56.02B	0.78	3.81%			0	8 seconds ago
iShares MSCI EAFE ETF EFA	$88.34		82.90B	5.18	2.76%			0	15 seconds ago
Vanguard FTSE Emerging Markets VWO	$48.93		69.39B	3.11	3.02%			0	14 seconds ago
iShares Silver Trust SLV	$33.03		11.28B	3.46	0.00%			0	13 seconds ago

Investors have long adhered to the adage “sell in May and go away,” a strategy intended to sidestep the seasonal volatility that often plagues financial markets. But this year, it seems some investors might wish they had heeded that advice more closely. Despite the robust performance of U.S. stocks in May, several other key markets faced substantial downturns. In this article, we delve into three specific sectors that struggled through May – bonds, international stocks, and precious metals – sectors where investors might feel regret for not selling sooner.

Bonds: A Yield-Driven Decline

iShares 20+ Year Treasury Bond

TLT

$85.72

1%

Financial markets are complex, and the bond market has certainly proved this in May. Bonds were a hotspot of movement as the 10-year Treasury yield rose sharply from 1.67% to 2.16%. That seemingly small percentage change translated into significant losses for bond investors, especially those holding longer-duration bonds.

iShares 20+ Year Treasury ETF (TLT): Big Losses Due to Rising Yields

When yields rise, bond prices fall – a fundamental inverse relationship in the bond market. The longer the bond’s duration, the more sensitive it is to interest rate changes. This sensitivity was acutely felt by holders of the iShares 20+ Year Treasury ETF (TLT), which suffered a near 7% drop in May alone. This ETF’s heavy weighting towards long-duration bonds made it particularly vulnerable to rising rates.

Meanwhile, the iShares Core Bond Market ETF (AGG), with its broader and more balanced exposure, wasn’t spared either, posting a loss of over 2%. While this might seem less severe, for an ETF that aims to provide stability through diversification, it’s a clear indication of widespread pressures across all bond types.

Double Trouble for U.S. Investors

The plight of bondholders wasn’t limited to domestic woes. U.S. investors in international bonds faced a double whammy with declining bond prices compounded by weakening foreign currencies. The anticipated end to the Federal Reserve’s accommodative policies only adds to the uncertainty, suggesting that volatility in the bond market might be here to stay.

Analyst Ratings for iShares 20+ Year Treasury ETF (TLT)

Summary of Analysts’ Outlook: Morningstar rates TLT with a Bronze Medalist Rating based on a fundamental assessment. Analysts at Yahoo Finance have raised the target price to $25.00. The current price is $94.17, suggesting a potential gain of 166.39% based on the average price target.

Analyst Ratings for iShares Core Bond Market ETF (AGG)

iShares Core U.S. Aggregate Bon

AGG

$97.84

0%

Analysts’ Outlook: TipRanks indicates a hold or accumulate recommendation for AGG. Despite recent downturns, the ETF remains stable with minimal potential gain projected.

International Stocks: Global Instability

iShares MSCI EAFE ETF

EFA

$88.34

1%

Editor’s Note: Analysis and insight for this article were originally sourced from our friends at The Motley Fool

Turning to global equity markets, it’s evident that international stocks faced significant hurdles. Developed and emerging markets alike were not spared from declines, demonstrating the risks that come with global investments.

MSCI EAFE Index ETF (EFA): Global Instability Costs Hard

Japan’s financial markets, which had been on a nine-month winning streak, experienced a downturn in May. This market shift was echoed across developed foreign markets, with the MSCI EAFE Index ETF (EFA), which represents a broad range of these markets, losing about 3%. The decline highlights the susceptibilities in economic conditions and investor sentiment abroad.

Emerging markets were hit even harder. The Vanguard Emerging Markets ETF (VWO) fell over 5%, plagued by ongoing concerns over economic stability and rising inflation. These markets are particularly vulnerable, with weak currencies and inflationary pressures eroding the middle class’s standard of living.

Economic Challenges and Geopolitical Contexts

International stocks are heavily influenced by broader economic and geopolitical contexts. Factors like emerging market stability, the strength of the dollar, and global trade policies play a crucial role in determining returns. Staying informed about these broader trends is more essential than ever for investors in global markets. Weak currencies and high inflation are eroding the standard of living in emerging markets, making them less attractive to investors desiring stability.

Analyst Ratings for MSCI EAFE Index ETF (EFA)

Summary of Analyst Outlook: The consensus outlook for EFA is moderate, with a strong bias towards buying. The current price of $81.58 suggests a potential gain of 12.31%, based on the ratings of 746 analysts.

Analyst Ratings for Vanguard Emerging Markets ETF (VWO)

Vanguard FTSE Emerging Markets

VWO

$48.93

1%

Summary of Analysts’ Outlook: VWO has a consensus rating of Moderate Buy, with an average 12-month price target of $555.30, suggesting an 8.59% increase from its current price.

Precious Metals: Safe Havens No More?

iShares Silver Trust

SLV

$33.03

0%

Gold and silver have long been viewed as safe havens during times of economic uncertainty. However, their performance in May has left investors scratching their heads. Instead of providing a buffer, both metals faced continuous declines, suggesting a disconnect between traditional market dynamics and current economic conditions.

iShares Silver Trust (SLV): Safe Haven No More – A Painful Decline

The iShares Silver Trust (SLV), closely tracking the performance of silver, experienced a dramatic 9% drop in May. This followed a 14% decline in April, indicating ongoing issues. Such steep declines highlight that even historically safe assets are not immune to current market forces.

Changing Investor Behavior

The declining prices of precious metals in the face of economic uncertainties speak volumes about shifting market dynamics. Despite market volatility, a stable U.S. economy and measured recovery pace appear to have driven investors away from these traditional hedges and towards more risk-on assets.

Analyst Ratings for iShares Silver Trust (SLV)

Summary of Analyst Outlook: The analysts have given a HOLD rating with an average price target of $25.00. The current price is $26.57, suggesting a potential gain of 4.77%. One analyst has provided this rating with this specific price target.

What’s Next?

The downward trends observed in bonds, international stocks, and precious metals suggest that these markets could face additional pressures in the short term. Major economic shifts or global interventions would be necessary to change this trajectory.

Investor Takeaway

For investors, the key takeaway is to remain vigilant and informed. Factors like central bank policies, geopolitical developments, and currency movements will continue to play significant roles in market performance. Strategic adjustments and a keen eye on economic indicators will be crucial for navigating these turbulent times.

As always, intelligence and strategic thinking are your allies in the market. By understanding these trends and remaining adaptable, you can better position your portfolio to weather any storms on the horizon. Keep an eye on these sectors, and remember, sometimes selling in May might just be the smartest move.