Executive Summary
After a disappointing April, May turned out to be a great month for global markets, especially S&P500 that went up by 4.8% to clock a YTD of 10.6%. Japan is up 17% for the year. Like they say, “Lift all boats”, all markets and asset classes (equities, gold, bitcoins, etc.) got lifted but the macro backdrop continues to be confused. Index is a misnomer as only a handful of stocks shape the index these days. From Magnificent 7 to Magnificent 5 and now to Magnificent 1 (Nvidia), the stock market stands on just one leg (stock). Higher rates should technically result in lower valuation (theory). But higher for longer rates seem to enthuse stock markets across the world so much so that we can count several big markets that are now experiencing lifetime highs. I have never seen such stock market lifetime highs when interest rates remain elevated. There are no precedents to “higher rates and higher valuation” in any of the past Fed hikes going back to 1950’s. Looking ahead, something should give in.
