Further rise in May

For the month as a whole, the US S&P 500 Index climbed 2.4 per cent measured in USD, while the European Stoxx 600 Index rose by 0.2 per cent measured in EUR and the Nordic VINX Index increased by 0.7 per cent measured in NOK.

Italian and Spanish trouble

After the stock exchanges' flying start to May, we suddenly had flashbacks to the European national debt crisis. This time it was Italy's government bond yields that rose to their highest levels since the national debt crisis of 2011-2012 after the president refused to approve a euro-sceptic as the finance minister. Fears decreased slightly once agreement was finally reached on a more moderate finance minister.

There was also excitement in Spain, where Prime Minister Rajoy was brought down by a vote of no confidence from the left. The new left-wing-led government is hardly a scenario the financial market wants, but since growth in the Spanish economy is good, we do not believe the favourable prospects will be weakened by major reforms.

Positive despite weaker momentum

The situation in the eurozone at present is nonetheless far better than it was before the national debt crisis. For example, we see that Italy's current account balance has risen from minus 3-4 per cent of GDP to almost plus 3 per cent. We see corresponding developments for several PIIGS countries. The fact that the European Central Bank's attitude and capacity have been clearly communicated is also positive. France is the only country where nothing structural has taken place and the current account balance is still negative. At the same time, the eurozone is where the macro momentum has been most disappointing so far in 2018, although the growth level is still good.

Immune to Trump?

Trump's trade policy is constantly causing concern and there is still no final clarification regarding new trade agreements or if a trade war will develop. From a geopolitical viewpoint, May was slightly quieter than the previous months. At the same time, a meeting between North Korea's leader and Trump is still on the agenda for June. The unpredictability surrounding Trump will nevertheless probably remain and be something we must live with. On the other hand, there are signs that the markets are gradually becoming more immune to constant diatribes and mixed signals.

The road ahead …

The stock markets have fought back strongly in the past few months, and the same is true for Delphi's funds which are all in front of their benchmarks so far this year. We still expect 2018 to be a positive stock-exchange year, but are also prepared for fluctuations.

"I don't make jokes. I just watch the government and report the facts"
Will Rogers