It’s not all doom and gloom, especially if you own UK shares

The world’s largest stock markets have lost trillions of dollars in value in 2022, but some are faring much better than others. It’s been no different in May.

Investors who followed the old stock market adage – “Sell in May and go away, come back on St Leger Day [usually mid-September]” will be smiling following a grim performance from most global equity markets in May 2022. Those who got out of US tech stocks will be happiest of all.

Only three of the world’s major stock markets – Shanghai, Frankfurt and our own FTSE 100 - had posted gains for the month as at the close of play on 26 May. American tech index the Nasdaq Composite was the worst performer, down 5%, with the UK’s AIM All-share index of smaller companies down over 6%.

The FTSE 100 added 0.3% in May. That followed a 0.4% gain in April at a time when the Nasdaq and other growth markets were in freefall.

It’s been the same story this month as it has been for much of this year. If it’s not concerns about the impact of inflation and rising interest rates on growth, it’s the global cost-of-living crisis and the threat of recession.

A run of disappointing corporate results out of the US has also dented confidence and caused a dramatic decline in share prices of the offending companies and sector peers. Standout fallers in recent weeks have included retail giants Walmart Inc (NYSE:WMT) and Target Corp (NYSE:TGT), social media firm Snap Inc Class A (NYSE:SNAP) and tech company Cisco Systems Inc (NASDAQ:CSCO).

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There’s been further drama at Twitter Inc (NYSE:TWTR), too, just weeks after Tesla Inc (NASDAQ:TSLA) owner Elon Musk agreed to pay $44 billion for the social media platform. He’s now fretting about the number of spam and fake accounts and claims the deal has been put “on hold”. Tesla shares have not fared well recently which is affecting the billionaire’s funding plan.

Fewer company results in the weeks ahead should mean less drama, but the risk of disruptive macro events and geopolitical developments remains.

Investors already expect further interest rate rises both here and in the US, but commentary from policymakers will be closely followed. So will economic data that could hold clues to the path of inflation and any possible pressure on central banks to deviate from the course currently anticipated by financial markets.

Can investors afford to relax in June?

June is often a bringer of positive change - the start of the summer and better weather putting us all in a good mood. Unfortunately, the same is rarely true of the stock market.

In the past 15 years, the FTSE All-Share has risen only four times, including 2019 and 2020. In June 2021, the index was down a fraction of a percent. This performance means it ranks among the weakest months for share price returns.  

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“June is not usually a good month for investors,” says Harriman’s Stock Market Almanac. “The market falls more often than it rises in June, and when the market does decline the falls can be quite large, whereas the positive returns are usually only modest.”

With no end in sight to the conflict in Ukraine, inflation at a 40-year high and interest rates set to keep rising, investors will have plenty to monitor in the weeks ahead. There will also be a seasonal lull in the corporate calendar following a slew of FTSE 100 results over the past month or so.