CIO Monthly Observations - May 2023
Markets in Review
Markets were volatile in April, rising for most of the month, then dropping negative in 2 of the last 4 trading days before month-end; then reversed course again and finished up for the month. The S&P 500 gained 1.5% in April, improving its year-to-date performance to 8.6%. The MSCI All Country World index also rose, gaining 1.3% during the month and extending its year-to-date return to 8.2%. The Bloomberg BarCap U.S. Aggregate Bond index improved 0.6% during April and its year-to-date return is now 3.6%.
The topsy-turvy month was included a surprise oil production cut, a takeover of the second largest bank in Switzerland and antitrust actions out of the UK, which blocked Microsoft from acquiring Activision, as they were deemed to have too much market power.
Credit Suisse, the second largest bank in Switzerland, was taken over by UBS Microsoft’s bid to buy Activision was blocked by UK regulators
OPEC+ surprised the market by cutting oil production by over 1 mm barrels per day
News in Review
Below are some stories that caught our eye this past month. To learn more, follow the links to the full article.
Switzerland’s second biggest bank was in danger of going bankrupt, but regulators decided to allow UBS to take them over in order to prevent contagion risk. Similar to the problems at US banks in the previous month, Credit Suisse faced a severe bank run and a takeover was determined to be the best option, because it would deliver “considerable confidence” to investors.
Microsoft was attempting to buy Activision, a maker of video games, for $69 billion dollars, but regulators in the United Kingdom vetoed the bill on antitrust grounds. Microsoft said it would appeal the decision, but pressure had been mounting on them as US and European regulators have been skeptical of the tie-up. Had it gone through it would have been one of the top 30 largest acquisitions ever. According to one expert, “Microsoft already enjoys a powerful position in cloud gaming, and this would [enable them] to undermine new and innovative competitors.”
Saudi Arabia and the other countries in the OPEC+ oil cartel announced that they were cutting oil production by
1.16 million barrels per day. The decision was a surprise and represents 3.7% of global demand, which had some people fearing this would make the existing inflation problem worse. However, if we have a recession then it is possible that oil prices will go lower anyway, which would alleviate some of the pricing pressures.
An Italian artist had created a piece called the “Comedian,” which is a duct-taped banana on a wall. One day a South Korean graduate student saw it and ate it because he said he was hungry. Initially employees were very upset, but because they replace the banana every few days in order to keep it looking fresh, they decided not to press charges against the student.