Global markets were relatively flat in May. In the U.S., markets continued to stabilize, sustaining the trend witnessed in March and April. Foreign markets were mixed during the month as growth continued to slow in China and investors became increasingly concerned with Britain’s potential exit from the European Union (“Brexit”). Commodities were mostly flat for the month as measured by the Bloomberg Commodity Index (-0.2%). Positive returns from energy offset negative returns from other subsectors within the index. Within energy, oil prices continued to rise as forest fires in British Columbia prompted the shutdown of nearly 40% of the regions oil sands production, leading to a significant decrease in oil production. Oil returned (+5.2%) as measured by West Texas Intermediate Crude. Noteworthy domestic asset class performance during the month included equities and real estate which outperformed their foreign counterparts. The measurements used for comparison were: the S&P 500 Index (+1.8%), MSCI ACWI ex U.S. (-1.7%), the Dow Jones U.S. Select REIT Index (+2.0%) and the S&P Global ex-U.S. Property Index (-2.5%). Within fixed income, U.S. Government bonds outperformed foreign developed and emerging market bonds. Also in the U.S., high-yield bonds performed in line with their investment grade counterparts. Despite weak performance for the month of May, year-to-date commodities and foreign bonds have outperformed U.S. stocks, U.S. REITs, and U.S. investment grade bonds.

Global uncertainty will cause volatility levels to remain at their long-term average as we move into the summer months. After a weaker-than-expected jobs report was issued early in June, the probability of a rate hike in the U.S. has been drastically reduced. Uncertainty surrounding the outcome of the Brexit vote on June 23rd has already begun to weigh on foreign markets and a vote to exit, in our view, would have negative effects on the European Union. Despite the current level of volatility, we are seeing fundamentals continue to drive asset prices which bodes well for undervalued growth assets. Currently, we see the most opportunity for growth outside the U.S. and favor emerging market assets relative to their developed market counterparts. Within fixed income, we favor U.S. short-duration debt over intermediate and long-duration debt. We maintain an allocation to short-term U.S. bonds and foreign government bonds to provide stability to our portfolios. This capital can be reallocated to growth assets in the event market conditions continue to improve. Consequentially, we expect to remain slightly overweight growth assets relative to our benchmark throughout June, with a slight chance of increasing allocations to risky assets later in the month.