With everyone having pushed the "sell in May and go away" mantra hard this year, gains of more than 2% for the S&P 500 (SNPINDEX:^GSPC) during the month gave stock market bulls some comeuppance against their more bearish counterparts. Despite fears of an imminent correction, stocks once again proved their strength in the face of adversity and pushed higher.
But not every financial market was so lucky. Let's turn to three hard-hit markets where investors would really prefer to turn back the clock and get a do-over rather than holding onto their positions.
Almost across the board, bond markets suffered big losses in May. With the yield on the 10-year Treasury going from 1.67% to 2.16%, even just a half-percentage-point gain in rates was enough to send the iShares 20+ Year Treasury ETF (NYSEMKT:TLT) down almost 7% for the month. Shorter-duration funds didn't suffer as much, but the iShares Core Bond Market ETF (NYSEMKT:AGG) lost more than 2%.
Overseas bond markets also suffered losses, with U.S. investors suffering the double-hit of falling bond prices and weakening foreign currency values compared to the U.S. dollar. As much as investors have been frightened of a possible end to the Fed's accommodative monetary policies, international bond markets could suffer more as risk-averse investors unwind carry-trades based on formerly wider interest rate differentials. For now, popular sentiment is for interest rates to keep moving higher in the near term.
2. International stocks
U.S. stocks did well in May, but overseas, investors weren't as lucky. Japan's stock market ended its nine-month streak of monthly gains with a slight loss in May, but when you measure from much-higher levels mid-month, the Nikkei has lost almost 14% from its highs. More broadly, an ETF tracking the popular MSCI EAFE index of developed foreign markets lost about 3% on the month.
Even worse were emerging markets, where the Vanguard Emerging Markets ETF (NYSEMKT:VWO) fell more than 5%. Another casualty of the flight from risk, emerging markets haven't inspired confidence among investors that they have the wherewithal to withstand the economic challenges they're facing. Unlike in the U.S., inflation is a fear in many parts of the emerging world, and weak currencies don't help countries that rely on imports to give their rising middle-classes the standard of living they want. For now, those trends appear to be firmly in place, and consequently, international markets will likely continue to stay under pressure.
3. Precious metals
As painful as April was for gold and silver, May turned out to be little better. Gold dropped almost 6% in May after losing more than 7% in April, while the corresponding losses for the silver-tracking iShares Silver Trust (NYSEMKT:SLV) were roughly 9% in May versus 14% the previous month.
The problem precious-metals investors face is that gold and silver tend to perform well in times of trouble, and despite all the uncertainty we've seen lately, one area that hasn't been disappointing is the U.S. economy. As long as the recovery sticks to the middle of the road, advancing at a measured pace but not picking up so much speed that it leads to dramatic central-bank action to thwart potential overheating, it will be difficult for precious metals to get back on their feet.
In the near term, all the trends pushing these markets lower appear to be intact. Unless the U.S. economy falters or unless we start seeing collective interventions around the world to halt the gains for the U.S. dollar, investors shouldn't expect a big turnaround in any of these markets in the near future.
Fool contributor Dan Caplinger owns shares of Vanguard Emerging Markets ETF. You can follow him on Twitter: @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.