Monthly Review and Outlook May 2026

Global equities advanced during May, with emerging markets outperforming developed markets. Gains were driven by strong corporate earnings and continued investor interest in technology and AI-related themes, although selectivity among the largest companies became more evident.

• United States: US equities rose over the month, supported by a generally positive end to the corporate earnings season. Information technology was the strongest-performing sector, reflecting ongoing AI-driven demand. However, there were signs that investors became more selective within the largest technology stocks, focusing more closely on earnings delivery and valuations.
• Europe: Eurozone equities delivered positive returns, supported by solid corporate earnings. Information technology and consumer discretionary stocks were among the strongest performers. Inflation rose to 3.0% in April from 2.6% in March, largely driven by higher energy prices, highlighting ongoing cost pressures in the region.
• United Kingdom: UK equities posted more modest gains and underperformed other regions. This was largely due to weakness in the energy and healthcare sectors, which are more heavily represented in the UK market. This offset strength seen in other areas.
• Japan: Japanese equities extended their recent gains, supported by strong performance in AI- and semiconductor-related companies. These sectors benefited from continued global demand and positive signals from US peers, alongside broadly resilient domestic fundamentals.
• Emerging Markets: Emerging market equities outperformed developed markets, supported by improving sentiment and continued optimism around AI-driven growth. Gains were led by technology-heavy markets such as Taiwan and South Korea, where semiconductor and memory stocks performed strongly. Hopes of progress towards a US–Iran agreement also contributed to improved sentiment despite ongoing geopolitical tensions.

Fixed income markets were positive overall in May, although volatility remained elevated. Movements in government bond yields were closely linked to developments in energy markets and geopolitical sentiment.

Yields rose to multi-year highs mid-month as concerns about escalation in the Middle East increased. However, these moves largely reversed by the end of the month as expectations grew that tensions could ease and fears of stagflation moderated.

Corporate bonds performed well and outpaced government bonds. In the US, investment grade bonds outperformed high yield, with some weaker performance in financials. In contrast, eurozone high yield bonds generally outperformed investment grade, supported by improving risk sentiment.

Commodities declined overall during May.

Energy was the weakest component, as the fragile ceasefire in the Middle East held and optimism grew around the potential for a more lasting agreement. This weighed on oil prices.

Precious metals also fell over the month, reflecting reduced demand for safe-haven assets as geopolitical concerns eased.

Looking ahead, markets are likely to remain sensitive to geopolitical developments, particularly in the Middle East, as well as to changes in energy prices and inflation expectations.

While the positive earnings backdrop and continued growth in AI-related sectors provide support for equities, investor selectivity is increasing, particularly among the largest companies.

Central banks are expected to remain cautious as they balance moderating inflation pressures against ongoing economic uncertainty. This could contribute to continued volatility across both equity and bond markets.

As ever, maintaining a diversified approach across asset classes and regions remains important. Periods of uncertainty can create short-term fluctuations, but also reinforce the value of a long-term investment perspective.

Forecasts of future performance are not a reliable guide to actual results, neither is past performance a reliable indicator of future results. The value of investments and the income from them can fall as well as rise and are not guaranteed, and the investor might not get back their initial investment.

Any views expressed are our in‑house views as at end‑May 2026. Investment markets and conditions can change rapidly, and the views expressed should not be taken as statements of fact nor relied upon when making investment decisions. This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.

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