Market review – May 2026

Equities (company shares) enjoyed very strong performance in May, driven by gains in AI-related sectors, positive corporate earnings and signs of easing tensions between the US and Iran. Bond markets were more unsettled, experiencing volatility as investors reacted to changing inflation dynamics and geopolitical developments, which led to sharp moves in yields (the income you earn from bonds).

US equities were again the standout performers, with both the S&P 500 Index (which tracks the 500 largest US stocks) and NASDAQ (which tracks US technology companies) reaching record highs during the month. This was supported by exceptional corporate earnings, particularly within semiconductors (computer chips) and AI infrastructure.

Japanese equities also performed well, driven by increased investment from overseas investors and AI-linked stocks, with technology investment firm SoftBank notably becoming the country’s largest company by market capitalisation.

European and UK equities also advanced, but did not keep pace with global peers. North Asian markets such as Korea and Taiwan outperformed on semiconductor strength, while Chinese equities underperformed amid disappointing economic data.

Early in the month, sovereign bond yields rose (to multi-year highs in some cases) as elevated oil prices fueled inflation concerns and reduced expectations for rate cuts. However, prices recovered, supported by the decline in the oil price later in the month. UK gilts (UK government bonds) posted decent gains, supported by softer inflation data and despite domestic political uncertainty, following the weak showing by the government in local elections. EU sovereign bonds edged higher, while US Treasuries (US government bonds) were broadly flat overall.

Although energy markets were volatile during the month as events in the Middle East played out, oil prices ultimately declined significantly in May on increased hopes of a diplomatic resolution to the US-Iran conflict. Copper prices rose on continued structural demand linked to electrification (the shift from earlier energy sources such as coal, gas and oil to electricity) and data centre investment. Among precious metals, the silver price rose, but gold fell.

The US dollar recovered from April’s weakness, strengthening against the euro, UK pound and Japanese yen.

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