Market Commentary

May 2026 delivered a strong reminder that markets often confound consensus expectations. Despite a backdrop of elevated geopolitical risk, persistent inflation pressures and rising energy costs, global equities produced robust returns, extending April’s momentum.

The defining feature of the current market environment remains the divergence between strong corporate earnings—particularly within global technology—and the growing complexity facing policymakers. While structural growth themes, most notably artificial intelligence, continue to support markets, the persistence of supply-side inflation and geopolitical uncertainty requires careful navigation.

Against this backdrop, we remain focused on balancing participation in global growth opportunities with prudent risk management, ensuring portfolios remain resilient across a range of potential outcomes.

International markets delivered a particularly strong performance during May, defying the traditional “sell in May and go away” narrative. Building on April’s momentum, equities were supported by robust corporate earnings and continued investment in technology. Improving sentiment around potential easing of Middle East tensions also helped stabilise the outlook for energy prices.

At the same time, inflation pressures remain elevated across several major economies, largely driven by energy costs. This continues to complicate the policy backdrop, with central banks balancing inflation risks against slowing growth dynamics.

USA

US markets delivered another exceptional month, with major indices again reaching record highs. The Nasdaq led gains, rising by 8.4%, supported by continued strength in technology shares. The S&P 500 gained 5.1%, while the Dow Jones rose by 2.8%.

Investor sentiment remained supported by strong corporate earnings, with many companies exceeding expectations. Inflation data showed renewed upward pressure, however, with headline inflation rising to 3.8% and core inflation to 2.8%, moving further away from the Federal Reserve’s target.

The Fed’s preferred inflation measure also edged higher, reinforcing expectations that interest rates may remain elevated. Despite this, markets continued to focus on earnings resilience.

Europe

European markets delivered a more muted performance relative to the US and Asia. Germany’s DAX rose by 3.3%, while France’s CAC increased by 0.8% over the month.

The region continues to face structural headwinds, including lower exposure to global technology leadership. Inflation pressures also increased, with eurozone inflation rising to 3.0%, largely driven by energy costs.

This has placed the European Central Bank in a difficult position, as it attempts to manage inflation without undermining an already fragile recovery.

UK

The UK market experienced a volatile month, ultimately ending broadly flat with a modest gain of 0.3%.

Inflation surprised to the downside, declining to 2.8% in April due to lower energy prices and government support measures. However, this is expected to be temporary given ongoing energy market uncertainty.

The Bank of England remains constrained by weak growth alongside persistent inflation risks and limited fiscal flexibility.

China

Chinese markets ended the month weaker, with the Hang Seng declining by 2.3% and the Shanghai Composite down 1.1%, as early gains were offset by profit-taking in technology and semiconductor stocks.

Economic data pointed to a stabilising but subdued environment, with manufacturing activity easing slightly while non-manufacturing improved marginally.

China’s continued focus on energy security, supported by significant crude stockpiles, remains a key buffer against global supply disruptions.

Japan

Japan was the standout performer among major markets, with equities surging by 11.9% and reaching record highs above 66,000.

The rally reflects both strong global demand for technology exposure and a continued structural re-rating of Japanese equities. Inflation remained contained at 1.4%, allowing for a supportive policy stance.

However, rising energy costs and global disruptions remain a risk to the outlook.

South Africa

The local market traded largely sideways, ending slightly lower by 0.3%, with weakness in resource stocks weighing on performance.

Sector returns were mixed, with financials and property outperforming, while industrials and resources lagged.

Inflation accelerated to 4.0% year-on-year in April, prompting the SARB to increase interest rates by 25 basis points to 7%—its first hike since May 2023.

The central bank also revised its inflation outlook higher and highlighted risks including energy disruptions and climate-related shocks.

Encouragingly, South Africa received a ratings outlook upgrade from Moody’s, reflecting improving fiscal stability.

What this means for your investments

The environment remains supportive of equities, particularly where earnings remain strong. However, persistent inflation and geopolitical uncertainty suggest markets are likely to remain sensitive to macroeconomic developments. For investors, this reinforces the importance of maintaining diversification across regions and asset classes, while balancing exposure to growth themes with resilience in a higher-for-longer interest rate environment. The current backdrop highlights the need for disciplined portfolio construction—ensuring exposure to long-term growth opportunities while remaining sufficiently diversified to navigate potential shocks.

The path ahead is likely to remain characterised by volatility, but this continues to present opportunities for long-term investors focused on fundamentals and valuation discipline.

As always, our approach remains anchored in delivering consistent, real returns over time, while actively managing risk in an increasingly complex and interconnected global environment.