May proved to be another positive month for investors, with global equity markets extending the gains seen in April and delivering further positive returns across most major regions. Despite persistent geopolitical uncertainty and elevated energy prices, risk appetite remained. Tentative signs of progress toward a resolution of the Iran conflict provided a degree of cautious optimism, while continued enthusiasm for artificial intelligence, resilient corporate earnings, and improving sentiment across emerging and Asian markets collectively underpinned a broadly positive environment for risk assets, shares in particular.
Source: Bloomberg
Global equities delivered strong returns through May, with performance again concentrated in technology-led markets and those most exposed to the AI investment cycle. The Nasdaq 100 was a standout performer of the month, gaining 8.9% in euro terms – a remarkable result that reflects both the continued rotation into high-growth technology names and the broadening of the AI theme beyond the handful of mega-cap names that drove earlier gains. Investors increasingly looked past inflation fears, focusing instead on the structural earnings tailwinds being created by the accelerating deployment of AI infrastructure globally.
Asia and emerging markets were also among the strongest contributors to global equity returns, both gaining more than 10.0%. These regions continued to benefit from their central role in the global technology supply chain, with semiconductor manufacturers and hardware producers in Taiwan and South Korea again driving outsized returns. A stabilising US dollar provided an additional tailwind, improving the attractiveness of emerging market assets for international investors.
Japanese equities also performed well, with the MSCI Japan index gaining 5.3% in euro terms. Japan’s market continued to attract interest from global investors drawn to its improving corporate governance and improving earnings. This was tempered somewhat by rising rates and some volatility in Japanese government bonds and the yen.
In the US, the S&P 500 rose 5.6% in euro terms, a solid result. Earnings results continued to broadly exceed expectations, with the technology sector again leading. The labour market remained resilient, and consumer spending – supported by ongoing tax incentives – held up better than many had anticipated given the persistence of elevated fuel costs. The Federal Reserve maintained its current interest rate stance, though several committee members signalled a higher-for-longer bias, contributing to an increase in Treasury bond yields.
European equities posted more modest gains rising 3.4% in euro terms. While the region participated in the broader global risk-on move, weaker purchasing managers’ data and softening consumer confidence pointed to the ongoing economic drag from elevated energy costs. Inflationary pressures remained a concern and that continues to constrain the European Central Bank’s ability to consider rate cuts.
The UK was again the relative laggard, with the FTSE 100 closing the month down 0.1% in euro terms. The index’s high weighting in energy, financials, and defensive sectors served it well earlier in the year but meant it got left behind in May in a rally driven overwhelmingly by technology and growth stocks. UK inflation remained above target and the Bank of England adopted a more negative tone, suggesting that rate cuts are unlikely in the near term. The Euro strengthened modestly against Sterling as political uncertainty clouded the picture about economic growth.
Source: Bloomberg
Bond markets were mixed in May but overall broadly positive. European government bonds rebounded as the ECB suggested that rate increases would be very carefully considered and that there was a need to avoid premature action. Corporate bonds increased to reflect the over positive stance on risk.
Taken together, May’s moves across bond markets illustrate the central tension facing policymakers globally: the need to contain inflation on one hand, and the imperative to protect increasingly fragile growth on the other. This divergence is likely to remain a source of volatility within government bond markets in the months ahead and reinforces the importance of diversified and selective positioning within fixed income allocations.
The picture in the US was notably different. Resilient growth figures and rising inflationary pressures continued to keep the Federal Reserve in a more hawkish posture, with markets pricing in the possibility of further rate increases – a dynamic that weighed on Treasury valuations and left US government bonds as the weakest performer within the fixed income universe through the month.
Overall, as May drew to a close, markets found themselves navigating a familiar but increasingly complex set of crosscurrents. The AI investment theme remains a powerful force, capable of driving significant equity returns. Yet the persistence of above-target inflation across the US, UK, and eurozone has meaningfully reduced the likelihood of near-term rate cuts, instead supporting renewed uncertainty.
Energy prices remain a central variable. Oil continues to trade broadly between $90 and $110, underpinning inflation expectations and complicating the path for central banks, though any resolution to the Middle East conflict could shift this picture quickly.
Wide diversification and meaningful allocations to growth assets through a selective exposure to the structural growth themes reshaping the global economy remain the most effective tools available to investors navigating this environment.
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This publication was prepared by Bernard Walsh, Head of Investments & Pensions for Fairstone Asset Management DAC trading as Fairstone & askpaul.
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Information as of the date of publication 30/04/2026
