May 2026 ended with broad gains across global stock markets, with Wall Street hitting new all-time highs. The dominant theme of the month was the strength of the technology and artificial intelligence sectors, accompanied by a sharp drop in oil prices and signs of easing geopolitical tensions in the Middle East. Investors continued to reward AI-driven growth, pushing ongoing tensions to the background.
In the United States, the Nasdaq 100 gained 10.5%, the S&P 500 5.1%, and the Dow Jones 2.8%, with all three indices building on their year-to-date gains to +20.1%, +10.7%, and +6.2%, respectively. In Europe, the monthly gain was more modest: FTSE MIB +3.7%, DAX +3.3%, SMI +3.1%, Euro Stoxx 50 +2.9%, CAC 40 +0.8%, FTSE 100 +0.3%. In Asia, the Nikkei stood out with a gain of +11.9%, while the CSI 300 rose 1.8%; the Hang Seng, however, was down, falling 2.3%.
WTI crude oil recorded its sharpest monthly decline of the year, dropping to around $86 per barrel—a decline of approximately 17%. The decline was fueled by diplomatic progress on the Iran issue and the easing of tensions in the Strait of Hormuz. Gold, on the other hand, lost 1.7% over the month, though it remained in positive territory year-to-date with a gain of 4.3%. On the currency front, the dollar weakened against the euro, which appreciated by 0.6% during the month, while the Swiss franc fell 0.1% against the dollar. Bitcoin lost 3.7% during the month and Ethereum 11.4%, with both cryptocurrencies in negative territory year-to-date.
On the central bank front, May marked an important milestone: on May 22, Kevin Warsh was sworn in as Chair of the Federal Reserve, succeeding Jerome Powell, who remains on the Board as a governor. The transition comes at a delicate time, with consumer inflation at 3.8% and producer prices at 6.0%—figures that leave little room for an immediate easing of monetary policy. Markets are not pricing in rate cuts for the remainder of 2026, with the first FOMC meeting led by Warsh scheduled for June 17. The new chairman faces the challenge of balancing pressure from the White House for lower rates with inflation still well above target.
In Europe, the picture remains complex. The ECB’s mid-May bulletin confirmed that inflation rose to 3% in April, driven by a surge in energy prices, which grew by 10.9% year-over-year. Preliminary May data showed Eurozone inflation at 2.8%, with energy prices still playing a decisive role. Analysts expect two rate hikes by the ECB by the end of the year, in June and September, with the deposit rate expected to rise from the current 2% to 2.5%. Growth estimates for the Eurozone in 2026 have meanwhile been revised downward to 0.8%.
On the geopolitical front, May saw tangible progress in negotiations between the United States and Iran, although no final agreement was reached by the end of the month. In mid-May, the first positive signs emerged, with Tehran willing to dispose of its stockpiles of enriched uranium in exchange for the lifting of the U.S. naval blockade. By the end of the month, negotiators had reached a draft agreement calling for the immediate reopening of the Strait of Hormuz without tolls, the removal of Iranian mines within thirty days, and the start of nuclear negotiations in the next round. As of June 1, the agreement has not yet been signed. Trump stated that he wants to reach an agreement but is in no hurry, sending Tehran a revised version of the text with some additional conditions. The signing of the agreement remains the main catalyst for energy markets and for maintaining the climate of confidence that characterized the month.
On the Ukrainian front, the month offered a partial diplomatic signal. Trump secured a three-day ceasefire on Victory Day, May 9, with a suspension of fighting and an exchange of 1,000 prisoners on each side. Once the pause ended, hostilities resumed quickly, with massive drone attacks in the following weeks. The negotiation process remains open but far from a concrete solution, with Russian territorial demands still at the center of the issue.
We end the month of May with an overweight position in equities, while remaining neutral on gold and bonds and slightly underweight in cash. At the sector level, we favor Information Technology, Energy, and Health Care: the first two continue to benefit from the AI cycle and the normalization of energy prices, respectively, while the third offers defensive characteristics that are useful in a still-uncertain environment.
The month confirmed just how quickly a single diplomatic development can reshape the landscape: the nearly 17% drop in oil prices is the most direct example. In such contexts, tactical management matters,and an approach that is updated daily helps shift allocations promptly when the market changes direction.
The start of June presents a packed agenda. The signing of the agreement between the U.S. and Iran will be the first key event: a final deal would cement the decline in oil prices and support equity sentiment, while a breakdown in negotiations could quickly reverse some of May’s gains. On the monetary front, the June 17th FOMC meeting—the first chaired by Warsh—and the June 11th ECB meeting, where a first rate hike is expected, are two events the market will be watching closely. Active management remains the most appropriate approach for navigating a phase in which geopolitics, central banks, and technology continue to move in tandem.
Legend
|
CPI: Consumer Price Index GDP: Gross Domestic Product FOMC: Federal Open Market Commitee BOJ: Bank of Japan |
FED: Federal Reserve System EIB: European Investment Bank BOE: Bank of England SNB: Swiss National Bank |
ZEW: Zentrum für Europeische Wirtschaftsforschung (Center for European Economic Research) YoY: Year on Year MoM: Month on Month |
Disclaimer: the content of this document is provided by i Partners SA (hereinafter iP) for information purposes only and is intended for internal use only. It does not in any way constitute an offer or recommendation to buy or sell a security or to carry out any type of transaction. Nor does it constitute any other type of advice, in particular to any recipient who is not a qualified, accredited, eligible and/or professional investor. It is to be used solely by its recipient and must not be forwarded, printed, uploaded, used or reproduced for any other reason. iP, cannot guarantee that the information contained herein is relevant, accurate or comprehensive. Accordingly, iP and its directors, officers, employees, agents and shareholders accept no responsibility for any loss or damage that may result from the use of the information contained herein. The content is intended solely for recipients who understand and bear all implicit and explicit risks involved. iP assumes no responsibility for the suitability or unsuitability of the information, opinions, securities or products mentioned herein. Past performance is no guarantee of future performance.