May 2026 Monthly Market Summary
Global Market and Economic Summary
Global risk assets delivered solid returns in May 2026, with markets largely looking through ongoing geopolitical uncertainty and several equity indices reaching new highs. The month was driven by three dominant themes: Middle East geopolitical risk, higher-for-longer inflation concerns and the continued AI-driven equity rally. Markets fluctuated between fears of an oil supply shock and optimism around strong technology earnings and potential diplomatic progress between the US and Iran. Global equity markets ended the month higher, with technology-heavy indices leading performance. While Developed Markets (DM) (+4.5%) continued on a positive trend and posted strong performance over the month, Emerging Markets (EM) (+9.7%) outperformed most other asset classes, led by the strong returns of Korea (+26.5%) and Taiwan (+16.2%). Global fixed income returns were more muted over the month, with longer- dated US Treasury yields ending the month higher, reflecting concerns about inflation, fiscal deficits and energy prices, subsequently pushing bond prices down. In contrast, UK Gilts performed relatively well as the UK’s disinflation and a deteriorating labour market caused yields to decrease over the month, pushing prices higher. Lastly, credit market allocations contributed to returns as credit spreads tightened over the month, causing credit allocations to outperform sovereign bonds.
The dominant macro theme in May was the renewed upward pressure on inflation, largely driven by energy markets following escalating tensions in the Middle East and concerns over global oil supply disruptions. In the US, inflation rose to 3.8% in April 2026 (released in May), up from 3.3% in March, marking the highest level since May 2023 and above expectations of 3.7%. The increase was primarily driven by energy prices, which surged 17.9% year-on-year (y/y). In the UK, inflation eased to 2.8% in April, down from 3.3% in March, below expectations and the lowest level since March last year, reflecting a sharp slowdown in housing and services inflation. In the Euro Area, inflation was confirmed at 3.0% in April, the highest since September 2023 and well above the ECB’s 2% target. In Japan, inflation edged lower to 1.4% from 1.5%, showing more stable price dynamics relative to other developed markets.
In other economic news, following the end of Jerome Powell’s term on 15 May 2026, Kevin Warsh was confirmed as the next Chair of the Federal Reserve. Powell will remain on the Federal Reserve Board of Governors but will not take on any further leadership role.
South African Market Update
South African equities (-0.3%) underperformed both DM and EM equities over the month of May. Financials (+0.9%) posted decent performance over the month, with local banks such as Firstrand (+4.8%), Capitec (+4.4%) and ABSA (+1.8%) providing some relief. In contrast, Resources (-1.0%) lost some of its recent strong momentum and posted negative returns over the month, subsequently becoming the worst- performing local sector over the last three months (-18.0%). Similarly, the Industrials sector (-0.7%) continued to struggle, as index heavyweights Naspers (-5.1%) and Prosus (-8.3%) detracted from performance, with SA Inc. stocks such as Spar (-24.6%), Pick ‘N Pay (-5.4%) and Clicks (-10.8%) struggling over the month. Lastly, Property (+0.6%) posted a lacklustre performance over the month, bringing year-to-date returns to +0.8% as investor sentiment weakened towards the month-end following the SARB’s (South African Reserve Bank) 0.25% rate hike.
South African bonds (+2.9%) were the top-performing local asset class, outperforming both developed and emerging market bonds and recovering much of March’s losses. The yield curve shifted lower across all maturities, with bonds in the 5–10 year segment outperforming as investors continued to favour this part of the curve due to its lower sensitivity to policy rate hikes relative to shorter-dated bonds, as well as its greater market liquidity. The SARB’s decision to raise the policy rate further reinforced confidence that monetary policy remains firmly focused on achieving the inflation target and preserving the Bank’s credibility.