Equity Trustees Monthly Market Summary May 2026
Report
MARKET SUMMARY
May was characterised by a narrow, thematic rally centred on resources and AI-enabler exposures, alongside falling bond yields. Earnings revisions weakened locally but strengthened globally.
Key themes included:
- US-Iran tensions continued to slowly thaw as both sides worked towards a resolution.
- The 1Q US corporate results season was very strong delivering better than expected results and earnings upgrades supporting the equity market outlook. )
- AI-enabler / resources-led rally dominated markets: AI tailwinds on the back of insatiable compute demand and expansive capex plans are driving markets. Australian equities rose modestly, driven primarily by mining, capital goods and AI-linked “infrastructure” trades, rather than broad-based strength.
- Inflation remains an issue and consumer sentiment remains soft.
Equity market performance – Markets rose but the ASX200 relatively underperformed.
- The ASX200 rose 1.1% supported by strong performance in large-cap miners.
- In local currency terms, Australia underperformed global markets (+4.61%), with the US (+5.3%), Japan (+12%) and Emerging Markets (+9–10%) materially stronger. In $A terms, global equities rose 4.53%.
- In the US, the technology sector (+15.9%) drive gains. Software recovered, while ‘memory’ names rallied strongly. The Tech-laden Nasdaq gained 8.4%. Both the S&P500 and Nasdaq ended the month at fresh all-time highs.
ASX200 Sector performance - Barbelled market with high dispersion
- Strong Materials (+10%) contribution offset weakness in Financials, Healthcare and defensives, highlighting narrow leadership and significant stock dispersion
- US Bonds were weaker with yields up 8-10 bp across the curve (US 10-year bonds ended the month at 4.37%). o Materials (+10.5%), Consumer Discretionary (+4.6%), and Industrials/Capital Goods (~+2–9%) led gains. AREITs also rose 3%. o Healthcare (~-9%), Utilities (~-7.6%) and Energy (~-6%) were the weakest sectors.
- Returns were theme-driven, with AI-enabler exposures (mining, infrastructure, data-centre proxies) outperforming, while earnings downgrades (e.g. CSL, ASX, Brambles) weighed on defensives.
Bond markets – Bond yields mostly fell
- Australian bonds gained 1.62%. Australian 10-year bond yields ended the month down 23bp to 4.83%. In the US 10-year bond yields rose 7bps to 4.44%.
- Lower yields in Australia reflected softer economic data and moderating inflation signals, reducing near-term tightening expectations.
- Central banks globally continue to emphasise data dependence, limiting expectations for near term easing. The US Fed held rates steady at 3.75%. The market is now pricing no rate cuts in the US this year
- Globally, bond markets were more mixed, reinforcing regional divergence in growth and policy outlooks.
Global economic news – the global economy has remained resilient
- Global Manufacturing PMI’s have increased as AI related demand increases. Manufacturers have also rushed to stockpile inputs to buffer against Middle East related disruptions. Increasing fiscal spend in certain jurisdictions is also helping. The Global Services PMI softened as consumers ration their discretionary spend.
- The US Federal Reserve held rates steady at 3.75%. The incoming Fed chair Kevin Warsh was sworn in taking over from Jerome Powell. Headline inflation (CPI) rose 0.6% month-on-month and 3.8% year-on-year. The unemployment rate remained flat at 4.3%. US business spend remains strong driven by tech related spend (see charts below). The USD rose 0.9%.
- China manufacturing and non-manufacturing indicators were solid at ~50 (> 50 is expansionary and < 50 is contractionary). Exports remain strong while domestic demand remains soft.