Global markets delivered positive returns in May as easing concerns around the conflict in the Middle East helped investors refocus on resilient economic growth, strong corporate earnings, and continued AI-related investment. Hopes for a ceasefire reduced fears of broader regional disruption, allowing markets to shift their attention back toward fundamentals.

U.S. equities gained 5.3% during the month, bringing year-to-date returns to 11.3%. Earnings were a key driver, with U.S. companies reporting roughly 30% year-over-year earnings growth. While technology remained the largest contributor, earnings growth excluding the sector was also strong at approximately 20%, highlighting broad-based corporate strength. Technology led sector performance, gaining 15.6%, while small-cap stocks continued to outperform the broader market year-to-date, suggesting market leadership is gradually broadening.

International equities also advanced. Developed markets gained 3.2%, while emerging markets rose 9.7% and are now up 25.7% year-to-date. Notably, emerging market strength has occurred despite relatively weak performance from China. Instead, returns have been driven by Taiwan’s semiconductor ecosystem and South Korea’s technology sector as investors look for alternate ways to access the AI themes at more attractive valuations.

Fixed income returns were modest but positive. U.S. bonds gained 0.3%, while high-yield bonds returned 0.5%. Inflation remains above the Federal Reserve’s target, reinforcing expectations for a higher-for-longer interest rate environment. However, elevated yields continue to provide investors with more attractive income opportunities than in recent years.

Commodity markets declined 3.6% during the month as oil prices fell on hopes that ceasefire negotiations would reduce the risk of supply disruptions in the Middle East. Gold also declined 1.2% as demand for traditional safe-haven assets eased alongside geopolitical concerns.