05 Jun 2026
Despite volatile oil prices driven by shifting geopolitical tensions and peace negotiations, and ongoing uncertainty around inflation and the Middle East, broader markets have remained resilient. This strength in global equities is attributed to markets’ forward-looking nature and the continued resilience of corporate earnings.
Monthly Market Outlook
Monthly Market Outlook
Stock Markets remain resilient
At first glance, recent headlines would perhaps suggest that markets could be struggling.
Since the start of March, we have witnessed a highly volatile oil price, as short-term energy market dynamics have moved in lockstep with potential peace negotiations. Periods of renewed tension and disruption to energy markets have led to oil prices rising, before easing as prospects for a resolution improve.
Ongoing tensions in the Middle East, fluctuating oil prices, and concerns about the inflationary impact of this conflict have all created continuing uncertainty for investors. Yet despite this ongoing uncertainty, broader markets have remained resilient.
We believe the strength in global equites, while perhaps surprising in the face of these geopolitical and macroeconomic uncertainties, is understandable for two main reasons: the forward‑looking nature of markets, which balance near‑term risks against the broader longer-term backdrop, and the relative strength that’s been demonstrated by recent corporate earnings results.
Bond markets: regional divergence remains important
In contrast to stock markets, government bond markets have remained somewhat more sensitive to these global developments through May, with notable differences across regions.
In the UK, bond yields rose earlier in the month before easing back, leaving bonds delivering positive returns overall, despite some volatility driven by domestic political developments. While political uncertainty can create short term market movements, this has historically tended to be temporary unless it results in a clear and lasting shift in economic or fiscal policy. At this stage, there is no strong evidence to suggest such a shift is the most likely outcome, in our view.
Looking back to the start of the year, UK bonds had been performing well, supported by improving inflation dynamics and expectations of interest rate cuts. It is important to remain focused on these underlying fundamentals rather than short term noise. As a result, we remain constructive on UK bonds, believing that UK bond performance is likely to remain supported as conditions stabilise.
In contrast to the UK, US bond yields moved higher (and bond prices lower) on stronger growth and higher inflation expectations, with the market somewhat playing catch-up with the larger increases in bond yields experienced in Europe over March and April. US bond yields eased again towards the end of the month as energy prices declined, in conjunction with developments in the middle east conflict.
This divergence in economic conditions and policy expectations across the UK, US and Europe reinforces the importance of focusing on underlying fundamentals – while avoiding getting caught up in the noise.
Earnings: the anchor supporting markets
A key driver of market resilience year to date has been strong corporate earnings (For context, these are the profits companies make, and they are important as stronger profits generally help support company share prices and stock markets). We have seen strong earnings growth particularly in the US, which has helped support solid equity market returns over the month. See chart below.
US equities have led, not only because of these consistent strong earnings but also continued investment in artificial intelligence. Another beneficiary of this AI investment theme are Asian markets, with large exposure to semiconductors (such as Taiwan and South Korea).
European and UK markets have lagged peers this month for a few reasons: a lack of AI beneficiaries (relative to US and Asia), greater sensitivity to the energy price shock, and a more moderate earnings outlook.
AI investment remains a key driver, but earnings growth is broad
In the US, investment in artificial intelligence continues to play a central role, with strong spending across data centres, semiconductors and cloud infrastructure.
However, we note that while large technology companies remain key contributors, earnings growth is extending across the US market, with solid performance from both large and smaller companies, despite geopolitical uncertainty and rising costs.
Underlying earnings strength, and improving earnings expectations, continue to underpin stock market strength, explaining why markets with strong earnings growth have largely looked through the “geopolitical noise” in the past month.
What this means for investors
Investors continue to balance ongoing geopolitical risks against a resilient backdrop for economic growth and earnings. To date, these constructive fundamentals have remained the dominant driver of markets.
Disclaimer
Any views expressed are based on information received from a variety of sources which we believe to be reliable, but are not guaranteed as to accuracy or completeness by atomos. Any expressions of opinion are subject to change without notice.
All investment views are presented for information only and are not a personal recommendation to buy or sell. Past performance is not a reliable indicator of future returns, investing involves risk and the value of investments, and the income from them, may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.
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The value of investments and any income from them can fall and you may get back less than you invested.
The value of investments and any income from them can fall and you may get back less than you invested.
