Inside the markets | Helping you guide clients

David Aujla narration:

Disclosures (not being read, only showing up on screen):

Inside the markets | Helping you guide clients. David Aujla, Portfolio Manager, Multi-Asset Solutions. Data as at 31 May 2026. This video was recorded 07 May 2026. This video is for Professional Clients only and is not for consumer use.

Hello, and welcome to the May edition of Inside the Markets, a deeper look at how global markets have been navigating what has been an exceptionally eventful 2026. My name is David David Aujla, and I’m the lead portfolio manager for Invesco’s Summit and Managed Multi-Asset Fund ranges, and its Model Portfolio Service, or MPS.

If April was about uneasy stabilisation, then May was largely about cautious optimism.

On screen text: Shift to cautious optimism as geopolitical risks ease

Hopes for a more durable peace framework between the US and Iran helped reduce some of the worst-case fears around the Strait of Hormuz, although the agreement remains incomplete and the situation fragile.

Oil markets responded quickly. After trading with a significant war premium earlier in the year, crude prices fell sharply

On screen text: Oil falls as war risk premium unwinds and demand expectations weaken

 as investors began to price in a lower probability of sustained supply disruption, while demand expectations from organisations such as OPEC and the IEA were revised down. As that geopolitical risk premium came out of energy markets, attention shifted back to growth, earnings and the durability of the disinflation trend.

Inflation data in several major economies continued to move lower, but generally remained above central bank targets. This reinforced the view that interest rates may stay on hold for longer than expected at the start of 2026.

Against this backdrop, global equities delivered another strong month,

On screen text: Equities rise again, led by US and emerging markets

once again outperforming fixed income. US and emerging market equities led the way, with Japan and Europe ex-UK also posting healthy gains. More commodity-sensitive markets, including Pacific ex-Japan and the UK, lagged.

A key feature of May was the renewed dominance of technology and AI-related stocks.

On screen text: AI and tech stocks drive market performance

Large-cap US technology continued to push higher on robust earnings and sustained enthusiasm around the artificial intelligence investment cycle. At the same time, Asian technology—particularly semiconductor and hardware companies linked to data centre build-outs—made a significant contribution to emerging market returns, helping drive strong gains over the month.

Global small and mid-sized companies also participated, but lagged the strongest tech-driven large-cap segments. This highlighted investors’ continued willingness to pay a premium for scale, balance sheet strength and visibility of earnings.

UK equities delivered only modest positive returns and underperformed most major regions. The market’s heavier exposure to energy and commodity-linked sectors, combined with a less growth-oriented sector mix, meant it benefited less from the global technology theme and was more affected by the fall in oil prices.

In fixed income, May was quieter but still modestly positive. With no major policy meetings during the month, investors focused on prior communications from the Federal Reserve, Bank of England and European Central Bank. All three kept rates on hold and maintained a data-dependent stance—acknowledging progress on inflation but stopping short of declaring victory.

Government bond returns were generally positive but muted, with yields moving in a relatively narrow range. Credit outperformed government bonds slightly, supported by tight spreads and continued demand for income. High yield and emerging market hard currency debt also delivered small positive returns, with relatively limited dispersion across fixed income sectors overall.

Gold, which had acted as a safe haven earlier in the year, declined over May as geopolitical risk premiums eased and investors became more comfortable with risk assets. This pullback reduced some of its year-to-date gains and served as a reminder that even defensive assets can be volatile when positioning is crowded and narratives shift.

Looking ahead, we are focused on four key areas.

First, geopolitics remains central. While the prospect of a more enduring US–Iran framework has been welcomed, it is far from guaranteed, and any setback could quickly reintroduce volatility in energy markets, inflation expectations and growth sentiment.

Second, central banks. With inflation close to, but still above target, policymakers face a delicate balance between easing too early and keeping policy restrictive for too long. How this evolves will be critical for both bond markets and rate-sensitive assets.

Third, the durability and concentration of the AI and technology theme.

On screen text: Markets reliant on tech; diversification increasingly important

May highlighted how reliant markets have been on US and Asian technology as key drivers of performance. The question now is whether leadership broadens or remains concentrated, which has important implications for diversification.

Finally, diversification itself. The first five months of the year have shown how quickly leadership can shift across energy, defensives, growth equities, credit and gold. Maintaining a genuinely diversified portfolio across assets, sectors, regions and styles remains, in our view, essential in an environment where macro, policy and geopolitical conditions continue to evolve rapidly.

As you can see, I’m in slightly different surroundings this time—recording from a hotel in Newcastle while meeting clients. As always, I hope you found this useful. If you have any questions, please get in touch, and I’ll see you next month.

Investment risks

The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Important information

Data as at 31 May 2026

This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

Views and opinions are based on current market conditions and are subject to change.

EMEA5554742/26