Investor update: May 2026

At a glance:

• April was a strong month for many financial markets, especially equities. Many of the asset classes that were hit hardest in March bounced back particularly strongly in April, such as emerging market equities.
• Improvement in the geopolitical picture drove sentiment, with the temporary US-Iran ceasefire agreed in early April helping confidence, and allowing investors to refocus on encouraging US corporate earnings releases.
• Major central banks have kept interest rates on hold, showing a degree of caution over the potential for higher inflation due to higher oil prices, something that can impact consumers and businesses.

Equity markets rally in April

After a difficult March for stocks, April was close to the opposite. Equity markets rebounded quickly, with many of the asset classes that were hit hardest in March among the strongest performers in April. The last two months have been particularly active on the geopolitical front, with a lot of news flow that can cloud the investment picture.

However, if we zoom out and look at how financial markets have done over the first four months of the year, it is a positive picture, with many asset classes delivering strong single-digit positive growth. The S&P 500 index – which reflects the performance of 500 of the largest US publicly traded companies – recouped its March losses to climb to new highs in the middle of the month, posting a further fresh all-time high on the last day of April.

Some asset classes have even delivered double-digit positive returns, such as emerging market (EM) equities. EM includes countries such as South Korea, China, India and Taiwan. EM countries are notable importers of oil from the Middle East, so they have been heavily impacted by higher oil prices and supply disruptions. The early-April ceasefire, albeit temporary, therefore helped sentiment recover.

Additionally, countries such as South Korea and Taiwan are home to globally-leading semiconductor companies playing a central role in the artificial intelligence supply chain. That sector experienced a significant rebound in April, with both countries posting exceptional equity market performance (South Korea +25% and Taiwan +34%).

Oil, inflation and central bank caution

The oil price dropped meaningfully after the ceasefire, but later rose again amid renewed tensions and blockades of the Strait of Hormuz. That matters because higher oil prices can feed directly into consumer costs and can create risks to consumption.

On inflation, the key point is timing and persistence: oil can fall quickly on good news, but if higher prices last, that may show up in inflation data. This creates a challenge for central banks. Higher interest rates can limit demand in some areas of the economy due to borrowing becoming more expensive (in pursuit of keeping a lid on inflation). However, higher rates don’t increase oil supply. Oil is something economies rely on, so demand doesn’t typically fall if prices rise, like with other goods and services.

What did central banks do?

Towards the end of April, two of the central banks that are particularly important for us – the Bank of England and the US Federal Reserve – were ‘on pause’, keeping rates unchanged, as many expected.

However, there were hints of debate:

• In the UK, a voting member of the Monetary Policy Committee (the chief economist) favoured a rate increase, flagging inflation risk.
• In the US, some voices highlighted the risk that inflation could return, potentially shifting votes in coming months.

Overall, the message from central banks was that rates may stay where they are for a while but policymakers are clearly watching oil-linked inflation risks closely. Rate hikes could be possible in the months to come.

For more information on inflation, interest rates and investing, you can read our guide on the topic.

How we are managing portfolios

Recent months have been dominated by geopolitical and headline-driven volatility, where prices in many asset classes dipped sharply in March and recovered strongly in April. In this environment, our approach has been to focus on the fundamentals. These are the underlying business and financial factors that drive companies' intrinsic value, and includes things like revenue and earnings growth.

While the oil price has spiked and that does have implications, the conflict in Iran has not meaningfully changed our view on fundamentals, and that is where our focus remains.

If we look at the big picture, a key focus area is the US and the health of its economy. We do not see a US recession on the horizon. Therefore, we want to remain ‘long’ risky assets, i.e. we have a positive view on the outlook for many stock markets, including the US. We have increased some positions in portfolios where we felt like the declines in certain asset classes in March looked too severe. Therefore, this can be a good opportunity to top up positions at more attractive entry points.

About this update: All figures, unless otherwise stated, relate to April 2026.

Sources: MacroBond, J.P. Morgan Personal Investing and Bloomberg.

Risk warning

As with all investing, your capital is at risk. The value of your portfolio can go down or up and you may get back less than you invest. Past performance and forecasts are not reliable indicators of future performance. We do not provide investment advice in this article. Always do your own research.