Investor update: June 2026

At a glance:

• Equity markets continued to move higher in May, building on the strong rebound seen in April. US corporate earnings growth has been a key driver, with the technology sector a standout performer.
• Government bond yields moved higher in the first half of the month before easing off in the second half. Investors have been assessing energy price-related news flow and subsequent implications for inflation, a key influence for bonds.
• The investment team started the year overweight equities and this positioning has benefited from the continued positivity in equity markets. The investment team has elected to trim some equity holdings to realise gains but remains overweight equities overall due to their positive outlook.

Equities push higher in May

After a strong rebound for many equity markets in April, the positive momentum continued into May. Markets have increasingly refocused on the underlying fundamentals, particularly the strength of corporate earnings coming out of the US.

This has helped investors look beyond some of the geopolitical uncertainty that has dominated headlines in recent months. Earnings growth has been encouraging, with some comparisons to the levels seen around the depth of the rate-cutting cycle in 2021. That has supported a further repricing higher in equity markets.

Technology has once again been one of the key areas of strength. The artificial intelligence (AI) theme remains an important driver, but the story isn’t confined to the large US companies that have dominated much of the discussion over the past couple of years. Capital expenditure linked to AI is increasingly flowing into Asia, particularly into markets such as South Korea, where leading semiconductor and technology-related companies play an important role in the global AI supply chain. This has helped support strong performance in South Korean equity indices.

AI will continue to have a major impact on the equity markets in the coming months.

Bonds: a tale of two halves

In the first couple of weeks of the month, government bond prices continued to come under pressure, meaning yields moved higher. Bond yields – bonds' rate of return expressed as an annual percentage – and prices move in opposite directions, so rising yields equals falling bond prices.

However, this trend reversed fairly strongly in the second half of the month. A key factor was the market’s continued focus on developments in the Middle East, including whether the ceasefire would hold and whether there could be a reopening of the Strait of Hormuz. The Strait of Hormuz is a crucial route for global oil shipments, so the ongoing uncertainty on the level of continued disruption to trade is a key focus for the direction of energy prices.

If geopolitical tensions ease and energy prices fall, that could reduce some of the pressure on inflation expectations. In turn, that may help government bond yields move lower.

Economic developments

In the UK, consumer price inflation (CPI) fell from 3.3% to 2.8% in April. This picture is slightly complicated by the influence of the energy market. Household energy prices are capped, meaning that the recent rise in oil prices linked to the conflict in the Middle East has not yet fed through directly to households.

However, the household energy price cap has recently reset, which means the impact could start to become more visible from July. As a result, in the near term, UK inflation could potentially move a little higher again. If geopolitical tensions ease and oil prices fall as a result, inflation could come down again over the medium term. The key issue is whether higher energy prices prove temporary or persistent.

Outside the UK, an important economic indicator remains the health of the US labour market. The US unemployment rate was 4.3% at its most recent reading in April, a level we think is very healthy. A strong labour market supports household income and ongoing consumer spending.

For investors, the US consumer is particularly important. If employment remains resilient, there is less reason to expect a slowdown in demand from US households. That supports the view that the near-term economic backdrop remains optimistic.

How we are managing portfolios

The investment team started the year overweight equities, meaning portfolios held more in equities than their long-term target allocation would typically imply. That position was maintained through the period of heightened uncertainty linked to the Middle East, and it has proved beneficial as equity markets have moved higher over the past couple of months.

As markets have repriced upwards, portfolios have been able to participate in those gains. The team has also rebalanced back towards target allocations where appropriate, collecting some of the gains from the appreciating equity prices.

The current view is that the positive environment for equities can continue into the coming months. As a result, the team is maintaining its equity positioning but will remain pragmatic with future adjustments depending on market sentiment and global macroeconomic and technical indicators.

About this update: All figures, unless otherwise stated, relate to May 2026. Data to the 27th of the month.

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.