Equity markets continued their strong growth in May, up around 4.5% for the month in local currency and 2.8% in NZ dollars (as the NZ dollar appreciated versus the US dollar and all other major currencies). Bond markets also had a positive month in May, although they remain volatile. The New Zealand bond market was particularly strong, up around 1%, while global markets were up 0.5%. 

Japan was the strongest developed market globally, on the back of growing hopes for a resolution to the conflict in the Middle East, which underpinned investor sentiment. Earnings announcements began the fiscal year in earnest. This was led by AI and semiconductor-related names. The US market was also particularly strong, notably the technology stocks. Again, a reduction in perceived geopolitical risks encouraged investors to rotate towards growth-oriented sectors. Expectations for a soft landing strengthened as concerns about energy-driven inflation eased and confidence grew that economic activity would slow without slipping into recession. Information Technology was the best-performing sector by a considerable margin. Strong earnings reports and upbeat outlooks from major technology firms reinforced expectations that AI-driven capital spending is still in its early stages and will continue to bring substantial gains for chipmakers and AI-related tech companies. 

Emerging market equities delivered strong gains in May, outperforming the developed markets index. Performance was led by index heavyweights Korea and Taiwan amid strong gains in memory and semiconductor stocks from continued AI demand. 

A late-month decline in oil prices helped improve the inflation outlook and reinforced expectations that monetary policy may not become more restrictive over time. Despite the positive headline return, market leadership remained narrow. Gains were concentrated in a relatively small group of growth-oriented companies, while commodity-linked and defensive sectors lagged. 

US Treasuries lagged other government bond markets given the robust economic backdrop as investors brought forward expectations for interest rate hikes. German government bond yields ended the month lower, with peripheral markets outperforming. In the UK, the market expects the Bank of England base rate to be held when the committee next meets in June. This helped support an outperformance of UK government bonds. 

Corporate bonds generated positive total returns and outperformed government bond markets. New Zealand was particularly strong, outperforming the major developed bond markets. 

Commodities had a weaker month in May, down 7.6%. The energy component was the weakest performer as the fragile ceasefire in the Middle East held during the month. The agriculture component also declined, as did precious metals. Industrial metals were the only component to go up. 

The positive returns from both the equity markets and the bond markets filtered through to positive returns for all the Private Wealth risk profiles, with those with more growth assets performing better than the more conservative ones. 

Underlying funds to perform well were the Schroder Global Emerging Markets Fund up 8.5%, and Schroder Sustainable Global Core Hgd 4.5%. Global Themes performed extremely well, with Global X AI &Tech ETF up 18.9%, iShares ICLN ETF 11.8%, iShares ECAR ETF 21.5%, iShares RBOT 8.6%.