Welcome to our monthly briefing, where we provide a comprehensive analysis of recent economic events and their implications for the financial markets. May’s commentary highlighted a market grappling with crosscurrents beneath strong headline returns, as enthusiasm around AI‑driven growth increasingly collided with signs of inflation persistence and uneven economic conditions.
Highlights from May’s Briefing:
- Emerging markets and U.S. growth stocks led returns in May, driven largely by semiconductor‑related winners. The MSCI Emerging Markets Index is now heavily concentrated in a small number of chipmakers, reflecting how central AI‑related capital spending has become across regions and asset classes.
- The surge in semiconductor stocks increasingly influenced returns beyond technology, affecting companies across multiple sectors.
- Small caps showed resilience despite headline concentration. Although large‑cap growth stocks captured most of the attention, U.S. small caps delivered respectable gains after early‑month weakness, underscoring that performance was not uniformly confined to the largest AI beneficiaries.
- Core inflation measures for both consumers and producers continued to move higher, with rising prices evident in goods, services, and business inputs. Notably, prices for components tied to data‑center buildouts surged at historically unprecedented rates, complicating the outlook for a near‑term return to the Federal Reserve’s 2% inflation target.
- Services inflation, housing costs, and everyday expenses remain elevated, raising the risk that interest rates stay higher for longer and volatility persists around AI and geopolitical headlines.
Read the May 2026 Monthly Briefing for insights from Chief Market Strategist Julie Biel, CFA
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