Executive Summary

Global financial markets recovered strongly during May 2024 as improving inflation data, resilient corporate earnings and renewed enthusiasm surrounding artificial intelligence restored investor confidence. The advance followed April's broad decline and carried several major equity indices to new record highs.

The United States remained the principal source of global market leadership. The S&P 500 and Nasdaq Composite delivered substantial gains as technology, semiconductor and communication-services companies benefited from continued investment in artificial-intelligence infrastructure. Nvidia once again produced results that exceeded already elevated expectations, reinforcing confidence that demand for advanced computing remained exceptionally strong.

Investors also responded positively to evidence that US inflation had resumed a gradual downward path. Consumer-price data for April showed a more moderate monthly increase than the unexpectedly strong readings reported during the first quarter. Although inflation remained above the Federal Reserve's objective, the improvement reduced concern that another interest-rate increase might be required.

The Federal Reserve maintained its policy rate at 5.25%–5.50% at the meeting concluding on 1 May. Chair Jerome Powell acknowledged that progress on inflation had slowed, but indicated that a further rate rise was unlikely to be the central bank's next move. Markets continued to expect that monetary easing could begin later in 2024 if inflation moderated further.

European equities advanced as regional economic indicators improved and investors prepared for a likely June interest-rate reduction from the European Central Bank. The eurozone appeared to be emerging gradually from stagnation, supported by recovering services activity and improving household purchasing power.

UK equities also delivered positive returns and the FTSE 100 established further record highs during the month. The Bank of England maintained Bank Rate at 5.25%, although two members voted for an immediate reduction. Headline inflation declined substantially, but persistent services inflation and wage growth caused policymakers to remain cautious.

Japanese equities advanced more moderately than US and European markets. Corporate reform and resilient earnings continued to support the long-term outlook, but weakness in the yen and uncertainty regarding future Bank of Japan policy created volatility. Japanese authorities intervened in the foreign-exchange market after the currency weakened beyond ¥160 per US dollar around the turn of the month.

Chinese and Hong Kong equities initially extended their recovery as authorities announced additional measures intended to support the property market. However, investor confidence remained fragile because of weak housing demand, developer stress and concern about growing international trade restrictions affecting Chinese electric vehicles and clean-energy products.

Government bonds recovered during parts of May as softer inflation revived hopes of eventual monetary easing. Yields nevertheless remained volatile, particularly near the end of the month when stronger business surveys and disappointing government-debt auctions renewed concern that interest rates could remain elevated for an extended period.

Commodity performance was mixed. Copper reached a record level as investors focused on mine-supply constraints and long-term demand from electrification, renewable energy, electricity grids and data centres. Gold and silver also reached new highs before retreating, while oil prices declined as geopolitical risk moderated and concerns increased regarding the strength of future demand.

Digital assets advanced following an unexpected change in the regulatory outlook for Ethereum. The US Securities and Exchange Commission approved exchange rule changes connected with proposed spot Ether exchange-traded funds. The approval did not permit immediate trading, but represented an important step towards broader regulated access.

Key Themes During May

• Global equities recovered strongly and several major indices reached new record highs.
• Softer US inflation revived expectations of Federal Reserve easing later in 2024.
• Artificial-intelligence investment continued to support technology and semiconductor shares.
• The European Central Bank prepared markets for a likely June interest-rate reduction.
• The Bank of England held rates unchanged, with two policymakers voting to cut.
• The FTSE 100 reached additional record levels.
• China introduced further measures intended to stabilise its property market.
• Copper reached a record high amid supply concerns and structural demand expectations.
• Oil prices declined as geopolitical risk premiums moderated.
• US regulators approved rule changes connected with proposed spot Ether ETFs.

Global Economic Overview

The global economy remained more resilient than anticipated during May, although substantial differences persisted between regions. The United States continued to expand, Europe began to emerge from stagnation and the United Kingdom recorded a stronger start to the year. China continued to rely upon industrial production and exports while attempting to address persistent weakness within the property sector.

Inflation remained the principal determinant of monetary policy. Price pressure had declined significantly from the peaks recorded during 2022, but progress towards central-bank targets was uneven. Services inflation, wages, housing and insurance costs remained more persistent than goods prices.

United States

The US economy continued to grow during May, supported by household consumption, employment and business investment. The pace of activity appeared slower than during the second half of 2023, but the available evidence did not suggest that a recession was imminent.

The Federal Reserve maintained the federal funds target range at 5.25%–5.50% at its meeting concluding on 1 May. Policymakers acknowledged that inflation had declined substantially over the previous year but stated that there had been insufficient further progress towards the 2% objective during recent months.

Chair Jerome Powell indicated that the current policy stance was restrictive and required additional time to influence the economy. Importantly for financial markets, he stated that a rate increase was unlikely to be the central bank's next move unless evidence emerged that policy was no longer sufficiently restrictive.

The Federal Reserve also announced that it would slow the pace at which its holdings of US Treasury securities were allowed to mature without replacement. The monthly redemption cap for Treasuries was reduced, moderating the process of quantitative tightening and limiting the amount of government debt that private investors would need to absorb.

US Inflation

Inflation data released during May provided cautious encouragement. The consumer price index for April increased more slowly than expected on a monthly basis, interrupting the series of firmer readings recorded during the first quarter.

Core inflation also moderated, although housing costs continued to make a substantial contribution. Services excluding housing remained important because they were closely connected to wages and domestic labour costs.

The personal consumption expenditures price index showed that underlying inflation remained above the Federal Reserve's target. Nevertheless, the absence of a renewed acceleration supported the view that the central bank could eventually reduce rates without first tightening policy further.

Investors continued to expect fewer rate reductions than had been anticipated at the beginning of 2024. The debate focused increasingly on whether the first move would occur in September, November or December rather than during the first half of the year.

US Labour Market

Employment conditions remained supportive but displayed signs of gradual moderation. April payroll growth was weaker than expected, while the unemployment rate increased slightly. Job vacancies and employee turnover continued to move towards more normal pre-pandemic levels.

Wage growth remained positive but showed tentative evidence of slowing. A gradual reduction in labour demand without a severe increase in unemployment would support the Federal Reserve's objective of returning inflation to target while avoiding a recession.

Later business-activity surveys indicated renewed momentum, creating some uncertainty regarding the pace of economic moderation. Markets remained highly sensitive to each employment and inflation release because small changes could significantly alter the expected path of policy.

Eurozone

The eurozone economy continued to recover gradually. Gross domestic product had expanded during the first quarter, ending the shallow technical recession recorded during the second half of 2023.

Service-sector activity improved and consumer confidence stabilised as lower inflation increased real household incomes. Manufacturing remained weak, particularly in Germany, although the pace of contraction became less severe in some surveys.

Inflation remained considerably below its 2022 peak. Headline and core measures were close enough to the European Central Bank's projections to maintain expectations of a June interest-rate reduction.

Negotiated wage growth remained elevated, but policymakers expected part of the increase to be absorbed through lower company profit margins rather than passed directly into consumer prices. The ECB continued to stress that policy would remain dependent upon incoming evidence after any initial reduction.

Germany

Germany remained one of the weakest major European economies. Manufacturing businesses faced subdued exports, high energy costs and lower demand for machinery, chemicals and traditional automotive products.

Business surveys nevertheless showed tentative improvement. Lower inflation, recovering global trade and the prospect of reduced interest rates provided the basis for a gradual recovery, although structural investment and productivity challenges remained significant.

United Kingdom

The UK economy expanded strongly during the first quarter, confirming that the shallow recession recorded during the second half of 2023 had ended. Services, construction and household spending contributed to the improvement.

The Bank of England maintained Bank Rate at 5.25% during its May meeting. Seven members supported no change, while two preferred an immediate quarter-point reduction. The increase from one to two votes for easing indicated that the committee was moving gradually towards a less restrictive position.

The Bank reduced its near-term inflation forecasts and expected headline inflation to fall close to the 2% target. However, officials remained concerned about services prices and wage growth, which provided a clearer indication of domestic inflationary pressure.

Headline consumer-price inflation declined substantially in April but remained somewhat higher than economists had expected. Services inflation also exceeded forecasts, causing markets to reduce the probability of a June rate cut.

Improving real wages supported household purchasing power, although mortgage refinancing continued to place pressure on borrowers moving from older fixed-rate agreements to more expensive loans.

China

China's economy continued to depend heavily upon industrial production and exports. Manufacturing investment remained strong, particularly within electric vehicles, batteries, solar equipment, machinery and strategic technology.

Domestic household demand remained less convincing. Retail sales growth was subdued and consumer confidence continued to be affected by falling property values and uncertainty regarding employment.

Authorities announced additional measures intended to support housing. These included reductions in minimum down-payment requirements, the removal of nationwide mortgage-rate floors and financing intended to help local state-owned enterprises purchase completed but unsold properties.

The measures represented a more direct attempt to reduce housing inventory and stabilise developer finances. However, investors remained uncertain whether local governments possessed sufficient resources or incentives to purchase properties on a meaningful scale.

Property prices continued to decline across many cities. The sector remained important because housing represented a substantial share of household wealth and land sales had historically provided significant revenue for local governments.

Chinese Trade Relations

Trade friction increased during May. The United States announced higher tariffs on selected Chinese products, including electric vehicles, batteries, semiconductors, solar cells, steel and aluminium.

The measures were intended to protect strategic industries and address concern about state-supported excess capacity. China criticised the decision and retained the ability to respond through tariffs, export controls or regulatory measures.

European authorities also continued investigating subsidies within the Chinese electric-vehicle industry. The prospect of broader trade restrictions created uncertainty for manufacturers and supply chains across Asia and Europe.

Japan

Japan's economy contracted during the first quarter as household consumption and exports weakened. Temporary disruption to automobile production also affected activity.

The Bank of Japan maintained its policy rate close to zero following the end of negative interest rates in March. Policymakers continued to signal that future normalisation would be gradual.

The yen remained extremely weak despite suspected intervention by Japanese authorities around the turn of April and May. The Ministry of Finance later reported substantial intervention expenditure during the period.

Currency weakness supported exporters' reported earnings but increased import costs for energy, food and raw materials. The effect on households complicated the government's efforts to support consumption.

Wage settlements remained comparatively strong, providing hope that higher earnings could support a more durable inflation and consumption cycle. Investors continued to assess whether these increases would extend beyond the largest companies.

Global Economic Outlook

The global economy remained capable of achieving a soft landing, but the path was unlikely to be uniform. The ECB appeared ready to reduce rates before the Federal Reserve, while the Bank of England remained positioned between the two.

Growth resilience reduced recession risk but also limited the speed at which central banks could ease. Markets therefore remained vulnerable to renewed inflation surprises and changes in government bond yields.

Geopolitical and trade risks remained substantial. Conflict in the Middle East and Ukraine, strategic competition between the United States and China and disruption to international shipping continued to affect investment decisions and supply-chain planning.

Equity Markets

Global equity markets rebounded strongly during May, reversing much of the decline recorded in April. Developed markets generally outperformed emerging markets, while technology and communication-services companies regained leadership.

United States

The S&P 500 gained approximately 4.8% during May and reached additional record highs. The Nasdaq Composite advanced by approximately 6.9%, while the Dow Jones Industrial Average gained around 2.3% and briefly traded above 40,000 for the first time.

The recovery was supported by softer inflation, resilient earnings and renewed confidence that the Federal Reserve's next policy move would eventually be a reduction rather than an increase.

Technology remained the strongest major sector. Investors continued to favour semiconductor manufacturers, cloud providers, networking companies and businesses supplying the infrastructure required for artificial intelligence.

Nvidia reported another exceptional increase in revenue and profit, driven by demand for advanced data-centre processors. The company also announced a share split and increased its dividend. Its results reinforced the view that artificial-intelligence infrastructure spending remained in an early phase.

Other semiconductor and hardware companies benefited from expectations that cloud providers, governments and large enterprises would continue increasing investment in advanced computing. Demand also supported memory, networking, optical communications and power-management suppliers.

Large cloud providers continued to report strong growth. Investors focused upon both the additional revenue generated by artificial-intelligence services and the substantial capital expenditure required to develop capacity.

Communication-services companies also advanced. Digital advertising remained resilient and artificial intelligence was expected to improve targeting, content recommendations and operating efficiency.

Utilities produced strong returns as investors reconsidered the sector's growth prospects. Data-centre development, manufacturing investment and electrification were expected to increase demand for electricity after years of limited growth.

Financials performed more moderately. Banks continued to benefit from elevated interest income, but the prospect of eventual rate cuts and concern about commercial-property exposure limited enthusiasm.

Small-capitalisation shares produced mixed results. Softer inflation initially supported expectations of lower financing costs, but higher yields near the end of the month affected companies with weaker balance sheets and greater refinancing requirements.

Market Concentration

The largest companies continued to account for a substantial proportion of index returns. This concentration reflected superior earnings growth, strong balance sheets and direct exposure to artificial intelligence.

However, it also increased market sensitivity to a limited number of earnings announcements. A disappointment from one of the largest companies could have a disproportionate effect on major indices.

Investors continued to seek evidence that the benefits of economic growth and technological investment would spread to a broader range of sectors. Utilities, industrials and selected financial companies provided some evidence of broadening, although technology remained dominant.

Europe

European equities advanced during May as economic indicators improved and expectations of a June ECB rate reduction remained intact.

Technology companies benefited from the global semiconductor rally, while financials continued to produce solid earnings. Selected industrial businesses gained from defence expenditure, infrastructure investment and improving international demand.

Luxury-goods performance remained mixed. Demand from wealthy consumers remained resilient in some markets, while China's uneven recovery limited sales growth for companies with substantial exposure to Chinese customers.

European banks continued to return capital through dividends and share repurchases. Investors assessed whether lower policy rates would reduce net interest margins, although improved economic conditions could also limit loan losses.

Defence companies remained supported by expanding government budgets and the need to replenish equipment and ammunition inventories. Valuations had increased substantially, requiring greater attention to contract execution and production capacity.

United Kingdom

The FTSE 100 advanced during May and reached further record highs. The index benefited from improving domestic economic data, attractive valuations and expectations that UK interest rates would eventually decline.

Financial companies performed well as the economy emerged from recession and credit quality remained stable. Consumer businesses benefited from improving real incomes, although households continued to face high housing and borrowing costs.

Mining companies experienced mixed performance despite strength in copper and selected metals. Individual returns depended upon commodity exposure, operating performance and company-specific developments.

Energy companies were affected by declining oil prices, although strong cash generation continued to support dividends and share repurchases.

The FTSE 250 was supported by stronger UK growth and takeover interest. Domestically focused companies remained more sensitive to Bank of England policy, mortgage conditions and consumer spending.

Merger-and-acquisition proposals continued to highlight the valuation discount attached to UK-listed companies. International buyers and private-equity sponsors remained interested in businesses whose public prices appeared low relative to comparable transactions.

Japan

Japanese equities produced a moderate positive return during May after declining in April. Corporate earnings, governance reform and share repurchases remained supportive.

The weak yen continued to benefit multinational exporters but created uncertainty regarding government intervention and future Bank of Japan tightening.

Financial companies attracted interest because gradual monetary normalisation could improve lending margins. However, the central bank's cautious stance limited expectations of rapid rate increases.

Technology and semiconductor-equipment businesses followed global industry sentiment. Long-term demand remained strong, but the sector's previous appreciation produced substantial short-term volatility.

China and Hong Kong

Chinese and Hong Kong equities initially advanced as authorities announced additional property-support measures. Low valuations, improving market liquidity and expectations of state intervention encouraged renewed international interest.

Property developers responded positively to reductions in down-payment requirements and plans for state purchases of unsold housing. However, gains were moderated by concern regarding implementation and the scale of available funding.

Technology companies remained comparatively resilient. Several leading platforms increased share repurchases and improved cost discipline, helping to offset slower domestic economic growth.

Trade tensions created pressure for electric-vehicle, battery, semiconductor and renewable-energy businesses. Higher US tariffs raised concern that additional countries could introduce protective measures.

India

Indian equities experienced volatility as the national election continued. Investors generally expected policy continuity, infrastructure investment and strong domestic growth, but uncertainty increased ahead of the final result.

Valuations remained elevated relative to many emerging markets. Financials, industrials, consumer companies and infrastructure-related businesses continued to attract long-term interest.

Asia-Pacific

Taiwanese equities benefited from semiconductor demand and artificial-intelligence investment. South Korean technology companies also advanced, supported by expectations of recovering memory prices and high-bandwidth-memory demand.

Australian equities produced mixed performance. Mining companies were influenced by metals prices and the Chinese outlook, while financial and property businesses remained sensitive to domestic inflation and interest-rate expectations.

Emerging Markets

Emerging-market equities advanced but generally underperformed developed markets. China's partial recovery provided support, while higher US yields and a firm dollar remained challenges for some economies.

Technology-oriented Asian markets performed particularly well. Commodity exporters produced mixed results as copper strengthened but oil declined.

Investors continued to differentiate according to inflation, political stability, external balances and the credibility of monetary policy. Countries able to reduce rates without destabilising their currencies remained comparatively attractive.

Indicative May Performance

Fixed Income Markets

Global fixed-income markets recovered modestly during May, although performance varied considerably throughout the month. Softer US inflation initially caused government bond yields to decline, but stronger economic surveys and renewed concern about persistent price pressure produced a reversal near month-end.

US Treasuries

The benchmark 10-year US Treasury yield began May close to the elevated levels reached during April. It declined after weaker employment and softer consumer-price data revived expectations that the Federal Reserve could reduce rates later in the year.

The rally lost momentum near the end of May. Strong purchasing-managers' surveys, firmer employment-cost indicators and weak demand at selected Treasury auctions caused yields to rise again.

The 10-year yield finished the month below its late-April peak but remained substantially above the level recorded at the end of 2023. Shorter-dated yields continued to reflect uncertainty regarding the exact timing of the first Federal Reserve reduction.

Minutes from the Federal Reserve's May meeting showed that policymakers remained concerned about the lack of recent inflation progress. Some participants indicated a willingness to tighten policy further if inflation risks required it, although Chair Powell had previously stated that an increase was not the most likely next step.

Investors continued to debate the neutral level of interest rates. Strong economic performance despite restrictive policy suggested that the rate consistent with stable growth and inflation might be higher than before the pandemic.

Quantitative Tightening

The Federal Reserve announced that it would slow the reduction of its balance sheet beginning in June. The monthly cap on Treasury securities allowed to mature without replacement was reduced from $60 billion to $25 billion.

The change did not represent conventional monetary easing, but reduced the risk that reserves within the banking system would decline too rapidly. It also moderated the amount of Treasury supply that private investors needed to absorb.

European Government Bonds

German government bonds produced mixed performance. Expectations of a June ECB rate cut supported shorter maturities, while stronger wage data and the rise in US yields created pressure later in the month.

Investors became less confident that the ECB would deliver a rapid sequence of reductions after June. Policymakers indicated that each subsequent decision would depend upon wages, services inflation and the strength of the recovery.

Peripheral eurozone spreads remained relatively contained. Demand for Italian and Spanish government debt was supported by higher yields and an improving regional outlook.

UK Gilts

UK government bonds initially benefited from the Bank of England's relatively dovish forecasts and the increase to two votes for an immediate rate reduction.

However, stronger-than-expected services inflation caused markets to reduce the likelihood of a June cut. Gilt yields consequently increased, particularly among shorter maturities sensitive to monetary policy.

The market continued to expect that Bank Rate would decline later in the year, but the anticipated starting point moved towards August or beyond.

Japanese Government Bonds

Japanese government-bond yields increased as investors anticipated further gradual policy normalisation. The 10-year yield moved above 1% for the first time in more than a decade.

The Bank of Japan continued purchasing government bonds, but market participants expected it eventually to reduce these operations. Currency weakness and rising import costs increased pressure for a less accommodative stance.

Investment-Grade Credit

Investment-grade corporate bonds generated positive returns as spreads remained tight and underlying government yields generally stabilised relative to April.

New issuance remained substantial. Companies sought to refinance maturities and secure funding while investor demand remained strong.

Credit quality was generally resilient, supported by strong earnings and liquidity. However, the cumulative effect of refinancing low-cost debt at higher coupons continued to increase interest expense.

Investors favoured issuers with moderate leverage, predictable cash flow and limited near-term refinancing needs. Greater caution was applied to commercial property, highly cyclical industries and companies dependent upon discretionary consumer spending.

High-Yield Credit

High-yield bonds benefited from strong equity markets and limited default expectations. Coupon income remained attractive, while credit spreads stayed close to historically tight levels.

The limited spread compensation reduced the margin of safety. Lower-rated borrowers remained vulnerable to a sustained period of high base rates, particularly where interest coverage was weak.

Refinancing activity increased as borrowers took advantage of improved risk appetite. Some companies extended maturities or replaced more restrictive private debt with syndicated loans and bonds.

Private Credit

Private-credit markets remained active, although competition from banks and public leveraged-finance markets increased. Stronger borrowers gained greater negotiating power and in some cases refinanced private loans at lower costs.

Direct lenders continued to offer certainty, speed and customised structures for acquisitions and complex situations. Floating-rate income remained attractive to investors.

Existing borrowers financed during the low-rate period continued to experience pressure. Amendments, maturity extensions, payment-in-kind interest and additional sponsor equity remained common responses.

Investors monitored whether reported valuations reflected current credit conditions. The absence of frequent trading made it more difficult to identify deterioration promptly.

Commercial Real Estate

Commercial-property debt remained an important area of concern. Office values were affected by high financing costs and uncertain occupancy, particularly for older buildings requiring substantial refurbishment.

Demand remained stronger for logistics, data centres, healthcare property, student accommodation and selected residential assets. These sectors benefited from structural demand or limited supply.

Fixed-Income Considerations

• Softer inflation supported government bonds during the middle of the month.
• Strong economic data caused yields to rise again near month-end.
• The Federal Reserve slowed the pace of quantitative tightening.
• The ECB remained positioned to reduce rates in June.
• Persistent UK services inflation reduced expectations of an immediate Bank of England cut.
• Japanese bond yields increased as investors anticipated gradual policy normalisation.
• Credit spreads remained tight, reducing compensation for future defaults.
• Private-credit borrowers continued to face high floating-rate interest costs.

Foreign Exchange

Currency markets remained sensitive to differences in monetary policy and inflation. The US dollar weakened during parts of May as softer economic data revived rate-cut expectations, but recovered near the end of the month when Treasury yields increased.

US Dollar

The dollar initially declined following weaker employment growth and softer inflation. Investors interpreted the data as evidence that restrictive monetary policy was beginning to slow the economy.

The currency recovered later as business surveys remained strong and Federal Reserve officials emphasised that inflation progress had been insufficient. Higher Treasury yields restored demand for dollar-denominated assets.

The dollar remained supported by the relative strength of the US economy. Although the ECB appeared ready to begin easing first, the Federal Reserve was expected to maintain higher rates for longer.

Euro

The euro advanced modestly during parts of May despite expectations of a June ECB reduction. Improving economic activity and firm wage data limited expectations of aggressive subsequent easing.

The currency's outlook depended upon the pace of policy divergence with the United States. A single ECB reduction followed by a cautious pause would be less negative for the euro than a rapid easing cycle.

Sterling

Sterling remained resilient during May. Stronger UK economic growth and persistent services inflation reduced expectations that the Bank of England would cut rates before August.

The currency benefited from the prospect that UK rates would remain comparatively high. However, the long-term outlook remained connected to whether domestic growth could continue after the initial recovery from recession.

Japanese Yen

The yen remained weak despite suspected intervention by Japanese authorities. It appreciated sharply around the turn of April and May but subsequently surrendered part of the gain.

The fundamental interest-rate differential remained substantial. Japanese rates were close to zero, while US short-term rates exceeded 5%, encouraging investors to borrow yen and invest in higher-yielding currencies.

Intervention could discourage speculative movements but was unlikely to create a lasting appreciation without a change in monetary conditions. Investors therefore continued to focus on whether the Bank of Japan would reduce bond purchases or raise rates further.

Chinese Renminbi

The renminbi remained under modest pressure from lower domestic interest rates, property weakness and capital outflows. Authorities continued to discourage rapid depreciation through daily reference rates and state-bank activity.

Trade restrictions complicated the currency outlook. A weaker renminbi could offset part of the effect of higher tariffs but risked creating additional international tension.

Swiss Franc

The Swiss franc remained comparatively weak following the Swiss National Bank's March rate reduction. Inflation remained contained, allowing policymakers to focus upon export competitiveness and economic conditions.

Emerging-Market Currencies

Emerging-market currencies produced mixed performance. Softer US inflation initially improved risk appetite, while the late-month rise in Treasury yields created renewed pressure.

Countries with high real rates, improving inflation and strong current-account positions remained more resilient. Political uncertainty and dependence upon foreign funding created greater volatility elsewhere.

Foreign-Exchange Considerations

• Monetary-policy divergence remained the principal driver of major currencies.
• The dollar weakened after softer inflation but recovered as yields rose.
• Sterling benefited from stronger UK growth and persistent services inflation.
• Intervention provided only temporary support for the yen.
• The renminbi remained managed amid property and trade pressures.
• Currency hedging remained important for globally diversified investors.

Commodities

Commodity markets produced mixed results during May. Industrial and precious metals reached important milestones, while oil declined as geopolitical risk eased and demand expectations weakened.

Oil and Energy

Crude-oil prices declined during May. Brent moved from the upper-$80 range towards approximately $80 per barrel, while West Texas Intermediate also weakened.

The reduction reflected lower immediate concern about a direct conflict between Iran and Israel, rising inventories and uncertainty surrounding the strength of global demand.

The International Energy Agency reduced its forecast for global oil-demand growth during 2024, citing weaker consumption in developed economies and changing patterns within China.

OPEC and its partners continued voluntary production restrictions. Investors anticipated the group's early-June meeting and debated whether the reductions would be extended into the second half of the year.

Strong production from the United States and other non-OPEC countries remained an important source of supply. This limited the ability of OPEC+ to increase output without creating downward pressure on prices.

European natural-gas prices increased during parts of May as supply outages and maintenance affected the market. Storage remained high, providing protection against immediate disruption.

Gold

Gold reached another record high during May, trading above $2,400 per ounce before retreating later in the month.

Central-bank purchases, geopolitical uncertainty and expectations of eventual monetary easing continued to support demand. Chinese household and institutional buying also remained influential.

The metal experienced profit-taking when US yields rose and the dollar strengthened. Its ability to remain elevated despite high real interest rates continued to demonstrate strong official and diversification demand.

Silver

Silver advanced sharply and traded above $30 per ounce. The metal benefited from both investment demand and expectations of increasing industrial use.

Solar-panel manufacturing, electronics and electricity infrastructure remained important sources of structural demand. Silver's smaller and less liquid market contributed to greater volatility than gold.

Copper

Copper reached a record price during May, with futures temporarily moving above $11,000 per metric tonne. The rally reflected mine-supply constraints, speculative positioning and expectations of growing demand from electrification and artificial intelligence.

Electricity grids, renewable-energy installations, electric vehicles and data centres required substantial copper. Investors increasingly focused on the limited pipeline of large new mines and the long period required to develop additional supply.

A short squeeze within the US futures market amplified price movements when traders faced difficulty delivering metal against contractual positions. Prices subsequently retreated from the peak but remained substantially higher for the year.

Immediate physical demand was less exceptional than futures-market pricing suggested. High prices discouraged some Chinese buyers, demonstrating the difference between long-term structural expectations and short-term consumption.

Aluminium and Nickel

Aluminium remained supported by sanctions affecting Russian supply and expectations of stronger manufacturing demand. Electricity costs continued to play an important role because aluminium production was highly energy intensive.

Nickel remained affected by rapid Indonesian supply growth. Prices recovered during parts of the month, but the long-term market remained challenged by excess production and pressure on higher-cost mines.

Iron Ore

Iron-ore prices recovered as Chinese authorities introduced additional property support and construction activity showed tentative improvement.

The outlook remained uncertain because residential development continued to contract. Infrastructure and manufacturing demand helped offset part of the weakness.

Agricultural Commodities

Cocoa remained exceptionally volatile after reaching record highs earlier in the year. Poor harvests and low inventories continued to support prices, although extreme positioning produced sharp daily reversals.

Coffee prices remained elevated because of weather and supply concerns. Wheat increased as adverse weather affected production expectations in Russia and other exporting regions.

Grain markets remained sensitive to Black Sea conflict, shipping conditions and changing crop forecasts across the Northern Hemisphere.

Commodity Overview

Digital Assets

Digital assets advanced during May as improving risk appetite and a significant regulatory development involving Ethereum attracted investor demand. Bitcoin recovered from its April weakness, while Ether produced a particularly strong gain.

Bitcoin

Bitcoin rose during May and returned towards the upper end of the trading range established after its March record high. Softer US inflation and recovering technology shares improved demand for higher-risk assets.

US spot Bitcoin exchange-traded funds returned to net inflows after experiencing weaker demand during April. The products continued to increase institutional accessibility and allowed exposure through conventional brokerage and investment-advisory platforms.

The effects of the April halving continued to influence mining economics. The block reward had been reduced from 6.25 to 3.125 Bitcoin, lowering the rate of new issuance and reducing revenue for miners.

Mining companies sought to improve efficiency, secure lower-cost electricity and expand into high-performance computing. Less efficient operators remained vulnerable where transaction fees and Bitcoin prices were insufficient to compensate for the reduced reward.

Ethereum

Ether advanced sharply after expectations changed regarding the approval of US spot exchange-traded funds. Earlier in the month, investors had considered rejection or substantial delay likely.

On 23 May, the US Securities and Exchange Commission approved exchange rule changes associated with eight proposed spot Ether ETFs. The decision represented a significant regulatory development but did not allow the products to begin trading immediately.

Individual registration statements still required approval before launch. Asset managers also amended proposals to remove or avoid staking features, which had created additional regulatory complexity.

The decision increased the probability that traditional investors would gain regulated access to Ether through familiar investment vehicles. It also raised questions regarding the regulatory classification of Ethereum and related network activities.

Ethereum Network

Ethereum remained central to decentralised finance, stablecoins, tokenisation and blockchain-based applications. Recent technical upgrades had reduced transaction costs on secondary scaling networks.

Lower fees encouraged activity but created debate regarding how much economic value accrued directly to the main network. Competition from alternative blockchains also remained significant.

Alternative Digital Assets

Smaller tokens generally benefited from improved sentiment, although performance varied substantially. Assets connected to decentralised finance, artificial intelligence and tokenisation attracted speculative interest.

Meme-related tokens continued to experience extreme volatility. Their performance was driven primarily by liquidity and online attention rather than conventional financial fundamentals.

Institutional Adoption

Financial institutions continued experimenting with tokenised funds, bonds, deposits and settlement systems. These projects aimed to improve transaction speed, transparency and operational efficiency.

Institutional interest increasingly distinguished between regulated tokenisation of conventional assets and direct exposure to unbacked digital tokens.

Custody, liquidity, legal ownership and interoperability remained important challenges before blockchain-based securities could achieve broad adoption.

Regulatory Environment

The approval process for spot Ether ETFs suggested a more flexible regulatory outcome than markets had expected. However, significant uncertainty remained regarding token classification, staking, decentralised platforms and stablecoins.

Digital-asset companies continued to face differing requirements across the United States, European Union, United Kingdom, Asia and offshore financial centres.

Digital-Asset Risks

• Spot Ether ETFs had not yet received all approvals required to begin trading.
• Digital assets remained highly sensitive to liquidity and interest-rate expectations.
• Mining economics remained challenging after the Bitcoin halving.
• Regulatory treatment of staking and alternative tokens remained uncertain.
• Leverage could amplify both rallies and corrections.
• Cybersecurity, custody and smart-contract risks remained material.
• Institutional accessibility did not eliminate underlying price volatility.

Private Equity

Private-equity conditions continued to improve gradually during May. Stronger public markets, accessible leveraged finance and reduced recession concerns supported transaction activity. However, delayed interest-rate cuts and limited distributions remained important challenges.

Deal Activity

Private-equity firms continued rebuilding transaction pipelines after the slowdown experienced during 2022 and 2023. Healthcare, software, business services, financial technology, industrial automation and energy infrastructure remained active areas.

Mid-market transactions continued to represent a substantial share of activity. These deals required smaller financing packages and often provided clearer opportunities for operational improvement or consolidation.

Larger buyouts remained possible for premium assets, but sponsors generally used greater equity contributions and more conservative leverage than during the low-rate period.

Corporate carve-outs attracted interest as large companies reviewed portfolios and sought to dispose of non-core divisions. Such transactions offered potential value but required careful separation of systems, employees, contracts and intellectual property.

Technology Transactions

Technology remained an important sector, although investors applied greater scrutiny than during the 2020–2021 period. Recurring revenue alone was no longer sufficient to justify premium valuations where growth, customer retention or cash conversion was weak.

Businesses providing cybersecurity, data management, specialised software and infrastructure tools remained attractive. Artificial-intelligence exposure increased interest where companies possessed proprietary data, distribution or clear customer demand.

Sponsors remained cautious towards businesses likely to be displaced by generative AI or requiring substantial ongoing investment to remain competitive.

Healthcare

Healthcare transactions remained supported by ageing populations, technological innovation and comparatively defensive demand. Specialist services, diagnostics, contract manufacturing and healthcare software attracted interest.

Investors monitored reimbursement, labour costs and regulatory risk. Businesses dependent upon a single product, customer or government programme required particularly careful assessment.

Financing Conditions

Leveraged-loan and high-yield markets remained open to high-quality borrowers. Sponsors refinanced portfolio-company debt, extended maturities and reduced spreads where market demand was strong.

Banks competed more actively with private-credit funds, particularly for larger and stronger transactions. This improved pricing and provided sponsors with additional financing alternatives.

Base interest rates remained high, limiting the overall reduction in borrowing costs. Investment cases therefore continued to require lower leverage and stronger operating performance than during the previous cycle.

Private Credit

Private credit remained an important source of acquisition and growth finance. Direct lenders offered certainty, speed and flexibility, while investors received floating-rate income and contractual protections.

Competition increased for attractive borrowers. Spreads tightened and documentation became more borrower friendly in selected transactions.

Older portfolio loans remained an area of concern. Borrowers that had been underwritten using much lower base-rate assumptions experienced pressure on interest coverage.

Payment-in-kind interest could preserve short-term liquidity but increased principal balances. Investors needed to distinguish between temporary flexibility and capital structures that had become fundamentally unsustainable.

Valuations

The recovery in listed equity markets improved valuation confidence for selected sectors. Technology and healthcare comparables supported premium pricing for high-quality assets.

However, buyers continued to apply conservative assumptions to exit multiples. The possibility that rates would remain elevated for longer restricted the amount of leverage available and reduced the price sponsors could justify.

Valuation gaps remained greatest for assets acquired near the peak of the previous cycle. Sellers were reluctant to accept prices below prior marks, while buyers required returns based upon current financing conditions.

Exit Environment

The exit market showed tentative improvement but remained below the level required to normalise private-equity distributions. Sponsors continued preparing businesses for public offerings, strategic sales and secondary buyouts.

Strong equity indices improved the environment for high-quality IPO candidates. However, new listings required credible growth, profitability and reasonable pricing to attract investors.

Trade buyers remained selective but willing to pay strategic premiums for assets offering technology, market access or cost synergies.

Sponsor-to-sponsor transactions provided another route to liquidity, although both sides needed to agree valuations under the same high-rate conditions.

Continuation Vehicles

Continuation funds remained widely used to provide liquidity while allowing managers to retain high-conviction assets. Existing investors could sell or roll their interests into a new vehicle.

Governance remained essential because the sponsor influenced asset selection, valuation and future economics. Independent advice, competitive pricing and clear disclosure were important protections.

Secondaries

The private-equity secondary market continued to expand. Limited partners sold fund interests to rebalance portfolios, generate liquidity or reduce exposure to older vintages.

Demand remained strongest for mature, high-quality portfolios with visible exit prospects. Discounts narrowed for desirable funds but remained substantial where valuations were uncertain or distributions appeared distant.

Secondary buyers benefited from shorter expected holding periods, diversified exposure and the ability to acquire assets below reported net asset value.

Fundraising

Fundraising remained concentrated among established managers with strong realised performance. Limited partners continued to face reduced distributions and high existing allocations to private markets.

Infrastructure, secondaries and private credit generally attracted stronger demand than conventional buyout strategies because of their income, diversification or liquidity characteristics.

Smaller and first-time funds faced longer fundraising periods. Sector expertise, meaningful manager commitments and co-investment opportunities became increasingly important.

Operational Value Creation

Operational performance remained the most reliable source of private-equity returns. Sponsors focused on pricing, procurement, digitalisation, sales effectiveness, working-capital management and management recruitment.

Artificial intelligence became more prominent within portfolio-company plans. Common applications included customer service, software development, document processing, marketing and financial analysis.

Successful implementation required secure data, employee training and measurable performance indicators. AI projects needed to produce identifiable savings or revenue rather than merely demonstrate technological ambition.

CE Global Private Equity Observations

• Transaction confidence continued to improve, particularly within the mid-market.
• Public-market strength supported valuation visibility but did not eliminate financing constraints.
• Competition between banks and private lenders improved options for stronger borrowers.
• Delayed rate cuts maintained pressure on highly leveraged portfolio companies.
• Trade sales, continuation vehicles and secondaries remained essential sources of liquidity.
• Fundraising continued to favour established and specialised managers.
• Artificial-intelligence investments required clear commercial applications.
• Operational improvement remained more dependable than leverage or multiple expansion.

Artificial Intelligence & Technology

Artificial intelligence remained the dominant technology theme during May. Strong semiconductor earnings demonstrated continuing infrastructure demand, while investors increasingly examined the electricity, networking, data and software required to support widespread adoption.

Semiconductors

Advanced semiconductor demand remained exceptionally strong. Cloud providers, technology companies, governments and research institutions continued to purchase processors capable of training and operating large artificial-intelligence models.

Nvidia reported another substantial increase in data-centre revenue and provided guidance above market expectations. Demand continued to exceed supply for its most advanced products.

The company prepared to introduce a new generation of processors, creating additional demand but also increasing the pace at which customers needed to upgrade infrastructure.

The AI opportunity extended across high-bandwidth memory, networking, advanced packaging, chip-design software, semiconductor manufacturing equipment and power-management components.

Supply-chain concentration remained a strategic risk. The most advanced chips depended upon a small number of manufacturers and equipment providers located across Taiwan, South Korea, Japan, the United States and Europe.

Custom Processors

Large cloud companies continued developing proprietary processors to reduce cost and optimise specific workloads. These chips could supplement rather than entirely replace externally supplied graphics processors.

Custom silicon created opportunities for semiconductor-design services, intellectual-property providers and advanced foundries. It also represented a long-term competitive risk for incumbent processor companies.

Cloud Computing

Cloud providers continued to increase capital expenditure. Artificial-intelligence services encouraged customers to use additional computing, storage and data-management capacity.

Companies with established enterprise relationships and broad infrastructure appeared best positioned to commercialise AI at scale. They could integrate models into existing productivity, security and development platforms.

The level of expenditure remained a concern. Investors required evidence that incremental revenue and customer retention would justify the construction of new data centres and purchase of expensive processors.

Enterprise Adoption

Businesses continued experimenting with generative AI across software development, customer service, marketing, research, legal work and internal administration.

Adoption remained gradual because companies needed to address accuracy, confidentiality, integration and employee training. Many organisations restricted the use of public models where proprietary or personal information was involved.

Businesses increasingly favoured smaller specialised models for specific tasks. These systems could be less expensive, easier to control and capable of operating within private environments.

Data and Software

Proprietary data became an increasingly important competitive advantage. Models available to many businesses could produce differentiated results only when combined with high-quality internal information and established workflows.

Software companies examined different pricing models for AI features. These included premium subscriptions, per-user charges and usage-based pricing.

The cost of inference remained relevant. Providers needed to ensure that revenue exceeded the computing expense generated by frequent customer use.

Data Centres

Demand for data-centre capacity continued to accelerate. Developers sought sites with available electricity, fibre connectivity and planning approval.

Power availability became the principal constraint in several markets. Grid connections could require years, creating a premium for facilities with secured capacity.

AI systems required greater power density and cooling than conventional computing. This supported demand for liquid cooling, electrical equipment, transformers and backup generation.

Electricity and Utilities

Utilities attracted increased investor attention because data-centre growth was expected to raise electricity consumption substantially. This represented a change after decades of relatively flat demand in some developed markets.

Technology companies sought long-term agreements involving renewable energy, natural gas, storage and nuclear generation. Reliable power was required continuously, making intermittent generation insufficient without complementary capacity.

The expansion created opportunities for grid operators and equipment suppliers, but required major capital expenditure and regulatory approval.

Cybersecurity

Artificial intelligence enhanced both offensive and defensive cyber capabilities. Attackers used automated tools to create phishing messages, synthetic identities and malicious software.

Security providers applied machine learning to detect unusual activity, prioritise alerts and respond more rapidly. Identity verification, cloud security and data-loss prevention remained high-priority areas.

Businesses also needed to protect information entered into AI systems. Governance policies increasingly specified approved providers, data classifications and human-review requirements.

Consumer Technology

Technology manufacturers promoted a new generation of personal computers and mobile devices capable of operating AI applications locally.

On-device processing could improve privacy, responsiveness and offline capability. It could also reduce the computing costs borne by cloud providers.

Investors considered whether AI functionality would produce a meaningful hardware replacement cycle. Adoption depended upon the availability of applications offering clear benefits to consumers and businesses.

Regulation and Competition

Regulators continued examining partnerships between major technology companies and artificial-intelligence developers. Access to computing power, data and distribution created concern that a small number of platforms could dominate the emerging industry.

Copyright litigation remained unresolved. Publishers, artists, software developers and other rights holders challenged the use of protected material within training data.

European businesses prepared for risk-based AI regulation. High-risk applications required stronger documentation, testing and human oversight.

Technology Investment Risks

• AI-related capital expenditure could grow faster than commercial revenue.
• High valuations created sensitivity to modest earnings disappointments.
• Supply-chain concentration created geopolitical and operational risk.
• Custom processors could reduce the market share of incumbent suppliers.
• Electricity and grid constraints could delay data-centre development.
• Enterprise adoption could proceed more slowly than investor expectations.
• Copyright, privacy and competition liabilities remained uncertain.
• Rapid innovation could shorten product cycles and increase obsolescence.

Sector Spotlight

Electricity Networks and Power Infrastructure

May's sector spotlight examines electricity networks and power infrastructure. Investment in artificial intelligence, data centres, renewable energy, electric vehicles and manufacturing increased demand for reliable electricity and exposed long-standing constraints within national grids.

Changing Electricity Demand

Electricity consumption had remained relatively stable across several developed economies for many years. This trend began to change as transport, heating, industry and computing became increasingly electrified.

Artificial-intelligence data centres added a particularly energy-intensive source of demand. Facilities containing advanced processors required large quantities of electricity for computing and cooling.

Manufacturing investment also increased demand. Semiconductor plants, battery factories and reshored industrial facilities required dependable power and lengthy grid connections.

Grid Constraints

Many electricity networks were designed for centralised generation located near large fossil-fuel or nuclear plants. Renewable energy increasingly originated in remote areas and produced variable output.

Grid operators needed additional transmission lines to move electricity from renewable-generation regions to cities and industrial customers. Distribution systems also required upgrades to support rooftop solar, battery storage, heat pumps and electric-vehicle charging.

Planning and permitting remained major obstacles. Transmission projects could require a decade or more from proposal to operation, creating substantial queues for new generation and demand connections.

Transformers and Electrical Equipment

Demand increased for transformers, switchgear, cables, substations and power-management systems. Manufacturing capacity was limited and lead times extended significantly for selected equipment.

Specialist manufacturers benefited from strong order books and pricing power. However, they also faced labour shortages, raw-material costs and the need to expand capacity carefully.

Data-Centre Power

Data-centre developers increasingly selected locations according to electricity availability rather than proximity to traditional technology hubs. Sites with secured grid capacity gained strategic value.

Operators considered on-site generation, batteries and direct agreements with power producers. Some projects examined natural-gas generation or small nuclear reactors to provide reliable output.

Power density increased as AI servers consumed more electricity within a smaller physical space. This required upgraded electrical systems and more advanced cooling.

Renewable Energy

Renewable energy remained essential to meeting rising electricity demand while reducing emissions. Wind and solar generation offered comparatively low operating costs but required grid expansion, storage and backup capacity.

Developers faced higher financing costs and supply-chain inflation. Some projects required revised contracts or public support to remain economically viable.

Transmission constraints caused renewable output to be curtailed in certain markets. Investment in the grid was therefore as important as investment in generation itself.

Energy Storage

Battery storage helped balance short-term differences between electricity production and demand. Costs had declined over time, encouraging rapid deployment.

Longer-duration storage remained less developed. Technologies involving pumped hydro, compressed air, thermal systems and alternative battery chemistries attracted investment.

Storage economics depended upon electricity-price volatility, grid-service payments and local regulation. Revenue models varied substantially between markets.

Nuclear Energy

Nuclear power attracted renewed interest because it provided continuous low-carbon generation. Governments extended the operating lives of existing plants and considered new large reactors and smaller modular designs.

Projects remained capital intensive and faced long construction periods. Cost overruns and regulatory complexity represented substantial risks.

Technology companies' need for reliable clean power increased the potential strategic value of existing nuclear assets.

Utilities

Regulated utilities could benefit from rising capital investment where regulatory frameworks allowed an appropriate return. Grid upgrades expanded the asset base upon which permitted earnings were calculated.

However, utilities required substantial financing. Higher interest rates increased capital costs and could create pressure where regulators resisted corresponding increases in customer bills.

Wildfire, extreme weather and physical infrastructure risks also increased. Companies needed to invest in resilience alongside capacity expansion.

Private-Market Opportunities

• Electricity transmission and distribution infrastructure
• Transformers, switchgear and electrical components
• Battery and long-duration energy storage
• Data-centre power and cooling systems
• Renewable-energy generation
• Grid-management software
• Demand-response and energy-efficiency services
• Electric-vehicle charging infrastructure
• Backup generation and microgrids
• Specialist maintenance and engineering services

Principal Risks

Infrastructure development depended heavily upon regulation, planning approval and government policy. Delays could reduce returns and increase costs.

Projects were capital intensive and sensitive to interest rates. Long construction periods increased exposure to inflation, supply-chain disruption and changing technology.

Utilities faced political pressure to maintain affordable customer bills. Regulators might restrict returns even where investment requirements increased substantially.

Demand forecasts remained uncertain. Artificial-intelligence electricity requirements could be lower or higher than projected depending upon processor efficiency and adoption.

Investment Perspective

Electricity infrastructure represented a foundational investment theme connecting artificial intelligence, energy transition and industrial policy. Generating capacity alone could not meet demand without corresponding investment in networks, storage and electrical equipment.

The strongest opportunities were likely to involve assets with contracted revenue, regulated returns, scarce grid access or technically specialised capabilities. Entry valuation and financing structure remained critical because of the sector's substantial capital requirements.

Regulatory Update

Regulatory developments during May focused on digital assets, artificial intelligence, international trade, competition, cybersecurity and private-market transparency. The interaction between technology policy and national economic strategy became increasingly important.

Spot Ether Exchange-Traded Funds

The US Securities and Exchange Commission approved exchange rule changes associated with proposed spot Ether ETFs on 23 May. The decision represented an important step towards regulated investment products holding Ether directly.

The approval did not permit immediate trading. Fund issuers still needed their individual registration statements to become effective before products could launch.

Several proposals removed staking features. Staking allowed holders to earn rewards for helping secure the Ethereum network but created additional questions regarding securities law, custody and taxation.

Financial institutions continued to assess suitability, volatility, custody and liquidity before making digital-asset products available to clients.

Artificial Intelligence

Companies continued preparing for the European Union's risk-based artificial-intelligence framework. Organisations needed to identify systems, classify their risk and assign responsibility for compliance.

High-risk uses within employment, credit, insurance, healthcare and critical infrastructure required stronger testing and human oversight.

Businesses also faced requirements relating to transparency, copyright and the use of personal information. Internal AI governance became an important component of broader risk management.

AI-Related Disclosures

Financial regulators continued warning companies and investment managers against overstating artificial-intelligence capabilities. Public claims needed to be accurate, specific and supported by actual business processes.

Investment advisers using automated tools remained responsible for suitability, conflicts and the accuracy of recommendations. Responsibility could not be transferred entirely to a third-party model provider.

US–China Trade Measures

The United States announced higher tariffs on selected Chinese strategic products. Electric vehicles, batteries, semiconductors, solar cells and certain metals were affected.

The measures reflected concern regarding national security, supply-chain resilience and subsidised overcapacity. Businesses needed to assess the effects upon sourcing, manufacturing and end-market demand.

China retained several possible responses, including tariffs, regulatory investigations and controls affecting critical materials or technologies.

Competition Policy

Competition authorities continued examining large technology companies, digital platforms and artificial-intelligence partnerships.

Regulators considered whether exclusive cloud relationships, financial investments or access to computing power could restrict emerging competitors.

Private-equity roll-up strategies also received attention where multiple acquisitions could create significant cumulative market concentration despite each transaction being relatively small.

Private Funds

Private-fund managers continued preparing for expanded disclosure requirements concerning fees, expenses, performance and preferential treatment.

Valuation remained a central issue because limited transaction activity reduced the availability of observable prices. Managers needed consistent methodologies and governance capable of challenging optimistic assumptions.

Continuation vehicles required particular attention to conflicts. Investors expected independent valuation, competitive processes and sufficient time to evaluate rollover or sale options.

Private Credit

Regulators increased their examination of private credit as the asset class expanded. Areas of interest included leverage, valuation, liquidity and links with banks and insurance companies.

Limited market transparency could make it difficult to identify deterioration or concentration. Managers needed reliable borrower reporting and realistic treatment of amendments and payment-in-kind interest.

Cybersecurity and Operational Resilience

Financial and investment businesses continued strengthening controls against cyberattacks and payment fraud. Artificial intelligence increased the sophistication of impersonation, phishing and synthetic-media attacks.

Companies needed procedures for verifying unusual payment instructions, particularly where senior executives appeared to make urgent requests through email, voice or video.

Third-party concentration remained important. Dependence upon a small number of cloud, software and data providers could cause widespread disruption.

Sustainability Disclosure

International companies continued preparing for expanded sustainability reporting. European requirements extended beyond climate to broader environmental and social impacts.

Reliable supplier data remained difficult to obtain. Businesses needed controls capable of supporting public claims and identifying estimation uncertainty.

Compliance Priorities

• Monitor the remaining approval process for spot Ether ETFs.
• Classify artificial-intelligence systems according to regulatory risk.
• Document human oversight and testing for automated decisions.
• Ensure AI-related public statements accurately reflect actual capabilities.
• Assess supply-chain exposure to new US–China trade measures.
• Review technology partnerships for competition and concentration risk.
• Maintain consistent private-asset valuation governance.
• Disclose continuation-fund conflicts clearly and independently.
• Evaluate leverage and payment-in-kind exposure within private credit.
• Strengthen identity and payment verification against AI-enabled fraud.

Looking Ahead

Markets entered June with renewed equity momentum and expectations that the European Central Bank would become the first of the largest central banks to reduce interest rates. The outlook remained dependent upon inflation, employment and the sustainability of corporate earnings.

European Central Bank

The ECB appeared highly likely to reduce its deposit rate by a quarter percentage point at its June meeting. Such a move would represent the first reduction since the tightening cycle began.

Investor attention would focus less upon the initial cut than upon guidance concerning subsequent meetings. Firm wage growth and improving activity could encourage the bank to proceed cautiously.

A slower easing path could support the euro and bank profitability, while more rapid reductions could provide greater assistance to households, property and business investment.

Federal Reserve

The Federal Reserve's June meeting would include updated economic and policy-rate projections. Investors expected officials to reduce the number of anticipated 2024 rate cuts from the three shown in March.

Inflation and employment data released before the meeting would remain critical. Continued moderation could preserve the prospect of a September reduction, while renewed strength could push the first move towards the end of the year.

Markets would also monitor the effect of slower quantitative tightening upon liquidity and government-debt markets.

Bank of England

The Bank of England's June decision would follow the UK general election announcement, creating additional sensitivity around communication. Most investors expected rates to remain unchanged.

Services inflation and wage growth remained the primary barriers to easing. A reduction later in the summer appeared increasingly likely if these measures moderated.

US Employment

Labour-market data would determine whether economic growth was slowing gradually or more abruptly. Investors sought moderate payroll growth, stable unemployment and slower wages.

Unexpected strength could increase yields and pressure equity valuations. Significant weakness could revive recession concerns despite improving the probability of rate cuts.

Corporate Earnings

Artificial-intelligence expenditure would remain an important market driver. Semiconductor demand appeared strong, but investors would increasingly require evidence that spending generated revenue and productivity for end users.

Companies outside technology would need to demonstrate that consumer demand and profit margins remained resilient in a high-rate environment.

Equity Valuations

Record index levels reduced the margin for disappointment. The largest technology companies justified premium valuations through strong growth, but market concentration increased vulnerability to company-specific developments.

Opportunities remained within less expensive markets and sectors, including the United Kingdom, parts of Europe, smaller companies and selected emerging economies. However, lower valuations often reflected genuine economic or structural risks.

China

Investors would assess whether property-support measures could improve sales, reduce housing inventory and stabilise prices.

Implementation by local governments would be critical. Insufficient funding or unattractive purchase economics could limit the programme's effectiveness.

Trade tensions would remain important for electric vehicles, batteries, solar equipment and semiconductors. European tariff decisions could have substantial implications for Chinese exporters and European manufacturers.

India

India's general-election result would be closely watched. Markets expected continuity in infrastructure investment, manufacturing policy and fiscal reform.

An unexpected result could create substantial volatility because valuations reflected confidence in political stability and strong economic growth.

Japan

The Bank of Japan's June meeting could provide guidance concerning future bond purchases. Reducing purchases would allow yields to rise and might support the yen.

Currency intervention remained possible if depreciation became disorderly. However, lasting appreciation would probably require a narrowing of interest-rate differentials.

Commodities

OPEC+ production policy would influence oil prices. Extending voluntary reductions could support the market, while announcing a return of supply might create downward pressure.

Copper's record rally increased correction risk. Investors would compare futures-market expectations with physical demand, Chinese imports and inventories.

Gold and silver would remain sensitive to real yields, central-bank demand and geopolitical conditions.

Digital Assets

The remaining regulatory process for spot Ether ETFs would be a major focus. Approval of fund registration statements would allow trading to begin and provide evidence of institutional demand.

Bitcoin ETF flows and miner economics would remain important following the April halving. Strong inflows could offset reduced issuance, while weaker liquidity could increase volatility.

Private-Market Outlook

Private-equity activity was expected to continue recovering gradually. Improved financing markets supported deals, but base rates remained high and exit valuations required discipline.

Generating distributions remained essential to improving fundraising. Trade sales, IPOs, secondaries and continuation vehicles would all contribute to liquidity.

Private credit remained attractive but increasingly competitive. Managers needed to resist weaker terms and ensure that yields adequately compensated for borrower risk.

Infrastructure associated with electricity, data centres and industrial reshoring remained an important long-term opportunity. These assets required substantial capital and careful assessment of planning, regulation and contracted demand.

Key Events and Indicators to Monitor

CE Global Private Equity Perspective

May demonstrated that markets remained capable of recovering rapidly when inflation data improved and corporate earnings remained resilient. However, the rebound did not eliminate the uncertainty surrounding monetary policy or the risks created by demanding valuations.

Artificial intelligence continued to support exceptional investment across semiconductors, data centres, cloud computing and software. The next stage of the theme was increasingly connected to physical infrastructure, particularly electricity generation, transmission, cooling and specialised equipment.

This interaction between digital growth and physical constraints created opportunities beyond the largest technology companies. Utilities, engineering businesses, electrical-equipment manufacturers and infrastructure investors could participate in the expansion.

Investors nevertheless needed to distinguish between durable demand and speculative projections. Copper prices and AI-related equity valuations incorporated substantial optimism regarding future growth.

Within private markets, financing availability improved but the cost of capital remained structurally higher than during the previous decade. Conservative leverage, reliable cash flow and operational value creation remained essential.

Private credit continued to offer attractive income, although competition risked weakening documentation and reducing spreads. Underwriting discipline was particularly important where borrowers relied upon payment-in-kind interest or future rate cuts.

CE Global Private Equity believes that opportunities remain strongest where long-term structural growth is combined with defensible competitive positions and realistic entry valuations. Electricity infrastructure, specialised healthcare, cybersecurity, industrial technology and selected business services remained areas of interest.

Diversification remained necessary. Policy divergence, trade restrictions, geopolitical conflict and market concentration could create abrupt changes in currencies, commodities and asset prices.

Maintaining liquidity and avoiding excessive leverage provided flexibility to invest during periods of market dislocation. Strong market performance should not reduce the importance of due diligence, downside analysis and disciplined capital allocation.

This market review is provided for general information and discussion purposes only. It does not constitute investment, legal, tax or other professional advice, nor an offer or solicitation to purchase or sell any security, financial instrument or investment product. Market values can rise or fall, and past performance is not a reliable indicator of future results.