Executive Summary

Global financial markets continued their recovery during May 2026 as resilient economic activity, strong corporate earnings and renewed confidence in artificial-intelligence investment outweighed persistent inflation and geopolitical uncertainty. The S&P 500 gained approximately 5.3%, while technology-heavy markets again outperformed as investors remained confident that AI-related expenditure would translate into sustained earnings growth.

May represented a continuation of the powerful rebound that began during April. US equities reached additional record highs, Japanese shares performed particularly strongly and European and UK markets also advanced, although by smaller margins. The Nikkei 225 gained approximately 11.5%, while the Euronext 100 and FTSE 100 rose around 2.5% and 0.9% respectively.

The macroeconomic environment nevertheless remained complicated. US inflation accelerated to approximately 3.8% in April as the effects of the Middle East energy shock continued to feed into consumer prices. Minutes from the Federal Reserve's April meeting showed that a number of policymakers believed further monetary-policy tightening could become appropriate if inflation remained persistently above target.

The Federal Reserve did not hold a policy meeting during May, leaving its target range at 3.50%-3.75%. Minutes from the April meeting were released on 20 May and reinforced the increasingly hawkish debate within the Committee.

The European Central Bank also did not hold a policy meeting during May, leaving the deposit facility rate at 2.00%. Eurozone inflation increased to approximately 3.2% in May and policymakers acknowledged that the earlier decision to leave rates unchanged had been finely balanced, with several members prepared to support a rate increase.

The Bank of England had no May policy meeting following its 30 April decision to maintain Bank Rate at 3.75%. UK inflation fell substantially to 2.8% in April from 3.3% in March, while first-quarter GDP expanded by 0.6%. The combination improved the domestic outlook, although unemployment increased to 5.0%.

Energy markets changed direction dramatically. Crude oil prices declined by more than 16% during May as hopes of eventual de-escalation in the Middle East and concern about weaker demand reduced the geopolitical risk premium. The broader Dow Jones Commodity Index declined approximately 3.5%.

Gold also weakened as investors reduced defensive positioning. World Gold Council data showed gold falling approximately 1.4% in US-dollar terms to around $4,546 per ounce, with stronger equity markets and modest ETF outflows acting as headwinds.

Key Themes During May

• The S&P 500 gained approximately 5.3%.
• Artificial intelligence and technology continued to lead equity markets.
• Japan delivered another exceptionally strong month.
• US inflation accelerated to approximately 3.8%.
• Federal Reserve officials increasingly discussed the possibility of renewed tightening.
• Eurozone inflation increased to approximately 3.2%.
• UK inflation moderated substantially to 2.8%.
• Crude oil declined by more than 16%.
• Gold weakened as safe-haven demand eased.
• Private-market conditions improved as public equity and credit sentiment strengthened.

Global Economic Overview

The global economy remained more resilient than investors had expected following the energy shock earlier in 2026. Growth continued across most major economies, although inflation remained elevated and differences between regions became increasingly pronounced.

United States

US economic activity remained comparatively strong. First-quarter GDP growth was revised to an annualised 1.6%, up from approximately 0.5% during the final quarter of 2025 but below the initial 2.0% estimate. Consumer spending and investment were revised lower, but the economy continued to expand despite higher energy and financing costs.

Unemployment remained at approximately 4.3% in April, providing evidence that the labour market had not deteriorated significantly despite earlier signs of weakness.

US Inflation

Annual consumer-price inflation accelerated to approximately 3.8% in April, its highest level since May 2023. Energy costs associated with the continuing Iran conflict remained an important contributor, reinforcing concern that the inflation shock could prove more persistent than originally anticipated.

Federal Reserve

The Federal Reserve did not hold a monetary-policy meeting during May, leaving its target range unchanged at 3.50%-3.75%. The principal policy event was the publication of minutes from the 28-29 April meeting on 20 May.

The minutes indicated that several officials believed some additional policy firming could become appropriate if inflation remained persistently above 2%. This represented a substantial change from the easing expectations that had prevailed at the beginning of 2026.

Markets increasingly considered the possibility that the Federal Reserve's next move could eventually be an increase rather than a reduction if energy and tariff-related inflation remained elevated.

Eurozone

Eurozone first-quarter GDP growth was confirmed at approximately 0.1%, demonstrating that the region remained close to stagnation. Higher imported energy costs continued to place pressure on manufacturing, household purchasing power and corporate margins.

Eurozone inflation increased to approximately 3.2% in May, its highest level since September 2023 and substantially above the ECB's 2% objective.

European Central Bank

The ECB did not hold a policy meeting during May, leaving its deposit facility rate at 2.00%. Minutes from April suggested that maintaining rates unchanged had been a close decision and that several members would have supported an increase if formally proposed.

The increasingly hawkish debate reflected concern that prolonged energy disruption could produce broader wage and price effects rather than a temporary increase in headline inflation.

United Kingdom

The UK economic picture improved during May. Annual CPI inflation slowed to approximately 2.8% in April from 3.3% in March, considerably below expectations of around 3.0%.

First-quarter GDP expanded by approximately 0.6%, the strongest quarterly growth since the first quarter of 2025. However, unemployment increased to 5.0% during the three months to March, reinforcing evidence of a gradual loosening in the labour market.

Bank of England

The Bank of England did not hold a meeting during May. Bank Rate therefore remained at 3.75% following the 30 April decision. The next policy announcement was scheduled for 18 June.

The decline in UK inflation reduced the immediate probability of a rate increase, although elevated energy prices and uncertain inflation expectations continued to argue against rapid easing.

China

China continued to demonstrate comparatively resilient growth. First-quarter GDP expanded approximately 1.3% quarter-on-quarter, supported by government measures, manufacturing and strategic investment.

Consumer-price inflation increased to approximately 1.2% in April, while unemployment declined to 5.2%. The People's Bank of China maintained its major lending rates at record lows for a twelfth consecutive month.

Japan

Japanese annual inflation moderated to approximately 1.4% in April. The combination of softer domestic inflation and continued fiscal support reduced immediate pressure for another Bank of Japan rate increase.

Global Outlook

The global economy remained caught between resilient growth and persistent supply-driven inflation. Falling oil prices during May provided some encouragement, but central banks required evidence that the improvement would persist before returning to an easing bias.

Equity Markets

Global equities advanced during May as strong corporate earnings and optimism surrounding artificial intelligence outweighed inflation and geopolitical concerns. Investors continued rebuilding risk positions following the severe volatility experienced during March.

United States

The S&P 500 gained approximately 5.3%, extending April's recovery and reaching further record levels. Strong corporate earnings and confidence in economic resilience remained the principal drivers.

The Nasdaq also advanced strongly as semiconductor, software and cloud-computing companies benefited from continued artificial-intelligence investment.

Artificial Intelligence and Technology

Technology remained the dominant source of US equity performance. Investors continued to favour businesses providing advanced processors, networking, cloud infrastructure and software capable of monetising AI adoption.

The debate increasingly centred on whether the enormous amounts being spent on data centres and computing infrastructure could deliver acceptable long-term returns. Strong earnings helped reassure markets during May.

Financials

Financial shares benefited from resilient growth and improving capital-market activity. However, the possibility of higher rather than lower Federal Reserve rates introduced additional uncertainty regarding funding costs and credit quality.

Industrials

Industrial businesses remained supported by infrastructure, defence, manufacturing reshoring and data-centre construction. Higher energy costs remained an important margin consideration.

Europe

European equities advanced more moderately, with the Euronext 100 gaining approximately 2.5%. Rising regional inflation and weak economic growth limited enthusiasm despite improving global risk appetite.

United Kingdom

The FTSE 100 gained approximately 0.9%. Lower UK inflation provided support to domestic sentiment, while energy and commodity weakness limited performance among some of the index's largest resource companies.

Japan

The Nikkei 225 gained approximately 11.5%, substantially outperforming most developed markets. Technology, industrial companies and expectations of continued fiscal support contributed to performance.

China

China's Shanghai Composite declined approximately 1% despite relatively strong economic data. Investors continued to weigh policy support against property weakness, trade uncertainty and subdued household confidence.

Emerging Markets

Emerging-market performance remained mixed. Semiconductor-heavy Asian markets benefited from renewed AI enthusiasm, while commodity producers faced pressure from lower energy prices.

Indicative May Performance

Fixed Income Markets

Fixed-income markets remained difficult during May as resilient growth and persistent inflation reduced expectations of central-bank easing. Investors increasingly considered scenarios involving stable or higher policy rates.

US Treasuries

US Treasury yields remained elevated as stronger inflation and the increasingly hawkish tone of Federal Reserve discussions reduced the probability of near-term rate reductions.

The April FOMC minutes reinforced the possibility that policy could eventually need to be tightened if inflation failed to move sustainably lower.

European Government Bonds

European government bonds faced similar pressure as eurozone inflation rose above 3% and several ECB policymakers indicated that an April rate increase had been a realistic alternative.

UK Gilts

UK gilt markets benefited somewhat from the sharp decline in April inflation, although investors remained cautious because of uncertainty surrounding energy prices and the Bank of England's future reaction.

Japanese Government Bonds

Japanese yields remained sensitive to the possibility of additional Bank of Japan normalisation, although softer domestic inflation reduced the urgency of an immediate move.

Corporate Credit

Corporate credit remained supported by positive equity sentiment and resilient earnings. Credit spreads remained comparatively contained despite higher underlying government yields.

Private Credit

Private-credit activity remained strong, but the possibility of higher-for-longer policy rates required greater attention to borrower interest coverage and refinancing requirements.

Premium borrowers continued to benefit from competition between private lenders, banks and public credit markets, while weaker companies faced increasingly differentiated terms.

Foreign Exchange

Foreign-exchange markets responded to differences in inflation, monetary-policy expectations and commodity exposure.

US Dollar

The dollar remained supported by resilient US economic activity and the growing possibility that Federal Reserve rates could remain unchanged or even move higher later in the year.

Euro

The euro remained sensitive to rising regional inflation and expectations that the ECB might ultimately need to reverse part of its earlier easing cycle.

Sterling

Sterling declined approximately 0.9% against the US dollar during May. Lower UK inflation reduced expectations of a Bank of England rate increase, while comparatively stronger US data supported the dollar.

Japanese Yen

The yen remained volatile as markets balanced softer Japanese inflation against the possibility of further Bank of Japan policy normalisation.

Chinese Renminbi

The renminbi remained closely managed as the People's Bank of China maintained accommodative lending rates. Stronger domestic growth provided some support, while trade uncertainty remained a constraint.

Commodities

Commodities reversed much of their earlier strength during May as oil prices declined sharply and improving investor risk appetite reduced demand for defensive assets.

Oil and Energy

Crude oil prices declined by more than 16% during May. Expectations of improving Middle East conditions, weaker demand and the possibility of greater supply reduced the exceptional risk premium that had developed during March and April.

The decline provided potential relief for consumers and energy-importing economies, although prices remained vulnerable to renewed disruption around the Strait of Hormuz.

Gold

Gold declined approximately 1.4% in US-dollar terms and ended May near $4,546 per ounce. Positive equity sentiment and modest ETF outflows created pressure, while a somewhat weaker dollar offered partial support.

The World Gold Council continued to highlight persistent inflation, sovereign-debt concerns and central-bank demand as longer-term supportive factors.

Copper and Industrial Metals

Industrial metals remained supported by infrastructure, electricity-grid and artificial-intelligence investment, although the broader commodity index declined approximately 3.5% during May.

Critical Minerals

Strategic minerals remained important to defence, semiconductor and energy supply chains. Governments continued to encourage diversification of mining and processing despite weaker short-term commodity sentiment.

Agricultural Commodities

Lower energy prices reduced some pressure on fertiliser, transportation and agricultural production costs, although weather and geopolitical supply risks remained important.

Digital Assets

Digital assets produced mixed performance during May. Early-month optimism faded as rising bond yields and more hawkish Federal Reserve expectations reduced demand for highly speculative investments.

Bitcoin

Bitcoin initially participated in the broader risk-asset advance before losing momentum later in the month. Investors continued to monitor institutional flows, real interest rates and the relative attractiveness of conventional risk assets.

Ethereum

Ether remained sensitive to the same liquidity environment while continuing to benefit from institutional interest in tokenisation and blockchain-based financial infrastructure.

Institutional Adoption

Traditional financial institutions continued developing digital-asset custody, stablecoins and tokenised securities regardless of short-term cryptocurrency price movements.

Risk Considerations

• Digital assets remained sensitive to rising bond yields.
• Hawkish Federal Reserve expectations reduced speculative momentum.
• Institutional participation remained significant.
• Tokenisation continued independently of cryptocurrency prices.
• Leverage remained capable of amplifying corrections.

Private Equity

Private-equity conditions continued to improve during May as public markets advanced and corporate earnings remained resilient. However, the increasingly uncertain interest-rate outlook prevented a full return to the highly leveraged transaction environment that characterised earlier cycles.

Deal Activity

Technology, healthcare, infrastructure, business services and specialised industrial companies remained among the most active areas. Strong public valuations improved agreement between buyers and sellers.

Financing

Financing remained readily available for high-quality businesses, but persistent inflation limited expectations that acquisition debt would become materially cheaper during 2026.

Higher-for-longer rates reinforced the need for acquisition returns to come from earnings growth, operational improvement and strategic repositioning rather than leverage expansion.

Artificial Intelligence

The strong performance of public technology equities supported private AI valuations. Investors continued to favour infrastructure, semiconductor, cybersecurity and enterprise applications with measurable customer adoption.

Energy

The sharp decline in crude prices demonstrated the difficulty of valuing energy assets using short-term commodity assumptions. Investments remained more attractive where returns depended upon contracted infrastructure or essential services rather than commodity prices alone.

Exits

Record equity markets improved the IPO and strategic-sale environment. Sponsors increasingly prepared mature assets for exit while market conditions remained constructive.

Secondaries

Secondary markets remained highly active as institutional investors continued to seek liquidity and managers used continuation funds to retain selected assets.

CE Global Private Equity Observations

• Strong public markets continued to improve exit conditions.
• Financing remained available but expensive by historical standards.
• AI and digital infrastructure remained highly competitive themes.
• Commodity volatility reinforced the value of contracted revenues.
• Operational improvement remained more dependable than leverage-driven returns.

Artificial Intelligence & Technology

Artificial intelligence remained one of the strongest drivers of global equity markets during May. Strong earnings reinforced confidence that AI-related investment was continuing to generate substantial demand for processors, cloud computing and data-centre infrastructure.

Semiconductors

Semiconductor manufacturers continued to benefit from demand for accelerators, advanced memory, networking chips and other components required for large AI computing clusters.

Cloud Computing

Cloud providers continued expanding data-centre capacity and reporting strong demand for AI-related workloads. Markets increasingly assessed revenue growth relative to the extraordinary capital expenditure required.

Enterprise Adoption

AI adoption continued moving from experimentation towards operational use within coding, customer support, financial analysis, research and administration.

Energy Efficiency

The dramatic volatility in oil and gas markets reinforced the importance of energy efficiency within digital infrastructure. Developers increasingly focused on reducing electricity requirements and securing long-term power arrangements.

Cybersecurity

The increasing use of AI also expanded cybersecurity requirements. Businesses required stronger identity, monitoring, data-protection and model-governance systems as more processes became automated.

Technology Risks

• AI valuations remained historically elevated.
• Capital expenditure remained exceptionally large.
• Investors increasingly demanded evidence of monetisation.
• Energy availability remained important to data-centre economics.
• Cybersecurity and governance risks increased alongside adoption.

Sector Spotlight

AI Cybersecurity and Digital Identity

May's sector spotlight examines cybersecurity and digital identity as the rapid deployment of artificial intelligence increases both the capability of defensive systems and the sophistication of cyber threats.

AI-Enabled Threats

Generative and agentic AI can significantly reduce the cost of producing convincing phishing messages, fraudulent identities and automated attacks. Cybercriminals can therefore operate at greater scale and adapt more quickly.

Identity Security

As automated systems increasingly interact with corporate software, organisations must distinguish legitimate human users, authorised AI agents and malicious automated activity.

Privileged Access

AI agents capable of accessing multiple systems can create substantial operational risk if permissions are poorly controlled. Privileged-access management therefore becomes increasingly important.

Data Security

AI systems require access to large quantities of internal information. Businesses need controls governing which data can be accessed, retained, processed or shared with external models.

Continuous Monitoring

AI can also strengthen cybersecurity by identifying unusual behaviour across networks and endpoints in real time. Automated detection can substantially shorten the period between intrusion and response.

Private-Market Opportunities

• Identity and access management
• Privileged-access security
• AI-agent governance
• Data-loss prevention
• Security monitoring and response
• Fraud and synthetic-identity detection

Investment Perspective

Cybersecurity represents one of the areas where artificial intelligence can simultaneously increase demand and improve the product offered. Businesses deeply integrated into customer security infrastructure and offering recurring services may possess particularly durable competitive advantages.

Regulatory Update

May's regulatory environment centred on inflation, central-bank policy, artificial intelligence, cybersecurity and energy-related risk.

Federal Reserve

Minutes from the April FOMC meeting demonstrated that some policymakers considered additional policy tightening potentially appropriate if inflation remained persistently above target. Businesses therefore needed to incorporate both stable and rising US interest-rate scenarios into financial planning.

European Central Bank

ECB policymakers also became more hawkish as eurozone inflation rose above 3%. Minutes suggested that an April rate increase had been considered a realistic alternative.

Bank of England

Lower UK inflation reduced immediate pressure for tighter monetary policy, although the Bank remained cautious ahead of its June decision.

Artificial Intelligence

Companies continued implementing governance, transparency and risk-management obligations associated with the EU Artificial Intelligence Act.

Cybersecurity

The increasing deployment of autonomous AI systems increased the importance of access controls, human oversight, incident reporting and data-security policies.

Private Markets

Managers continued to monitor whether private valuations appropriately reflected the strong public-market rebound while allowing for elevated discount rates and financing costs.

Compliance Priorities

• Stress-test portfolios against higher interest-rate scenarios.
• Monitor inflation and central-bank policy closely.
• Continue implementation of EU AI requirements.
• Review AI-agent identity and access controls.
• Maintain energy and supply-chain contingency planning.
• Apply disciplined private-market valuation procedures.

Looking Ahead

Markets entered June with global equities near record levels, oil substantially below its April highs and investors increasingly focused on whether declining energy prices would be sufficient to prevent further central-bank tightening.

Federal Reserve

The Federal Reserve's June meeting would be closely watched following increasingly hawkish April minutes. Inflation remaining close to 4% could strengthen calls for higher rates, while weaker growth or employment would favour continued patience.

European Central Bank

The ECB's June meeting could involve a more explicit debate over rate increases. Eurozone inflation at approximately 3.2% represented a substantial departure from the near-target environment that had allowed policy to ease during 2024 and 2025.

Bank of England

The Bank of England was scheduled to announce its next decision on 18 June. Falling UK inflation created greater flexibility than existed in the United States or eurozone, although global energy risks remained significant.

Oil and the Strait of Hormuz

Oil remained one of the most important variables for global markets. Continued declines could improve household purchasing power and inflation expectations, while renewed disruption could reverse May's progress quickly.

Artificial Intelligence

AI-linked earnings would continue determining whether elevated technology valuations remained justified. Investor emphasis was increasingly shifting from infrastructure expenditure towards utilisation, revenue and cash generation.

Gold

Gold's modest May decline demonstrated that stronger equities and ETF outflows could outweigh geopolitical uncertainty over shorter periods. However, the World Gold Council continued to highlight the possibility that renewed monetary tightening could create financial-market stress capable of eventually supporting gold demand.

Private Credit

The possibility of higher policy rates represented a renewed challenge for leveraged borrowers. Investors would need to monitor cash-interest coverage, refinancing schedules and covenant headroom carefully.

Private Markets

Strong public markets provided attractive exit conditions, but the interest-rate outlook remained less favourable for new leveraged acquisitions. Investors would need to balance improved market confidence against elevated financing costs.

CE Global Private Equity Perspective

May demonstrated that financial markets can continue advancing even while central-bank policy becomes less supportive. Strong earnings and artificial-intelligence investment allowed equities to overcome rising inflation expectations and the possibility of renewed monetary tightening.

CE Global Private Equity believes that this environment places greater importance on genuine cash generation. Businesses capable of increasing earnings without relying upon falling interest rates or multiple expansion are likely to be better positioned if financing conditions remain restrictive.

Artificial intelligence remains a compelling long-term theme, particularly across semiconductor infrastructure, cybersecurity, cloud computing and power systems. However, high valuations require increasingly careful assessment of customer concentration, capital intensity and monetisation.

Lower oil prices provide welcome relief after the severe energy shock experienced during March and April, but geopolitical conditions remain unresolved. Energy security, electricity infrastructure and supply-chain resilience therefore remain attractive structural themes despite weaker short-term commodity prices.

CE Global Private Equity continues to favour recurring revenue, pricing power, moderate leverage and businesses possessing durable competitive advantages. The increasingly uncertain interest-rate environment makes disciplined capital structures particularly important for investments initiated during the remainder of 2026.

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.