Market Update May 2026

May was the month the mood shifted. After three months in which the war between the United States and Iran set the rhythm of every market, the headlines finally began to point the other way. Mediators in Islamabad, Cairo and Riyadh stitched together the outline of a 60-day deal that would extend the ceasefire, reopen the Strait of Hormuz, and bring nuclear talks back to the table. Oil read the change first and gave up most of its war-time premium, while equities held near the highs they had reached in April’s relief rally. Washington had its own changing of the guard: Jerome Powell handed the Federal Reserve to Kevin Warsh in the middle of the month, a quiet but historic transition that arrived just as the bond market was wrestling with whether the next move in rates is still down or could yet be up. The truce was never clean. A flare-up around the strait on 28 May, and a ballistic missile aimed at Kuwait the same night, reminded everyone how thin the peace really is. Even so, the direction of travel in May was unmistakably toward resolution rather than escalation, and that was the story investors traded.

Geopolitical Developments

Fighting did not stop in May, but the diplomatic track gained ground. Mediation from Pakistan, Saudi Arabia, Egypt and Turkey produced a draft 60-day framework in the final week of the month. Iran agreed in the text to restore Hormuz traffic to pre-war levels. American and Iranian negotiators say they have “mostly agreed” on the terms, which also include the start of nuclear talks.

The arrangement remains brittle. On 28 May, US forces shot down four Iranian one-way attack drones threatening commercial shipping near the strait and destroyed a ground-control station at Bandar Abbas before a fifth drone could be launched. The same day Iran fired a ballistic missile at Kuwait. Kuwaiti air defences intercepted it. US Central Command described the launch as an “egregious ceasefire violation” while confirming the ceasefire itself stayed in force. Brent jumped more than 3% on the headlines before giving the move back as diplomacy held.

The conflict is now in its fourth month. The International Energy Agency still calls the original Hormuz shutdown the largest oil supply disruption on record. What changed in May was the direction of the marginal news. Markets moved from pricing further escalation to pricing partial resolution.

Market Developments by Asset Class

Equities

The S&P 500 spent the month in a tight range near record territory and closed at 7,599.96 on 1 June, the first session after the period. The pan-European STOXX 600 finished May around the 624 to 626 area, broadly flat after April’s sharp rebound. Earnings helped. Results came in better than feared on both sides of the Atlantic, and company commentary on AI capital spending, cloud demand and consumer behaviour stayed constructive.

Sector performance shifted with the move in oil. Energy was the biggest laggard and gave back most of its April gains. Airlines, transport and consumer discretionary outperformed as fuel costs fell and Middle Eastern airspace traffic gradually recovered. Banks split: the steeper yield curve early in the month helped net interest margins, but the spike in long-end yields around 18 May pressured rate-sensitive names. Defensives lagged in a steady risk-on tape.

The Swiss Market Index traded in the 13,400 to 13,500 area through late May. The November 2025 trade agreement with the United States caps Swiss tariffs at 15%, including pharmaceuticals, and continues to shape exporter sentiment. Section 232 pharma tariffs take effect on 31 July, but Switzerland and Liechtenstein remain inside the 15% cap. EUR/CHF traded around 0.928. The SNB repeated its readiness to step in if franc strength becomes excessive. Roche and Novartis stayed firm, Swiss banks benefited from a steeper curve, and luxury names traded mixed.

Bonds

Bond yields swung more than equities in May. The 10-year US Treasury yield rose from around 4.30% in early May to 4.61% on 18 May, the highest level in a year. It then eased back to a weekly average of 4.47% at month-end. US activity data stayed firm. April job openings reached a one-year high, and the May ISM manufacturing reading came in above expectations. Oil and shipping kept an inflation premium in pricing. The change at the top of the Fed added a short-term policy question.

The 28 to 29 April FOMC meeting left the federal funds rate target at 3.50% to 3.75%, with the new range effective from 30 April. Four members dissented. That made the 8 to 4 outcome the most divided FOMC vote since October 1992. Stephen Miran wanted a 25 basis point cut. Beth Hammack, Neel Kashkari and Lorie Logan voted to hold but rejected the easing bias in the statement. Powell’s term as Chair ended on 15 May. The Senate confirmed Kevin Warsh on 13 May by 54 to 45. He was sworn in on 22 May for a four-year term running to 21 May 2030. Powell stayed on the Board.

The European Central Bank held rates unchanged on 30 April. The deposit rate stayed at 2.00%, the main refinancing rate at 2.15%, and the marginal lending facility at 2.40%. President Christine Lagarde flagged the 11 June meeting as the next decision point and said the path forward would be clearer “in six weeks”. Staff projections place eurozone HICP at 3.1% in the second quarter and 2.6% for the full year, reflecting energy passthrough from the war. Market pricing has shifted from rate cuts in early 2026 to the possibility of a 25 basis point hike on 11 June. Swiss government bonds stayed an anchor for CHF portfolios, with the SNB policy rate at 0%.

Real Estate (Switzerland)

Swiss real estate fundamentals stayed supportive in May. The SNB policy rate is still 0%, and mortgage conditions remained attractive as a result. Swiss CPI rose to 0.6% year on year in April, up from 0.3% in March. The reading came in slightly above expectations but well inside the SNB’s target range. The SNB has repeated that its willingness to intervene in foreign exchange markets remains high in the current environment of safe-haven flows.

Demand for prime urban residential continues to outpace supply, and listed Swiss real estate has behaved as a stable diversifier in CHF balanced portfolios. A clean ceasefire and lower oil prices would gradually reduce upside risk to inflation and keep the rate environment supportive.

Commodities

Crude oil dominated commodity markets in May. Brent fell about 19%, its worst single month since the early pandemic, and finished close to $92 a barrel. WTI ended near $87. Three drivers stand out: the tentative US-Iran framework, the partial reopening of Hormuz, and the expectation of higher non-OPEC supply in the second half of the year. Most analysts now look for Brent to trade in a $90 to $100 band over the coming weeks until the terms are signed and physical flows fully normalise.

European TTF gas eased on improved Asian LNG flows and the calmer geopolitical tone. Industrial metals were mixed. Copper held a firm bias on the broader risk-on mood. Palladium and platinum stayed subdued.

Gold consolidated after its strong run earlier in the year. Prices traded between roughly $4,521 and $4,766 an ounce in May and finished near $4,694. That works out to a decline of about 4% on the month, and the metal is still up around 66% year to date. A firmer dollar, higher real rates and the easing of acute geopolitical risk all weighed on the price. The structural backdrop has not changed. Central banks bought roughly 244 tonnes in the first quarter, and Goldman Sachs raised its end-2026 forecast to $5,400 an ounce.

Everon Strategies and Portfolio Positioning

Income Strategies

Year to date, Income CH Equities returned +1.17%, compared with +1.10% for the iShares Swiss Dividend ETF. Returns were close, but the path was different. The strategy delivered a Sharpe Ratio of 0.99 against 0.77 for the benchmark, meaning investors collected the same payoff with noticeably less risk along the way.

A few numbers help put the strategy in context. The portfolio holds 23 Swiss names in a near equal-weighted construction. The largest position is UBS at just under 5% of the portfolio, and the smallest is Nestlé at around 2.5%. The benchmark, by contrast, is heavily concentrated in three mega-caps: Nestlé, Novartis and Roche together account for the bulk of its weight, leaving roughly 28% in healthcare alone. Five-year dividend growth has averaged 5.8% per year for the portfolio against 4.8% for the benchmark, which reflects the quality bias built into the selection. The sector tilts that follow are meaningful. The strategy runs a 14-point overweight in real estate (Allreal, PSP Swiss Property and Mobimo) and an 11-point overweight in industrials (Burkhalter, SGS, Schindler), offset by a 14-point underweight in healthcare and a 13-point underweight in basic materials.

Looking across the year so far, the dominant positive contributors have come from financials, where Vontobel, UBS and Helvetia Baloise have each added meaningfully to performance. Technology, mainly through Swisscom, has also been a strong contributor, alongside real estate names such as Allreal and PSP Swiss Property, and selected industrials including Burkhalter. The biggest detractor has been consumer cyclicals, where Geberit has been the single-name drag. Utilities (BKW) and consumer non-cyclicals (Nestlé and Galenica) have also weighed on the relative return. We see these as specific-name issues rather than a problem with the strategy’s design.

Multi Factor Strategies

Multifactor North America returned +4.76% in May, broadly in line with the S&P 500’s +4.84%. Year to date the strategy is up 13.88%, against the index’s +10.52%, an outperformance of more than 300 basis points. The diversified factor mix continues to add value over concentrated mega-cap exposure. Quality and momentum factors contributed positively across the period, while pure value lagged toward the end of May as the energy reversal weighed on related names. Financials and selected industrials did most of the heavy lifting. Mid-cap names that are underrepresented in passive benchmarks remain a meaningful source of differentiation.

Outlook

June brings two specific calendar items that should set the tone. The first is President Trump’s signature on the 60-day US-Iran MOU and a credible reopening of Hormuz. That would lock in oil’s decline, let inflation expectations cool, and reopen the door to a Fed cut later in 2026. The second is the ECB meeting on 11 June. Lagarde will choose between a small hike to protect the inflation track and a hold while the war’s after-effects clarify. Whichever way the decision goes, it will set the direction for European fixed income through the summer.

Three other variables are worth tracking. Kevin Warsh’s first communications as Fed Chair will shape rate expectations into year-end. The second-quarter eurozone HICP print, currently projected by ECB staff at 3.1%, will either validate or undermine the hawkish case. And US equities at record highs are priced for the optimistic outcome, so any setback in the diplomatic track will hit harder than the underlying news might suggest.

For Swiss investors, the franc is both a structural strength and a tactical risk. An SNB intervention is plausible if EUR/CHF revisits the 0.92 area. Earnings season has been broadly constructive. Our portfolios continue to favour breadth, quality and selective exposure to themes that benefit from the eventual normalisation of energy markets. We are keeping a disciplined view on position sizing and sector spread.

Your Everon Investment Team