Latest investment update

Equity markets outperformed bond markets throughout May. Strong company earnings underpinned this performance, particularly in sectors linked to technological innovation. Artificial intelligence (AI) remains a key long-term growth theme, although leadership within the sector has broadened. Performance has shifted from large technology platforms towards semiconductor and chip manufacturers, which play a critical role in enabling AI. This reflects the continued development of the theme rather than any loss of momentum.

Emerging Markets (EM) were a notable area of strength, outperforming other regions, including the US. Countries such as Taiwan and South Korea have benefitted from their central role in semiconductor production, positioning them at the heart of the AI supply chain. As a result, these markets are providing attractive exposure to AI-driven growth, often at a more compelling price than developed markets such as the US. This supports our overweight allocation to Emerging Market equities within Personal Portfolio Funds.

Fixed income markets remained volatile in May as expectations around inflation and interest rates evolved, with oil price movements - driven in part by geopolitical tensions affecting key routes like the Strait of Hormuz - adding to uncertainty. Central banks held rates steady in May, balancing inflation control with growth, but investor expectations have shifted from anticipated rate cuts toward a “higher-for-longer” outlook, with some risk of interest rate increases. Although inflation has risen modestly and is not yet a major threat to stability, the combination of shifting rate expectations and external pressures is likely to keep bond markets sensitive in the near term.