Resilient corporate earnings in an uncertain environment.

Our view on the markets and investment strategy in the May 2026 Market Compass.

The Iran conflict continues to shape the macroeconomic backdrop through elevated energy prices and constrained monetary policy flexibility, yet equity markets have demonstrated notable adaptability. In our tactical asset allocation, we made no adjustments in May and maintain our neutral positioning in equity and fixed income, with gold remaining strongly overweight.

Iran conflict evolves into a structural market factor

The Iran conflict remains a dominant risk factor, though market reactions have moderated noticeably. Diplomatic progress is absent, with negotiations between the United States and Iran showing little convergence, particularly regarding control over the Strait of Hormuz. While a full blockade has not materialized, ongoing shipping disruptions underscore the vulnerability of global energy flows. A persistent geopolitical risk premium is now embedded in the oil market. The primary relevance lies less in direct market shocks and more in its influence on inflation, margins, and monetary policy flexibility.

Earnings season delivers upside surprises

The Q1 2026 reporting season has proven stronger than expected, with a majority of companies exceeding earnings expectations by a notable magnitude. Revenue performance has been solid, confirming that momentum is not driven solely by margin effects. Earnings expectations for coming quarters have been revised upwards - an atypical pattern at this stage of the cycle. The S&P 500 gained 10.4% in April to reach a new all-time high, while the Euro Stoxx 50 (+5.6%), Stoxx Europe 600 (+4.8%), and Swiss Performance Index (+4.0%) delivered more moderate returns.

Central banks in wait‑and‑see mode

The Federal Reserve left rates unchanged in April, conveying a cautious stance with a slight shift towards an easing bias, while internal divisions have become more pronounced. The European Central Bank appears clearly more restrictive, signaling possible further tightening to preserve credibility despite weaker economic data. On both sides of the Atlantic, a prolonged environment of elevated interest rates is emerging.

Hyperscaler demand is contractually secured, not speculative

Amazon, Alphabet, and Microsoft reported order backlogs growing roughly four times faster than data centre investment since 2022. Remaining performance obligations expanded from approximately USD 364 billion to USD 1.46 trillion by the end of Q1 2026, while quarterly capital expenditure rose from USD 30 billion to over USD 110 billion. This contractually secured demand base suggests disciplined capital allocation rather than speculative excess, underpinning the fundamental case for the artificial intelligence and cloud infrastructure value chain.

Apple enters a new chapter

Tim Cook has stepped down as Apple CEO after delivering approximately 20% annual returns since 2011, significantly outperforming the broader market. His tenure was defined by expanding the high-margin services business, deepening ecosystem monetization, and executing substantial share buyback programmes - scaling Apple efficiently rather than reinventing it.

Fed leadership transition ahead

Jerome Powell's term as Federal Reserve Chair is coming to an end, shifting investor focus to Kevin Warsh and the degree to which his monetary policy stance may be influenced by Donald Trump, who has repeatedly called for rate cuts in public.

How we are positioned

We assess the risk-return profile for global equities as balanced, with a clear preference for the United States, supported by robust earnings momentum, lower sensitivity to geopolitical disruptions, and high-quality business models with strong pricing power. Gold remains strongly overweight - the recent price correction represents a healthy test of the 200-day moving average, not the end of the upward trend. Structural demand from central banks, de-dollarization trends, and defensive positioning support the case. Our tactical stance: Cash 2/5, Fixed Income 3/5, Equities 3/5, Alternative Investments 4/5.

Download the full Market Compass May 2026 PDF

Access our in-depth outlook, regional analysis, and detailed positioning rationale. Download the PDF now to explore our scenarios, risks, and portfolio strategy in detail.

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Download the full PDF of our May 2026 Market Compass for a detailed analysis and forward-looking guidance on navigating today's financial markets.

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