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There were highs and dips in the investment markets in May 2026. Discover some of the factors that may have affected your portfolio’s performance.
Remember, short-term market movements are a normal part of investing. When you’re reviewing returns, it’s typically a good idea to look at the bigger picture and assess performance over several years.
Ongoing conflict continued to affect markets in May 2026
On 1 May, US President Donald Trump announced he would lift tariffs on Scotch whisky following a state visit from King Charles. The news led to drinks maker Diageo being among the biggest risers on the FTSE 100 – an index of the largest companies listed on the London Stock Exchange – after shares were up 2% in early trading (the Guardian, 1 May 2026).
Banking giant HSBC suffered a drop of more than 5% when trading opened on 5 May (the Guardian, 5 May 2026). It was the biggest faller on the FTSE 100 after the bank reported a drop in profits and a $400 million (£298 million) fraud-related loss in the UK.
Hopes of a peace deal between the US and Iran led to investor optimism on 6 May.
Trump announced there was “great progress” towards an agreement, which buoyed markets, particularly in Asia. South Korea’s leading index, the Kospi, was up 8% and broke through the 7,000-point mark for the first time (the Guardian, 6 May 2026). Samsung Electronics experienced a jump of 15%, which took the company’s market value above $1 trillion (£0.75 trillion).
More broadly, MSCI’s All-Country World Index was up 0.56% to reach a new record.
For many markets, the positive news continued on 7 May. Japan’s Nikkei index was up more than 5.5% and closed on a new high (the Guardian, 7 May 2026). Indices in Germany, France, and the US also rose. However, the UK lagged, with the FTSE 100 falling by 0.55%.
Anticipation of higher inflation due to rising oil prices led to the FTSE 100 slipping further on 15 May, with mining and utility stocks particularly affected. The index fell to its lowest level since the end of March 2026 (the Guardian, 15 May 2026).
On 22 May, US stocks opened higher with the S&P 500 index up 0.4% and the technology-focused Nasdaq also up 0.4%. US cosmetics giant Estée Lauder’s shares were up 11% after it ended merger talks with Spanish rival Puig (the Guardian, 22 May 2026).
UK
Overall, economic data released by the UK’s Office for National Statistics (ONS) was positive.
First, the UK economy beat GDP forecasts in March. The economy grew 0.3% month-on-month to deliver 0.6% growth in the first quarter of the year (ONS, 14 May 2026). News from the construction sector was particularly encouraging. After falling in the second half of 2025, the sector increased by 1.5% in March.
Official data also suggests inflationary pressures are easing. In the 12 months to April, inflation was 2.8% compared to 3.3% a month earlier (ONS, 20 May 2026). The dip is largely due to electricity and gas prices falling.
However, the conflict in Iran is expected to have an impact on business operations.
S&P Global’s Purchasing Managers’ Index (PMI) (1 April 2026) found that manufacturing businesses’ costs are surging because of the conflict in the Middle East. Indeed, the prices of raw materials, energy, and labour rose at one of the fastest paces since the survey began in 1992, outside of the post-pandemic inflation surge in 2022.
In addition, the forecasting group ITEM Club predicts the UK economy will lose 162,000 jobs in 2026 amid the conflict involving Iran (the Times, 11 May 2026).
One company that has benefited from the conflict is the oil and gas company Shell (Reuters, 7 May 2026). The company revealed profits more than doubled quarter-on-quarter in the first three months of the year. Reported profits of $6.9 billion (£5.15 billion) for the first quarter of 2026 have attracted some criticism.
Despite many retail businesses struggling, there was positive news from clothing retailer Next. The firm revealed far stronger sales than expected in the three months to April 2026 (Reuters, 6 May 2026). Sales were up 4.4% compared to the 1.3% predicted.
In contrast, carmaker Jaguar Land Rover reported a sharp dip in profits. Britain’s largest carmaker only made £14 million in profit before tax in the year to March 2026 (Tech Story, 16 May 2026). That’s a slump of more than 99% when compared to the £2.5 billion reported a year earlier. The company was affected by US trade tariffs and a cyber-attack that disrupted factories for months.
Europe
According to the European Central Bank (ECB), both the eurozone and wider European Union posted subdued economic growth of 0.1% in March (30 April 2026).
In addition, the ECB data (30 April 2026) suggests inflation is rising across the economic bloc. In the 12 months to April 2026, inflation was 3% – an increase of 0.4% when compared to a month earlier.
A PMI (6 May 2026) reading also indicates that the service sector in the eurozone shrank in April for the first time in almost a year. The reading was 47.6, with a number below 50 suggesting contraction. The decline was linked to the effect of the conflict in the Middle East.
US
The US also experienced higher inflation. According to the Bureau of Labor Statistics, in the 12 months to April, inflation was 3.8% after a month-on-month increase of 0.6% (BBC, 12 May 2026). The data could make it difficult for the US central bank to cut interest rates, despite pressure to do so from Trump.
There was positive news for the economy in the job data. Official figures suggest 115,000 jobs were added to the economy in April, beating forecasts of 62,000 (BBC, 8 May 2026).
However, outplacement firm Challenger, Gray & Christmas (7 May 2026) warned that job cuts were up 38% month-on-month in April, with AI driving layoffs.
Asia
China’s National Bureau of Statistics (NBS) reported factory output slowed to 4.1% year-on-year in April (CNBC, 17 May 2026). The weakening economic data comes despite a jump in exports, as customers tried to stockpile goods to avoid supply disruptions due to the conflict.
In addition, the NBS reported China’s producer price inflation rose to a 45-month high of 2.8% in April due to higher energy prices (Think, 11 May 2026). The increase could affect profit margins and may suggest challenges ahead for Chinese producers.
Please note: The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
