The rally in global equity markets continued strongly in May.  The MSCI All-country World index rose over 5.7% (in EUR) for the month, pushing its 2026 return into double-digit territory (12.9% in EUR). Two major themes contributed to the solid results in May. Firstly, the resilient earnings and continued strength of Technology shares. The dominant driver remained the global buildout of artificial intelligence (AI) infrastructure. That sustained the strong demand for semiconductors and data center supporting activities, further reinforcing expectations for enduring corporate profit growth. Secondly, optimism over a potential Iran war peace deal and the reopening of the Strait of Hormuz made investors more hopeful that the tensions in the Middle East would not disrupt global economic activity that much. Oil prices eased at the end of the month, improving the inflation outlook, and fueling expectations that monetary policy may not become more restrictive after all. Gold prices also declined, now down almost 20% from their February highs.The US dollar slightly strengthened in the month, thus eroding local market returns, but still emerging markets equities well outperformed developed markets ones – gains in emerging-markets were led by technology-heavy regions such as Korea and Taiwan, which continue to benefit from strong AI-related spending. Overall, market leadership remained narrow – gains were concentrated in a relatively small group of growth-oriented companies, while commodity-linked and defensive sectors lagged. US equities advanced over 5% in May (S&P500 in USD), outperforming other developed markets and reaching new all time highs, supported by strong first-quarter earnings and continued strength in technology shares. At the same time, GDP growth was revised down to 1.6%; inflation came in softer than expected; consumer spending remained solid (rose at a healthy 2% rate), while personal income remained flat. Despite weaker macro data, European equity markets mostly advanced in May, with the UK the only major market to decline. Earnings growth was modest at around 5%, but more than 60% of companies beat estimates, a result above the historical average. Consumer confidence improved slightly but remained below long-term norms, pointing to depressed consumption. Euro area inflation rose to 3%, above the ECB’s 2% target, suggesting a possible June rate increase. Economic data remained weak, with France reporting a 0.1% GDP contraction in the first quarter and UK business activity slipping into contraction, as reflected in the PMI reading of 48.5. Asian and emerging market equities stood out in May for a second straight month. South Korea and Taiwan AI-related companies dominated as both markets recorded increases of 35% and 16%, respectively – the South Korean KOSPI equity index is up already over 100% in 2026, on the back of 76% rise in 2025 (all returns in own currency). Japan also advanced on stronger economic data, while China lagged, reflecting weak domestic demand and a still-deep property downturn – house prices have declined 15% in the past year. Global bond markets posted a modest gain in May – the Bloomberg Global Aggregate index went up 0.3% (in USD), International bonds led performance, as non-American government bond yields declined, amid the fall in oil prices (bond yields and bond prices move in opposite direcitons). Reflecting resilient credit conditions, emerging market debt gained 0.8% in May, and corporate bonds outperformed government bonds. Enduring sharp intra-month volatility, driven by the Middle East conflict, and shifting inflation expectations, the 30-year US Treasury yield ended the month just below 5% (at 4.97%). Overall, May confirmed the market’s strong preference for earnings visibility, innovation-driven growth and lower perceived geopolitical risk.
       U.S. equities delivered another exceptionally strong month in May, with the S&P500 rising 5% and reaching multiple record highs, supported by robust first-quarter earnings and renewed confidence in a soft-landing scenario. The rally was driven overwhelmingly by Technology – the NASDAQ100 equity index advanced 10.5% during the month – while Communication services gained 6.7%, underscoring the market’s continued preference for growth and AI-related stocks. Within Technology, first-quarter earnings growth reached 54% year on year, while the sector’s advance since late March exceeded 40%. Spending on AI remained the dominant market theme, reinforcing demand for semiconductors and other growth-oriented businesses, while the strength of just a few large-cap technology names continued to shape overall index performance. This enthusiasm was also visible in corporate reporting, with the term “AI” cited on 337 S&P500 earnings calls, well above the five-year average of 164 and the ten-year average of 103. Outside the leading growth sectors, market leadership narrowed considerably, highlighting the market’s continued concentration – and dependence on a relatively small group of companies. Among the better performers also were Healthcare (rose 5.5%) and Financials (+3.7%). By contrast, Consumer staples declined 1.6%, Utilities fell 1.1% and Energy lost 0.9%, as lower oil prices and easing geopolitical concerns reduced demand for defensive and commodity-linked sectors. The macroeconomic backdrop remained supportive but mixed, with U.S. GDP growth revised down to 1.6% on an annualised basis and personal consumption growth still resilient at 2.0%. Inflation data pointed to renewed price pressures in the U.S. during April. Headline CPI, or Consumer Price Index, rose 3.8% year on year. Core CPI, which excludes the volatile prices of food and energy, reached 2.8%, supported in part by a rebound in housing-related components. The other inflation measure (more preferred by the Fed), PCE or Personal Consumption Expenditure, also indicated persistent inflation, with headline PCE at 3.8% and core PCE at 3.3% – quite higher than Fed’s 2% target. Further, labor market data additionally dispersed expectations for near-term rate cuts, and that the Fed will maintain a cautious and data-dependent position. The U.S. fixed-income market was volatile in May 2026, as the persistent inflation pressures and the Middle East geopolitical tensions drove a sharp mid-month rise in Treasury yields, before stabilizing toward month-end. The yield curve flattened a little, with the 2-year Treasury ending the month at 4.09% and the 10-year at 4.45%. The 30-year yield also climbed to its highest level since 2007 before easing back to 4.97% at the month end. Market sentiment was shaped by stronger-than-expected producer inflation, continued expectations of a higher-for-longer Fed stance, and temporary oil price pressure linked to tensions around the Strait of Hormuz. As geopolitical concerns moderated and energy prices retreated later in the month, part of the earlier bond sell-off reversed.
        European stock markets also rose in May despite a deteriorating macro backdrop. The pan-European equity index Stoxx600 gained 2.4% (in EUR), supported by robust earnings: more than 60% of companies beat estimates and earnings grew around 5% compared to an year earlier. However the rally contrasted with weaker fundamentals: euro area inflation accelerated to 3.0% in April from 2.6% in March, slipping further above the ECB’s 2% target – Europe is one of the main victims of the globally high energy prices. Moreover, the eurozone composite PMI fell to a 31-month low at 47.5 (a reading below 50 indicates a contraction), and France’s first-quarter GDP contracted by 0.1%. The stock  market resilience reflected expectations that geopolitical tensions in the Middle East would not lead to a prolonged supply shock. Nonetheless, disruption to shipping through the Strait of Hormuz contributed to renewed energy-driven inflation concerns, at a time when many central banks on the continent remain sensitive to the slightest signs of rising price. Sector performance reinforced the selective nature of this rally: Information technology and Consumer discretionary led gains, supported by earnings momentum and continued investor interest in growth areas, while Energy and Utilities lagged. UK equities lagged continental Europe, with the FTSE All-Share index up 1.2% (in GBP). A notable divergence emerged beneath the headline index: the FTSE250 rose 4.6%, versus 0.7% for the FTSE100, suggesting that more domestically exposed segments benefited from improving sentiment toward the UK interest-rate outlook. Inflation eased to 2.8% in April from 3.3%, helped by lower household energy costs, but the lowest number of job openings in five years pointed to weakening labour market conditions. Taken together, these indicators suggested a softer domestic backdrop and reduced pressure for a more hawkish Bank of England stance. Government bond markets were mixed in May, driven by inflation data, policy expectations and politics. In Europe, headline inflation rose, while core inflation eased to 2.2% as services inflation softened amid Easter-related calendar effects. German bund yields fell outside very short maturities, while peripheral eurozone markets such as Spain, Italy and Greece outperformed. The ECB did not meet, but markets priced a high probability of a June rate increase. UK gilts outperformed, supported by lower-than-expected inflation, expectations of an unchanged Bank of England rate in June and signs of labour market weakness. Political uncertainty following regional election results added to volatility. Overall, corporate bonds posted positive total returns and outperformed government bonds.
         Against the backdrop of strong gains on international markets in May, the Bulgarian Stock Exchange (BSE) chalked up relatively modest growth. The benchmark SOFIX index rose by 1.5%, with all other indices on the BSE also ending the month higher. The upturn in activity following the adoption of the euro continues – there has been an increase in the number of deals compared with a year earlier, and turnover is almost double. In May, a successful initial public offering (IPO) took place on the growth market for small and medium-sized enterprises, Beam – the electric boat manufacturer ‘Helios Marine’ – raised €2.4 million. The funds will be used to expand the production of electric boats and yachts. The third strategic meeting under the beamUp Lab programme (6th edition) was also held during the month, at which four of the selected companies received feedback from investors. Thus, among the blue-chip stocks on the local stock exchange, ‘Real Estate Fund Bulgaria’ AD performed best in May, with a return of over 10%, whilst the worst performer was the technology firm ‘Sirma Group Holding’ AD (-13.7%), whose decline has now continued for a fourth consecutive month.
Source: Bloomberg, BSE