We generally recommend that you hold investments for the medium to long-term, which we would view as being for five years or more. The monthly market commentary provides an insight into the current factors that are affecting short-term global returns, but should not be viewed as a basis for making long-term investment decisions. You should consider your own investment goals and timeframes before making any such investment decisions. If you do have any concerns about where your money is invested, please contact your Origen adviser.
Introduction
Global equity markets rose in May, with emerging markets strongly outperforming developed markets. Investor sentiment was boosted by easing tensions in the Middle East in the second half of the month, with the resulting sharp fall in the oil price reducing concerns over inflation. Strong corporate earnings announcements were also supportive. Fixed income markets also rose, amid hopes that a US-Iran deal might be moving closer.
Economic Overview
UK
Economic Growth
A preliminary estimate showed the UK economy grew by 0.6% in Q1, matching forecasts, up from a revised 0.2% in Q4 2025 and the strongest pace since Q1 2025. Growth was led by services, which rose 0.8%, while production increased 0.2%, supported by a 0.8% rise in manufacturing, and construction grew 0.4%. Higher gross fixed capital formation, household consumption and government spending supported expenditure. The economy grew 1.1% year-on-year, ahead of the forecasted 0.8%.
The economy unexpectedly grew by 0.3% in March, well ahead of the forecasted 0.2% contraction but below February’s revised 0.4%. Services led the growth, rising 0.3%, while construction grew 1.5% and production fell 0.2%.
Unemployment & Labour Market Statistics
Labour market data weakened as hiring slowed and vacancies fell in April. Unemployment rose from 4.9% to 5% in the three months to March, while an early provisional estimate showed payrolled employees declined on both a monthly and annual basis. Vacancies fell to 705,000 in the three months to April, the lowest since February 2021.
Regular pay growth slowed to 3.4% in the three months to March, its weakest pace since 2020, whilst after inflation there was an increase of 0.3%. Private sector regular pay, a measure closely watched by the Bank of England, rose 3%, compared with 4.8% in the public sector. Total pay, including bonuses, grew 4.1%, or 1.0% in real terms.
Inflation
Headline UK CPI inflation fell from 3.3% in March to 2.8% in April, the lowest since March 2025 and below the forecasted 3%. The slowdown was mainly driven by lower housing and household services inflation after the reduced energy price cap took effect on 1 April. Transport costs rose at a slower pace, as lower vehicle excise duty offset a 23% jump in motor fuel prices. Food and non-alcoholic beverages inflation also eased, although clothing and furniture prices rebounded.
Core inflation, which excludes food, energy, alcohol and tobacco prices, fell from 3.1% to 2.5%, just below expectations, while services inflation slowed sharply from 4.5% to 3.2%. Goods inflation rose from 2.1% to 2.4%.
US
Economic Growth
US Q1 growth was revised down from an annualised 2% to 1.6%, missing unchanged forecasts but remaining above Q4 2025’s 0.5% pace. The downgrade reflected weaker inventories and consumer spending, which was cut from 1.6% to 1.4%. Gross private domestic investment rose 7%, below the previous 8.7%, while equipment spending was unchanged at 17.2% and intellectual property investment rose 11.6%. Investment in structures and residential property fell, net trade detracted as imports outpaced exports, and government spending rebounded 4.4% from a 5.6% contraction in Q4.
Inflation
US CPI rose 0.6% in April, matching forecasts and slowing from March’s 0.9% increase, as energy prices drove over 40% of the rise. Energy costs climbed 3.8%, with gasoline up 5.4% and other motor fuels, including diesel, up 17%. Electricity prices increased while food prices rose 0.5%. Annual CPI increased to 3.8%, the highest since May 2023 and above March’s 3.3%.
Core CPI, which excludes volatile food and energy components, rose 0.4%, the largest gain since January 2025 and above March’s 0.2%, partly due to a one-time rent adjustment after last year’s government shutdown disrupted data collection. Rents and owner’s equivalent rent both rose 0.5%, while footwear prices posted their biggest increase in five years. Annual core CPI rose 2.8%, up from 2.6% in March.
Europe
Economic Growth
The second estimate confirmed Eurozone Q1 growth of 0.1%, the weakest since Q2 2025, as tight energy supplies linked to the Middle East conflict weighed on activity. Germany grew 0.3%, while growth slowed in Italy (0.2%) and the Netherlands (0.1%), and France stalled. Annual growth was 0.8%, in line with the preliminary estimate and down from 1.3% previously.
Inflation
Eurozone inflation rose from 2.6% in March to 3% in April, slightly above forecasts and the highest since September 2023. The increase was mainly driven by energy costs, up 10.8%, their fastest rise since February 2023. Non-energy industrial goods inflation rose to 0.8% and unprocessed food to 4.6%, while services inflation eased to 3% and processed food, alcohol and tobacco slowed to 1.6%. Core inflation fell from 2.3% to 2.2%.
Asia and Emerging Markets
Japan
An advance estimate showed Japan’s economy grew faster than expected in Q1, supported by exports and consumption. Annualised growth reached 2.1%, ahead of the forecasted 1.7% and the revised 0.8% in Q4, marking the strongest pace in six quarters. Private consumption accelerated, public investment rose for the first time in three quarters, and net trade contributed as exports outpaced imports. However, growth slowed in government spending and business investment. On a quarterly basis, the economy grew 0.5%, ahead of the revised 0.2% in Q4 and the forecasted 0.4%.
Market Overview
CR = Capital return; LC = Local currency
Source: Lipper for Investment Management
Past performance is not a reliable indicator of future performance
UK equities rose in May, with the mid cap FTSE 250 enjoying a much stronger gain than the FTSE 100. The FTSE 100 suffered from declines in the large energy and healthcare sectors, with the former affected by falling oil prices, whilst the consumer discretionary and basic material sectors were among the top performers. The FTSE 250 has a greater allocation to the financials, industrials and consumer discretionary sectors, which contributed to its strong outperformance, as did its much smaller exposure to energy stocks.
US equities, as shown by the S&P 500, rose in May, supported by easing tensions in the Middle East. AI-related stocks were by far the strongest performing, amid robust earnings reports and positive outlooks from major technology firms. The energy sector underperformed amid falling oil prices. European markets, as demonstrated by the FTSE World Europe ex UK Index, also rose, with information technology stocks again among the top performers whilst energy stocks declined. The Japanese Nikkei 225 Index ended May with a very strong double-digit gain amid optimism over an end to the Middle East conflict, whilst AI-related enthusiasm supported semiconductor and tech-related stocks.
Asian markets performed strongly, as shown by the large gain in the broad MSCI Asia ex Japan Index. However, the gains were led by a narrow range of stocks, with AI-related companies in South Korea and Taiwan responsible for much of the strong performance. However, there were declines across much of the rest of the region, including China, Hong Kong and India. Emerging markets similarly performed strongly, as shown by the gain in the broad MSCI Emerging Markets Index. South Korea and Taiwan were again the key drivers of the robust return, but most other regional indices lagged the broader index. In particular, Brazil was a notable laggard amid increased political risk due to an ongoing corruption scandal as well as uncertain outlook for further interest rate cuts due to stickier inflation.
UK government bonds (FTSE Actuaries UK Conventional Gilts Index) produced a positive return in May, with mid-month volatility due to fears over higher inflation easing amid hopes of a potential peace agreement between the US and Iran. Gilts did come under some pressure earlier in the month owing to heightened political uncertainty, but recovered after Andy Burnham, a leading contender in any leadership challenge, confirmed he would maintain existing fiscal rules. Sterling investment-grade corporate bonds also rose as they outperformed government bonds in May.
This update is intended to be for information only and should not be taken as financial advice.
CA13560 Exp:06/2027
