Monthly Market Observations — May 2026

Three developments defined April 2026: (1) Rise of the Machines -- The AI trade stormed back with the SOX Semiconductor index posting its second-best monthly performance on record, driven by long-term chip and cloud partnerships between Google, Intel, Broadcom, and Anthropic; (2) The Strait Remains Narrow -- Iran conflict talks in Islamabad failed twice, the US announced its own blockade of the Strait of Hormuz, WTI surged above $105 and Brent hit $114, with damage concentrated in oil, bonds, and insurance rather than equities; (3) Losing Energy -- The IMF cut 2026 global growth to 3.1% and raised inflation to 4.4%, with energy importers in Europe and Asia (net imports of roughly 2.5% of GDP) most exposed. Portfolio considerations address the failure of traditional hedges, with gold falling 1.1% and Treasury yields rising 8-10bps, and the Fed leadership transition as Kevin Warsh awaited confirmation with markets pricing in no rate cuts through year-end.