June 2026

UK

Multiple headwinds: the backdrop remained challenging for UK investors during May, and sentiment was damped by persistent geopolitical tensions, rising domestic political uncertainties, a wider focus on AI-related stocks, and concerns over inflationary pressures. The FTSE 100 Index edged 0.3% higher, while the FTSE 250 Index rose by 4.3%. The yield on the benchmark gilt rose as high as 5.19% during the month. Meanwhile, the price of Brent crude oil rose as high as US$115 in May but ended the month at US$92.

Iran impact: research from the British Chambers of Commerce (BCC) found that 80% of UK businesses reported an existing or expected impact from the Iran conflict, while 75% expected higher energy costs over the next year. The BCC commented: “The geopolitical landscape has been shaken and there’s no quick fix.”

An uncertain outlook: the International Monetary Fund (IMF) upgraded its forecast for UK economic growth this year from 0.8% to 1% but cautioned that activity could be undermined by both global and domestic uncertainty. The IMF believes that holding interest rates for the rest of 2026 “should be sufficient to bring inflation back to target by end-2027”. The UK economy expanded by 0.3% during March. 

Inflation eases in the short term: the annualised rate of consumer price inflation fell from 3.3% in March to 2.8% during April – its lowest level in over a year – dampened by government measures to reduce energy bills. Looking ahead, however, inflationary pressures are considered likely to gather pace in response to an expected rise in household energy bills.

Cost of living: retail sales volumes dropped by 1.3% during April, and the British Retail Consortium warned: “Discretionary spend is likely to drop further as the cost-of-living squeeze worsens.” Elsewhere, Chancellor of the Exchequer Rachel Reeves unveiled the government’s “Great British Summer Savings” – a package of measures including VAT cuts on children’s food, travel, and entry to attractions such as theme parks. 

Mid-cap dividend growth: UK dividends rose at a headline rate of 21.1% to 16.4 billion during the first quarter of 2026, boosted by sterling’s weakness and £3.3 billion-worth of one-off special dividends. According to Computershare’s Dividend Monitor, dividends climbed by 1.1% to £13.2 billion on an underlying basis. Payouts from the FTSE 250 Index rose by 5.9% during the period, compared with growth of 0.9% from the FTSE 100 Index.

Global

Hopes of a deal: global equity markets generally rose during May, boosted by continuing demand for AI-related stocks. The price of oil dropped sharply at the end of the month, finishing May at US$92.05 per barrel on hopes that the US and Iran were nearing an agreement that would reopen the Strait of Hormuz. Optimism was tempered, however, by wider uncertainties about the outlook for inflation and monetary policy alongside some concerns over tech-related valuations. 

Fresh highs for US stocks: as May ended, US indices reached new highs amid investors’ fresh enthusiasm for tech and AI-related stocks. Over May as a whole, the Dow Jones Industrial Average Index rose by 2.8% while the Nasdaq Index climbed by 8.4%. Investor sentiment was lifted by hopes of a resolution to the conflict in the Middle East. Nevertheless, US consumer confidence continued to deteriorate in May, according to the University of Michigan’s Consumer Sentiment Index.

US inflationary pressures: high and increasing energy prices stoked the annualised rate of inflation, which rose from 3.3% to 3.8% in April. In particular, airline fares rose by 20.7% in April. Meanwhile, producer prices rose by 1.4% month on month. 10-year Treasury yields rose as high as 4.67% during the month.

A challenging outlook for Europe: the European Central Bank warned that “acute geoeconomic stress” was being exacerbated by ongoing uncertainties around global trade and international cooperation, particularly with regard to US policy. The European Commission’s Spring Economic Forecast revised down growth expectations for the eurozone to 0.9% this year and 1.2% next year, citing the impact of the Middle East conflict on energy prices. Inflation in the euro area is predicted to average 3.0% in 2026 – compared with a previous forecast of 2.1% – easing to 2.3% in 2027. Elsewhere, according to the Bundesbank, the Middle East conflict is likely to dampen Germany’s economic growth, which is expected to “stagnate” in the second quarter. Nevertheless, the Dax Index rose by 3.3% over May, boosted by tech-related stocks. 

Tech boost for Japan: Japanese equities hit new highs in May, buoyed by interest in the technology sector. Against a backdrop of AI-related optimism, Japan’s Softbank Group surged during the month, helping to propel the Nikkei 225 Index to a fresh all-time high. Over May as a whole, the Nikkei 225 Index soared by 11.9%.