The W1M Investment Barometer – May 2026

Is it a good time for the largest IPO in history with an implied market capitalisation of around $2 trillion? Markets certainly seem interested in anything technology and AI related. Despite two major conflicts in the world and a very sharp oil price spike this year, causing inflation globally, both equity and credit markets have been remarkably positive so far this year. Is there some complacency? Or is there just too much focus on when conflicts might end rather than the global economic damage being suffered? The importance of being properly diversified, actively choosing what to own and what not to own, having inflation resilience in portfolios and protection strategies, as we go into the summer, seems clear.

Fixed Income

Oil price shocks: Historical credit impact

Spread move vs oil price shock

Source: ICE BofA, W1M. Data as at 31 March 2026. 
*Note:  First year values used for ongoing conflicts greater than 1 year in duration

The US-Iran conflict has given the global economy a significant inflation shock from higher energy prices which, together with  high levels of borrowing in major western economies, has led to higher government bond yields; that means greater interest burdens on many governments and consumers and business facing higher interest rates too. The charts above show that credit spreads  (the difference in yield between a risk-free benchmark (like government bonds) and a riskier asset (like a corporate bond of the same maturity) have not moved much despite a much bigger jump in oil prices this year than was see in other geopolitical shocks such as the Iraq war or when Russia invaded Ukraine; there has been a muted reaction in spreads. This implies markets are expecting the US-Iran conflict to be short term, as that seems to be in US interests, and then oil prices to fall thereby limiting medium to longer-term impacts on inflation. This may be optimistic and even if conflict ends soon, as most people wish, around a fifth of global oil supply has been directly limited and returning to normal will take many months; it is not just a case of switching a tap on, obviously. Inflation is pushing interest rates up in most major economies; we are underweight fixed income but have a relative preference for government bonds given they have been reacting more to the threat of inflation than corporate bonds have (so far).

Equities

We have moved to neutral in our asset allocation to equities given risks related to inflation, interest rates likely to rise globally and some pockets of high valuation in markets.  Concentration (markets indices being driven by a few large stocks) is not necessarily healthy. Technology stocks going up have, amazingly, driven nearly all of the return in global equities in April. If a small number of stocks drive markets up, should market sentiment change towards them, they can also drag market indices down. This is most relevant for passive funds. Active equity funds have the opportunity not to own stocks if there seems potentially too much excitement surrounding their future potential growth in the short term.

April saw the return of market concentration

c.85% of the MSCI ACWI’s 7% return driven by US and Asian semiconductor stocks and the US hyperscalers

Sector contribution %

Source: MSCI, Factset., W1M

1. Communication Services sector excl. GOOG + META
2. Consumer Discretionary sector excl. AMZN
3. Info Tech sector excl. Semi & Semi Equipment sub-group + Samsung (classified in Tech Hardware)
4. Mag3 = GOOG, AMZN, META (US hyperscalers not classified within Info Tech)
5. Semi & Semi Equipment sub-group + Samsung

Why does tech continue to dominate? There is an “AI revolution”, whatever that means for different companies, and some amazing profit growth is positively impacting certain semiconductor and AI related stocks globally. The important question is whether huge valuations will be justified by earnings in the long run and that is not fully known yet at the stock or sector level. Old industries are also able sometimes to enjoy strong earnings growth: the oil price spike may be inflationary and negative for the global economy but for oil companies, it is a chance to make “supernormal” profits and for the energy sector to take its place with technology as a sector delivering strong growth currently.

Upside to earnings estimates driven by semiconductors, oil & US hyperscalers

Top 10 contributors to uplift in CY2026 earnings estimates (USD)

MSCI ACWI: CY26 EPS Growth +25% (+9 pts)

Source: MSCI, Factset., W1M

N.B. Excludes NVIDIA which reports on 20.05.26.

Being global and active, we do not own hundreds or thousands of stocks in funds but have a portfolio typically of around 50 stocks, or fewer, and each investment we make in a company’s shares is based on a 3-5 year investment case. Our medium to longer-term objective in equity funds (CPI+4.5%) is not based on a volatile equity index but is, like all our solutions, aimed at beating inflation meaningfully over time so that purchasing power is maintained and grown. This approach frees us up from investing in companies just because they are very big in an index; Nvidia is around 8% of the S&P500 market’s value but we do not own it and do not have to own it  - while an active manager measured against the S&P500 index might buy into the shares even if they think there are risks simply to manage their own risk relative to the benchmark they have been given. Shares can be held for the wrong reasons. Passive funds hold shares regardless of valuations if they are in an index if they aim simply to replicate that index. Being genuinely active, when perhaps markets seem highly focussed on a particular area, such as artificial intelligence growth opportunities, we can choose not to own stocks which could turn out to be very “expensive”. We are not against investing in technology stocks and have significant exposure in both the US and Asia: We hold AMD (a US chip designer competing with Nvidia), TSMC (the leading global chip maker based in Taiwan), Keyence (Japanese automation technology), CATL (a Chinese company which leads the world in advanced battery technology) as well as Microsoft, Amazon and Alphabet (Google) and others. But, investing for the medium and the long run is not just about tech and our holdings are well diversified with the aim not of matching what can be volatile equity indices but beating inflation consistently over the medium and long run.

Active stock selection is more important when market indices are concentrated

We invest in companies where the market underappreciates the quality of the business. This can either be the long-term sustainability of high returns or the improving fundamentals. We call these “Compounders” and “Improvers”.

Source: W1M, Google Images. As at 31.12.2025

Risk warning: This allocation should be used as a guide only. Differing market conditions may mean the above weightings will decrease or increase tactically. The investments listed are for example purposes and should not be considered as advice or a solicitation to buy or an offer to sell a security.

Being passive can give “Lost Decades”

As in 2022, when there is an inflation shock and interest rates have to rise, equity indices and bonds can fall together rather than being diversifying. Passive funds holding bonds and equities can have very long periods of weak performance. After a long period of passives doing well, the market may have forgotten that passive strategy returns can be poor: Post the dotcom crash, for example, there was a 9 year period in which a negative return was delivered from a passive strategy. That is a long time to be patient. Active investors can mitigate this risk partly by not replicating the concentration observable in key indices.

Passive 60/40 portfolios have endured 6 "lost decades" since 1900; could we be entering no. 7?

Source: BofA, Bloomberg. As at 31.12.25.  Note: 60/40 = 60% S&P 500 real total return and 40% US 10-year bond real total return

Risk warning: Past performance is no guarantee of future results.

Real Assets: Do you have enough inflation resilience in your portfolios?

Given an oil price shock causing inflation, the value of including real assets in multi asset solutions is clear given their inflation resilience. That can come from long contracts which are “inflation plus” or just from basic economics meaning that if mining prices increase (labour and energy), metals prices must increase or supply falls as mining companies will only survive if they can cover costs. Real Assets are a diverse group of investments including exposures to metals (gold, uranium, copper) as well as power generation and distribution and decarbonisation related (renewables) companies.

Real Assets: Investing in the future – power, grid, and decarbonisation

Source: W1M. As at 31.12.25

Risk warning: The above is for example purposes only and should not be considered a solicitation to buy or sell a security. Differing market conditions may mean the above weightings will decrease or increase tactically.  

Do you insure your car?

Most people pay for insurance and hope not to claim. But, if there is a crash, it is good to know insurance will mitigate the costs which follow. Similarly, volatility is to be expected in markets. Even when long-term prospects are good, there can be short-term volatility. W1M multi asset solutions have bespoke protection strategies which aim to mitigate losses when there are sharp market moves. Despite the US-Iran conflict radically changing the inflation and interest rate outlook globally, equities have not had any significant sell-offs this year -yet. Nobody can say there definitely will be a crash. Neither can anyone say there definitely won’t be a sharp correction. But, in addition to active positioning within our portfolios, we actively take steps to protect  our multi asset solutions, to be ready for whenever volatility may spike. Paying for some insurance tends to be a good idea.  

If you expect volatility, do you have a protection strategy?

How did it perform during Covid-19 crisis?

Actual PS performance vs S&P 500 (TR) 

*Inception: 19th April 2016  Data to from 31.12.19 to 31.03.20

Source: Goldman Sachs, Bloomberg, W1M.

Figures are calculated on a total return basis, net of fees.

Risk Warning: Past performance and simulated past performance is no guarantee of future results and the value of such investments and their strategies may fall as well as rise.
You may not get back your initial investment. Capital security is not guaranteed.

In summary, the US-Iran conflict has obviously given the global economy an inflation shock. We are neutral on equities at current levels, underweight fixed income as rates are expected to rise, overweight real assets for inflation resilience and implementing bespoke protection strategies in case volatility spikes. The importance of being properly diversified, actively choosing what to own and what not to own, having inflation resilience in portfolios and protection strategies, as we go into the summer, seems clear.

Summary of our views

May 2026 Asset Allocation positioning

CIO Bill Dinning’s May 2026 Global Outlook Video is here: Global Outlook May 2026 | W1M