Market insights,
May 2026
Investing
5 min read
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Please note: All performance numbers referenced in this article are sourced via Morningstar, and are in NZ Dollar terms, unless stated otherwise.
Bond markets wobbled in May as the frustrating impasse between US and Iranian negotiators soured the mood of debt investors.
In parallel, global equity markets performed fairly well all things considered. Strong corporate earnings in the US continued to defy blustery macro headwinds.
Meanwhile at a stock level, Nvidia once again caught the eye. However, the market reaction to another successful earnings report was relatively flat.
Bond markets: Not happy
Let’s start with the main story of the month – bond markets. The ongoing stand-off between the US and Iran strained both the fragile ceasefire that’s been in place since 8 April[1], as well as market sentiment.
Prior to May, investors had seemingly been prepared to ride out inflation concerns stemming from the rise in oil prices. Last month, however, their patience ran out. The looming prospect of interest rate hikes in key economies (to counter inflation) became too significant to ignore.
At one stage during the government bond sell-off, the yield on 30-year US Treasuries hit its highest level since October 2023. A similar story played out in Europe, where the yield on 30-year German Bunds reached a level not seen since 2011. Likewise, in the UK, the long-term yield on Gilts was reminiscent of 1998 – the last time they reached 5.77%[2].
By the end of May, the angst had largely settled but the contagion from the Iran war had left its mark.
Interestingly, the popularity of gold – a beneficiary of volatility earlier in 2026 – didn’t materially rise. The price (per troy ounce) mostly followed a downward trajectory in May, ending at $4,523 by the close[3]. While still high by historical standards, the exuberance for the precious metal seen in Q1 appears to have run its course.
As hopes rose of a longer-term US-Iran ceasefire, the price of brent crude oil closed the month at $95 USD, down from $119 on 1 May[4].
Equities and earnings: How good?
In contrast to the events described above, equity markets put on another act of defiance across the month. Robust corporate earnings, especially in the US, propelled stocks higher.
By the end of May, the MSCI World Index had gained +2.82% month-on-month. It’s up +6.12% so far in 2026 (as at 31 May) and has posted +16.43% over 5 years. Likewise, the S&P 500 rose +3.48% across the month.
For holders of Kiwi stocks, it was another slow grind but there was more to be optimistic about compared to recent months. The S&PNZX50 closed May marginally up at +2.64%. However, it’s down –2.24% year-to-date, and it remains relatively flat at +1.46% over 5 years.
At a stock level, Nvidia’s Q1 earnings release was the dominant story. Despite an 85% increase in first-quarter revenue ($81.6 billion USD), and a boost in net income to $58.3 billion USD[5], the company’s share price initially fell on the news. Investors in the AI trade are becoming increasingly hard to impress, with some starting to question how long Nvidia’s market dominance can last as new market participants emerge.
A 3:3 vote thriller kept the OCR on hold
Against that backdrop, the MPC met to discuss whether or not to change the OCR.
In the end, the decision went down to a 3:3 vote thriller that saw the OCR staying at 2.25%[6] until the MPC meets again in July. The deciding vote was cast by Governor, Dr Anna Breman.
In the Reserve Bank’s post-meeting messaging, it was clear that the window for Kiwis to lock in low rates had become extremely narrow: “We expect inflation to fall to 2% next year. Spare capacity in the economy is limiting how fast prices can increase. Fuel prices are likely to remain high but will come down over time. We’re focused on ensuring that inflation returns to 2%. We expect to increase the OCR this year[7].”
Later in the month, the NZ government unveiled its Budget, setting the tone for the election battle ahead. The Finance Minister’s overarching strategy prioritised prudence over vote-winning giveaways.
For Kiwi investors, particularly those holding international stocks, there was one noticeable tweak. The de minimis threshold for when investors become subject to the Foreign Investment Fund (FIF) regime, was doubled to sit at $100,000[8].
Meanwhile for non-profits, there was a welcome piece of good news. The government announced a rise on the amount of net income that non-profits can earn before becoming eligible for income tax from $1,000 to $10,000[9] – a no-doubt welcome reprieve during challenging conditions.
Investor implications
As a reminder, we are hosting a ‘Mid-Year Outlook’ client call on Wednesday 17 June.
Our Helm Wealth speakers will discuss the key investment themes and trends of the year so far, and their implications for portfolios. We’ll also hear macro insights from Bevan Graham, economist at our sister firm, Salt Funds Management.
If you’d like to join us but still need to register, please contact us for more information.
Sources and references
[1] Source: Source: https://www.bbc.com/news/articles/cze29764067o
[2] Source: https://www.ft.com/content/1a33355b-b080-49f6-88e1-e613843a8af0?syn-25a6b1a6=1
[3] Source: https://goldprice.org/spot-gold.html
[4] Source: https://tradingeconomics.com/commodity/brent-crude-oil
[5] Source: https://www.bbc.com/news/articles/c759x9pq3dpo
[6] Source: https://www.rbnz.govt.nz/monetary-policy/about-monetary-policy/the-official-cash-rate
[7] Source: https://www.rbnz.govt.nz/monetary-policy/monetary-policy-statement/monetary-policy-statement-filtered-listing-page/2026/may-270/monetary-policy-statement-may-2026
[8] Source: https://kpmg.com/nz/en/insights/government-public-sector/new-zealand-budget-2026/tax.html
[9] Source: https://www.beehive.govt.nz/release/improving-tax-rules-charities
Photo credit: Haoli Chen for Unsplash