On the surface, markets looked fine: indices near record highs, earnings strong, the kind of numbers that make it tempting to stop asking questions. But the more you look at what drove those returns, the less straightforward the picture becomes.

A single theme has done most of the work. Strip away AI, and global equities have gone nowhere since the Iran War began. This is not a broad bull market rewarding diversified investors – it is a highly concentrated one rewarding a specific bet, made early, and held with conviction.

Beneath the surface, the environment has quietly become more difficult. Crude oil was the most volatile asset in the room in May, and the UAE’s departure from OPEC removes one of the market’s traditional stabilizers at precisely the wrong moment. Many had declared inflation defeated, but it is finding new engines in energy prices and the relentless capital spending demands of the AI buildout. These forces are enough to put rate hikes back on the table and rate cuts firmly off it. And yet, emerging markets quietly delivered the strongest equity returns of the month. This was driven not only by the same AI factor, but also by underlying fundamentals that have been developing for some time.

This update tries to make sense of all of it. We wish you a pleasant and insightful read.