Global stock markets closed out May at new all-time highs, defying a landscape marked by armed conflict in the Middle East, a historic transition in the Federal Reserve chairmanship, and oil prices that just weeks ago had reached levels not seen since 2022. The correction in energy prices and sustained enthusiasm for artificial intelligence outweighed the uncertainty and set the tone for what was a positive month for risk assets.

The dominant geopolitical factor continues to be the conflict between the United States, Israel, and Iran, which began on February 28 with attacks that resulted in the death of Iranian Supreme Leader Ali Khamenei. The effective closure of the Strait of Hormuz—through which nearly 20% of the global oil supply passes—triggered one of the most severe energy supply shocks in recent history in April, with Brent crude averaging $117 per barrel that month. However, progress in ceasefire talks toward the end of May triggered a sharp correction, causing WTI to trade at $87.36 per barrel—a monthly decline of 16.86% that boosted investor sentiment.

In this regard, the stock markets closed the month at record highs. The S&P 500 rose 5.15% in May, with a year-to-date return of 10.73%, while the Nasdaq was the best-performing index, rising 8.36% and posting a year-to-date return of 16.05% in 2026, driven primarily by semiconductor companies. Companies such as Dell Technologies, Micron, and Qualcomm led the sector’s gains. Globally, the ACWI posted a year-to-date return of 11.45%, supported by strong performance in developed markets and a weak dollar.

On the fixed-income side, investment-grade bonds generated a return of 0.76% during the month, while high-yield bonds returned 0.49%; the latter has accumulated a year-to-date return of 1.68% and is performing well within the debt markets. As for interest rates, the 10-year Treasury bond closed the month at 4.45%, generating a positive spread of 47 basis points versus the 2-year bond and reflecting a more restrictive rate environment, putting the prospect of rate cuts in 2026 on hold and even foreshadowing rate hikes toward the end of the year. We will see what direction the new Fed Chair, Kevin Warsh—who formally took office as the Fed’s new chair on May 22—takes.

Turning to the local market, Banxico cut the benchmark rate by 25 basis points on May 7, bringing it to 6.50%, and formally declared the cycle of monetary easing that began in March 2024 to be over; that cycle resulted in a total of 450 basis points in rate cuts. Governor Victoria Rodríguez Ceja noted that maintaining the rate at its current level will help reinforce the downward trend in inflation, with analysts projecting that the rate will remain at 6.50% for the rest of the year. Headline inflation stood at 4.45% in April and core inflation at 4.26%, with convergence toward the 3% target expected by 2027. Meanwhile, the CPI rose 1.08% for the month and is up 6.65% year-to-date, with a price-to-earnings ratio of 15.56 that remains attractive in relative terms compared to global markets. Finally, the Mexican peso appreciated 3.63% against the U.S. dollar year-to-date, standing at 17.36 pesos per dollar, supported mainly by a trade balance that has accumulated a surplus of 3,508 million dollars in the first four months of the year and foreign direct investment that reached a new all-time high of 23,591 million dollars in the first quarter.

Overall, May proved to be a month of remarkable resilience. It is worth noting that the conflict in the Middle East remains the primary risk, and its resolution would serve as an additional catalyst—both through oil prices and through a reduction in the global risk premium. A disciplined and selective approach, with an emphasis on asset quality, remains the most appropriate strategy in this environment.

‍