The April AI-driven rally continued in May, with the semiconductor sector posting its strongest two-month run on record and US—along with Japan, Korea, and Taiwan—equities closing at their respective all-time highs on the final day of the month. Under the surface, however, the picture was more nuanced, with only 3 out of the eleven S&P 500 sectors in positive territory for the month (compared to 9 in April). A sharp fall in oil prices through the second half of the month—driven by tentative progress in US-Iran peace negotiations—was seen as a potential catalyst to dampen inflation expectations, though market hopes for a more dovish Fed were tempered in early June by strong May nonfarm payroll numbers.
