Market News: Week Ending May 29, 2026

Market News: Week Ending May 29, 2026

This week, global markets continued to navigate a complex backdrop of competing forces: resilient corporate earnings, rising inflation pressures, moderating growth, and shifting central bank policy. Nowhere is this tension more evident than in emerging markets, where the geopolitical shock has created stark winners and losers.

Geopolitical Tensions Drive Inflation Risks

The 13-week disruption in the Strait of Hormuz has extended far beyond initial expectations. Oil prices remain elevated despite a fragile ceasefire, with supply losses partly offset by demand destruction and alternative routing. The consensus view is shifting: this is no longer a temporary shock, but a structural supply constraint that will persist.

For investors, the implication is clear—inflation risks remain elevated globally, constraining central banks' ability to ease policy aggressively.

U.S. Economy: A Tale of Two Speeds

U.S. economic data this week revealed a striking divergence. Manufacturing activity surged to a PMI of 55.3, driven largely by corporate stockpiling ahead of rising costs and supply disruptions. Input prices jumped to their highest levels since 2022, signaling that inflationary pressures are building throughout the supply chain.

But the broader picture is more cautious. Services activity softened to a PMI of 50.9, and employment declined. This suggests that elevated price pressures are beginning to weigh on demand—a warning sign that the strength in manufacturing may be temporary.

The FOMC minutes reinforced this tension. Officials struck a hawkish tone, signaling that rates may need to rise if inflation remains above target. Yet the consensus remains that the Fed will hold rates steady in the near term, balancing inflation concerns against growth risks.

Emerging Markets: Technology Masks Energy Vulnerability

Emerging market equities tell a revealing story. After falling 13% in the first month following the Iran conflict, they've recovered and now sit up 22.6% year-to-date (USD, through May 8, 2026). However, this headline recovery masks a dangerous divergence.

The rally has been almost entirely driven by technology stocks riding the global AI wave. South Korea exemplifies this pattern, up 92% YTD as investors looked past energy concerns to focus on semiconductor giants like Samsung and Hynix. This concentration in technology has insulated parts of Asia from the real pain of higher energy prices.

But that pain is showing up elsewhere. Energy-sensitive emerging economies with limited technology exposure—India, Indonesia, and Thailand—are significantly underperforming, each down from their post-conflict lows. Even Latin America, where net oil exporters like Brazil might be expected to benefit from higher prices, has barely recovered wartime losses.

The real risk: If the Strait of Hormuz closure persists through summer and energy prices remain elevated, the vulnerability of emerging market consumers, fiscal accounts, and monetary policy becomes acute. Spillover effects into the most energy-dependent emerging economies could constrain their ability to stimulate growth or manage inflation.

Global Growth Cooling, Central Banks Likely to Ease Outside the U.S., economic momentum is slowing:

Canada: Headline inflation rose to 2.8% YoY in April, driven by gasoline prices. However, core inflation eased to 1.5%—its lowest level in over five years. Retail sales volumes declined as households pulled back, signaling that underlying demand remains soft. The Bank of Canada is likely to remain on hold.

United Kingdom: CPI inflation eased to 2.8% YoY from 3.3%, but the labour market showed clear cooling signs. Payrolls fell by approximately 100,000 in April, with the unemployment rate rising to 5.0%. The Bank of England likely has scope to remain on hold despite persistent inflation risks.

Japan: GDP expanded at an annualized 2.1% in Q1, with inflation moderating to 1.4% YoY. Growth was driven by solid exports and stronger real wages supporting consumption. The Bank of Japan may continue policy normalization despite energy cost headwinds.

China: A broad-based slowdown unfolded this week. Fixed asset investment fell 1.6% YoY, industrial production slowed to 4.1%, and retail sales grew just 0.2%—barely moving. Policy easing is likely later in the year as growth pressures build, though policymakers remain cautious in the near term.

The Investment Framework

The market sits at an inflection point. Strong corporate earnings are real, but valuations face pressure from elevated yields and inflation concerns. Technology leadership in emerging markets reflects genuine opportunity in AI, but concentration risk is rising as energy-vulnerable economies diverge sharply.

Manufacturing strength suggests resilience, but services softening and labour market cooling suggest demand is beginning to crack under the weight of higher prices. Central banks face a dilemma: inflation risks tied to geopolitical disruptions argue for restraint, while slowing growth across major economies argues for easing.

Bottom Line

Oil supply disruptions are likely to persist. Global growth is moderating. Central banks are caught between inflation and growth concerns. Emerging markets are diverging sharply based on exposure to energy shocks and technology trends. But earnings remain strong, diversification is essential, and disciplined positioning rewards investors who stay focused on their long-term strategy rather than reacting to weekly headlines.

 

Note:
All index performance is in Canadian dollars.

IMPORTANT DISCLAIMERS
The information in this letter is derived from various sources, including CI Global Asset Management, CRA, Bloomberg, National Post, Globe and Mail, Wall Street Journal, Bloomberg, Reuters, Investment Executive, Advisor.ca, MarketWatch, Toronto Sun, The Guardian, MSN.ca and Statistics Canada at various dates. This material is provided for general information and is subject to change without notice. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances. Certain statements contained in this communication are based in whole or in part on information provided by third parties and CI Global Asset Management has taken reasonable steps to ensure their accuracy. Market conditions may change which may impact the information contained in this document.