Insights
Market Review for May 2026

Global bonds: A rocky month thanks to war contagion

Global equities: A good month, especially in the US and even in NZ

Nvidia: Record numbers posted but failed to impress

Europe’s heatwave: Records broken in the UK and France

OCR: Kept on ice but for how much longer?

We're going to start with the weather as events in Europe served up another painful reminder of the world’s climate emergency.

Thanks to a heat-dome, both the UK and France posted their hottest ever temperatures in May. Average temperatures in the UK at this time of year are in the 20s (Celsius) but last month saw a record-breaking peak of 35 degrees [1].

While in the case of France, the heatwave proved to be lethal with at least 7 fatalities directly linked to it [2].

As an ethical investor, we consider environmental factors (amongst other things) in the portfolios we construct on behalf of clients. We firmly believe that the current trajectory of global temperatures is unacceptable and can be altered. Climate-related deaths are a sad sign of the times. But we have the opportunity to play our part, and you can rest assured that Pathfinder remains on a mission to support the transition to a low-carbon world that helps mitigate the effects of climate change.

In other news, we’ve had a few queries from members recently about some of the high-profile IPOs – or, Initial Public Offerings to give them their full name – being commented on in the media, including the one linked to SpaceX. This is the private US space transportation company founded by Elon Musk.

As a reminder, an IPO is the event when a private company opens itself up to public ownership via a stock market listing.

At Pathfinder, we don't chase investments based on publicity and hype – no matter how exciting an offer might seem. The fact that an investment is listed on an index also doesn’t guarantee that we’ll consider it. And, as active managers, it certainly doesn't mean it will automatically end up in our portfolio.

As ever, we review each investment against a range of criteria including financial performance and of course, against our Ethical Investment Policy. This process involves our global equities partner, Nordea, assessing the financial attractiveness of a group of global shares that Patthfinder determines are compliant with our EIP. Only if the stars align will we consider making an investment.

In the case of SpaceX, we’re not chasing the hype and it’s a launch event that we will be keeping our feet firmly on the ground for. For the time being, it’s a ‘no’ from us.

In May was a temporary sell-off in global bond markets, which was a sign of contagion from the Iran war.

Until last month, investors had largely bought into the view that higher oil prices (linked to the Strait of Hormuz’s closure and supply shock) and rising inflation risk, could pass relatively quickly.

The mood shifted, however, amid signs that the US and Iran were unable to agree a long-term ceasefire. The knock-on effect being that oil prices would stay higher-for-longer, thus strengthening the case for higher interest rates to tame inflation (making some bond investments instantly less attractive).

At one stage in the month, there were record-high yields on long-dated government debt in the US, Germany and UK. In other words, the cost for governments to service their debt rose sharply. In the case of the US, rising yields on Treasuries will have felt uncomfortable because the country’s debt pile is already astronomically high – north of $37 trillion USD [3].

While bond markets did ultimately settle back down before month-end and ended higher, the short-lived sell-off was an indication that investors are nervous about the prospect of higher interest rates.

For our members, there was a currency factor that played out too. When it comes to fixed income investments, we hedge the returns back to NZ dollars. (For more information on what hedging is, please see this separate article). In May, the NZ dollar strengthened which could have eaten into any unhedged offshore assets. However, because of our hedging strategy, the global bond returns will have been protected from this currency noise. For anyone wanting to know more about bonds, what they are, how they work, check out this blog.

Despite the ongoing geopolitical tension and macroeconomic headwinds currently buffeting investors, global stock markets had a surprisingly good month.

The US stock market remained in excellent health, propped up by strong corporate earnings. For now, investors are looking through the noise and putting their faith in Corporate America.

The S&P 500 – a major US index – gained +5.01% across the month [4]. While at a global level, the MSCI World Index posted a return of +4.55%, taking it to +10.49% for year-to-date [5].

Even Kiwi stocks, which have had a torrid 2026 so far, managed to return better numbers than in recent months. The NZX50 finished May up +2.64% - a welcome result considering the index is down -2.24% year-to-date.

At a stock level, arguably the main event revolved around Nvidia which yet again, revealed eye-popping earnings. The chipmaker announced Q1 revenue of $81.6 billion USD [6], painting a picture of robust performance and ongoing high demand for its services.

Interestingly, the market response was pretty flat and at one stage, the company’s share price even dropped after the earnings results were published.

How so? You’d think that record earnings and the booming appetite for AI more broadly would see investors lapping up the strong set of numbers. In the case of Nvidia, however, there’s a growing sense of unease that its incredible success story could soon lose momentum. At some stage, investors know that competitors – whether current market participants and/or yet-to-emerge market participants –will eat into Nvidia’s dominant position.

In many ways, the company is a victim of its own success and exemplifies the high level of ‘unknowns’ surrounding the wider AI space.

Back at home, and there was a collective sigh of relief amongst borrowers, thanks to the Reserve Bank’s decision to keep the OCR on hold at 2.25%.

It wasn’t a foregone conclusion, however, with the final vote tied at 3:3. In the end, it was a deciding vote by the Governor, Dr Anna Breman that swung it.

Even before the war in Iran and rising oil prices, the market had been pricing in NZ rate hikes before the end of the year. Global events in May suggest that that first rate hike just got a little nearer.

Lastly, we’d like to remind you that you can see all of our relative performance numbers for both our Managed Funds and the Pathfinder KiwiSaver Plan funds, by clicking here.

If you have any questions, please don’t hesitate to contact a member of our Customer Care team who will be happy to help.

[1] https://edition.cnn.com/2026/05/26/climate/europe-heat-climate-intl

[2] https://www.1news.co.nz/2026/05/27/extreme-early-heat-wave-shatters-records-brings-deaths-in-europe/

[3] https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/

[4] https://www.spglobal.com/spdji/en/indices/equity/sp-500/#overview

[5] www.msci.com/documents/10199/255599/msci-world-index-usd-net.pdf

[6] NVIDIA Q1 Returns