Here’s my quick wrap-up on global markets for serious long-term Aussie investors – including shares markets, interest rates, inflation, bonds, currencies, commodities, and more, including portfolio implications.
Key points:
- May was a tedious month watching markets predictably see-saw in Trumps’s ‘Deal-or-No-Deal’ circus.
- Every time Trump announces his latest ‘deal’ - oil prices, bond yields and the US dollar fall, while share markets and risk currencies like the AUD rise. Then every time the latest ‘deal’ falters eg bombings resume or yet another Trump threat to ‘annihilate’ or ‘destroy’ Iran - oil prices, bond yields and the US dollar rise, while share markets and risk currencies fall. (Check out my weekly Market Pulse reports for details.)
- Despite Trump’s stated war objects (none of which have been accomplished), Trump’s actual number one priority would be to get fuel prices down in order to retain MAGA votes in the November mid-term elections. To do that he must end the war and dress it up as an ‘EPIC WIN’ for Trump/US, and the Strait of Hormuz must be opened quickly so prices have time to come down by November.
- Both appear unlikely any time soon.
- Meanwhile the tech / ai / chip / data-centre boom continues to inflate in the US/global boom, but the Aussie share market continues to lag.
- Will I be jumping in on the SpaceX IPO?
- In Australia we had another RBA rate hike, high inflation, and Federal government trying to ram through a range of tax hikes.
- For me the focus should not be about the details of the proposed tax hikes, but on the BALANCE between taxing and spending. The main problem is the government’s addiction to deficit spending and debt, which punishes the next generation of tax-payers.
- If the government is serious about ‘intergenerational equity’, why is it still happy (indeed striving) to run deficits and increase debts which burden the next generation of tax-payers?!
- Plus more on inflation, interest rates, bonds, FX, commodities, and bitcoin.
But first - my essential 1-page snapshot chart - covering Australian and US share markets, short and long-term interest rates, inflation, and the AUD/USD exchange rate. Regular readers will notice that this year I have dropped the first version (all on one chart) and now just have the second version (showing Australian and US inflation and interest rates separately in the lower sections) from now on.
It is my go-to chart that tells me what happened when and why, whenever answering queries from advisers, investors, doing webinars, market updates, etc.
Not only does this chart have all the detail I need to answer investor questions from advisers, but even from the back of the room you can easily see the big picture on where we are for share markets, currency, inflation, long & short interest rates.
I will get into shares in a moment, but from the back of the room you can see that share markets had a minor hiccup in March (top right corner of the chart – red for US, green for ASX), but are back on track in April and May - at least for the US which is soaring to new highs.
Bottom line – if you were rattled by the volatility and price falls in March then you ain’t seen nothin’ yet! (or you are too young to remember what a decent sell-off looks and feels like!)
Share markets
Global share markets continued rising in May after the brief sell-off in March when panicking investors sold down just about everything except for oil/gas stocks profiting from higher prices with the Strait of Hormuz closed.
Panic selling is crazy of course. It’s just an irrational knee-jerk panic reaction we see in every so-called ‘crisis’. I also suggested readers take a look at some of my research that debunk myths about the impacts of wars and oil prices on share markets -
And:
These fact-based research pieces demonstrate that most of the big wars/crises, including those involving oil price spikes, inflation, and even ‘big’ wars, actually turned out to be positive for share markets in a large majority of cases (after initial short-term panic sell-offs of course).
Then, right on cue, share markets brushed off the March panic and rebounded in April and May as the war drags with no end in sight.
Global Industry Sectors
The next charts show total returns from global sectors for May 2026 (middle chart), calendar year to date (right), compared to 2025 (left chart):
The stand-out sector up is fossil fuels (‘energy’) – with across the board double-digit rises in the major stocks this year as they profit from the global supply squeeze.
Major global stocks
Here is the picture for the largest global stocks (all of which are US based) for the same three periods:
The stars in May were the US tech/ai giants, which were under-pinned by very good profit reports for the March quarter (Nvidia, Microsoft, Amazon, Alphabet/Google, Broadcom amongst others). Oil/gas stocks were down as oil prices fell back.
Mag-7 update
For context, next are share price charts for the so-called ‘Magnificent Seven’ stocks over the past decade. I have also added three other punters’ favourites Oracle, Palantir, and Adobe, plus China’s Alibaba and Tencent:
(For the benefit of new readers, I have not used any y-axis scale trickery here – the vertical y-axes all start at zero, and have regular, nominal scales, which highlights the explosive share price growth of the US giants from very low levels in the past decade.)
China’s Alibaba and Tencent are up over the past year, but both are still below their 2021 peaks. By comparison, all of the US majors are well above their previous peaks in the 2021 Covid stimulus boom, even struggling low-margin car-maker Tesla, finally.
Aside from Tesla, Adobe is the odd one out here – seen as being most vulnerable to being eaten by ‘ai’.
The US tech giants are still very expensive on a range of metrics. See my report on how they stack up individually on revenues, profits, dividends, and pricing -
A few months ago I published a six-part series on pricing of global share markets to better understand their implications -
For more on US profits and pricing – see:
SpaceX IPO?
Speaking of speculative bubbles, the latest, hottest new thing is the upcoming IPO of Elon Musk’s SpaceX – a combination of three ventures: the profitable Starlink business, plus speculative potential money-pits Space and ai. It is set to be the largest IPO in the history of the world – raising some US$75B for an initial valuation of US$2 trillion.
Will I be lured in?
Here’s a hint. Real money is made buying low (when there’s ‘blood in the streets’ and the thing you are buying is deeply unpopular and dirt cheap), and selling high (or just holding on).
The SpaceX IPO is the exact opposite.
Here’s a hint: I have only ever found (and bought) one ‘500-bagger’ in my life: bought Fortescue Metals in 2003 for today’s equivalent of 2.7 cents per share post 10:1 split. It was at the bottom of the market and there was ‘blood in the streets’ at the end of the ‘tech-wreck’, and the aftermath of the US-led invasion of Iraq. It was also the bottom of the commodities cycle (before the China boom took off) when you literally couldn’t give away speculative mining stocks. Especially one run by a cowboy who had just blown up Anaconda Nickel at great cost to shareholders and lenders.
Lesson – you buy when everyone else is running the other direction. Don’t be lured into a buying frenzy at crazy prices at or near the top of a boom/bubble. Always go against the crowd.
Make up your own minds in SpaceX!
Major country share markets
Share markets almost everywhere had another good month in May. Here are the main markets:
The US share market continued to surge – S&P500 up 5% for the month and posted 11 new all-time highs in May (making it 22 new all-time highs so far in 2026).
Other US indexes were also strong: Dow jones +2.8% in May, and +6.2% in 2026, NASDAQ +8.4% in May and +16% in 2026, Wilshire 5000 +6.1% in May, +10.9% in 2026.
However, it is not just a US boom. Best of the major markets has been Japan, led by Softbank (big Facebook holding plus other US tech bets), Keyence (robotics), and Shin-Etsu Chemical (plus assisted by weaker yen). Next best was the US (tech/ai giants), and also Canada (oil/gold).
So far in 2026 global share markets are ahead by 12% (in local currency terms). This may make it a fourth good year in a row in the current boom, following three very strong years averaging +20% per year in 2023, 2024 and 2025.
Share markets everywhere (not just US tech/ai stocks) are still vastly over-priced on a variety of measures – including and especially in Australia (despite its lower apparent headline pricing) - and we are well and truly due for a global correction. Refer to the above reports on share market pricing.
Australian shares
The local Australian share market continues to lag the rest of the world. It posted no new all-time highs in May (the last all-time high for the All Ords was at the end of February immediately before the US started bombing Iran). The All Ords was up just 1% in May, and is flat for the year to date.
Here are the main ASX stocks for May 2026 (middle chart), calendar year to date (right), compared to 2025 (left chart):
In May, most of the big miners were up (higher prices for iron ore, gas, coal), fossil fuel producers were down (oil prices down), and the rest of the market was generally down.
There are two main reasons for the Aussie share lagging the US and rest of the world in the current boom. First, the ASX market is dominated by century-plus old low-growth dinosaurs – see:
The second reason is that the very few innovative Aussie companies that do have something new and different to offer the world are notorious for their over-ambitious overseas expansion plans that almost never live up the hype.
So far this year, the main ASX winners have been fossil fuel producers (led by Woodside +30%, Santos +27%), and miners (BHP +37%, RIO +26%, Lynas +54%, Pilbara Min +53%, Iluka +36%, MinRes +35%), although the gold miners have been flat with the recent gold price boom easing off this year.
The big banks have been mixed this year (CBA +3% to NAB -12%), but other sectors hare mainly down.
Worst this year have been health care, which has been a sea of red ink: CSL (-44%), Cochlear (-61%), ProMedicus (-40%), ResMed (-20%), Sonic (-14%). Most of these have been own goals – with aggressive expansion adventures failing to live up to the hype.
Also hit hard this year have been several former tech stars for the same reason (overly ambitious expansion), plus also the threat of ‘ai’: Wisetech (-47%), Xero (–34%), Seek (-10%), REA (-19%).
Inflation & interest rates
A stalemate in the US/Iran looking like a reasonably likely outcome would mean above-target inflation lasting longer (after some possible short-term rises).
Despite inflation remaining sticky around the world, central banks have mainly held cash rates flat this year – taking a middle road between further rate HIKES to reduce spending and inflation, versus rate CUTS to stimulate slowing economies due to higher prices.
In the US inflation ROSE from 3.3% to 3.8%, and annualised 3-month inflation running rate ROSE from 5% to 7.3% pa. The overall US economy is hot. US unemployment flat at 4.3%, which reflects strong jobs markets.
At the Fed, Kevin Warsh (Trump’s latest pick) has replaced Jerome Powell (Trump’s previous pick) as Chair of the US Fed rate-setting board, which continues to keep rates flat this year after six rate cuts in 2024 and 2025.
Australia is the exception of course. The RBA has been the only central bank in the world to switch from rate cuts after the 2021-3 inflation surge, back to rate HIKES. The RBA’s three hikes in February, March and May this year reversed its three unjustified cuts last year as inflation was, and still is, running well above target range.
Even before the latest war on Iran, Australia already had the HIGHEST cash rate amongst its peers – because we have the highest inflation, the highest inflation expectations (treasury yields), the loosest/highest inflation target, and the lowest unemployment rate among our peers.
For the full story see –
Australian Unemployment rose from 4.3% to 4.5% - with a fall in jobs for younger workers. This could be employers just waiting for more certainty on interest rates and input costs from the US-Iran war. Or it could be some impacts of ai taking jobs.
Bond yields and bond markets
The picture on inflation and interest rates leads us directly to bond markets, in which every local and global institutional retirement/pension fund is required to hold huge allocations (but not mine fortunately).
Bond yields rose for the first three weeks as the US/Iran see-saw led to fears of prolonged war. There was some excitement/panic when 30-year yields rose above 5%, the highest since 2007, but yields fell back as the Trump see-saw swung back towards another ‘deal’.
Yields remain higher almost across the board for the year to date, as elevated fuel prices lift fears of even higher inflation and cash rates ahead.
The next charts show changes in 10-year treasury yields in May (top chart), in 2026 calendar year to date (middle), and last year (bottom):
(In my charts of changes in bond yields, I show RISING yields in red as they mean LOWER bond prices & returns; and I show FALLING yields in green as they mean HIGHER bond prices & returns.)
This sea of red (rising yields) this year is bad for bond market returns.
Bond market returns
Last year (2025) turned out to be the fourth straight year of poor nominal and real returns from bonds, as yields rose virtually across the board with inflation remaining ‘sticky’. So far 2026 is looking like being a fifth straight year of poor nominal and negative real returns from bonds. We have not seen that since the 1970s.
Despite below average returns on bonds in 2025, at least 2025 was a better year for bonds than 2024 when yields rose by significantly more. Not nearly as bad as 2022, which was the worst year for US bonds in more than a century, and the worst year for Australian bonds since the 1931 Commonwealth debt default/restructure.
Now with the war in Iran and major oil/gas disruptions, yields are on the rise even further, meaning more losses (or poor returns at best) for bond markets.
Fortunately I have been out of fixed rate bonds in portfolios (advised, and my own) since 2021, due to fears that yields will remain elevated for at least the next few years, due to persistent inflation, with loose fiscal policy (governments running deficits and debts), and also loose monetary policy (central banks under enormous political pressure to keep rates too low).
It is not just the latest war in Iran. We have a host of longer-term inflationary pressures at work – including rising military spending everywhere, on-shoring of manufacturing, wage pressures from labour shortages resulting from reduced immigration, transitions to renewable energy sources, and increased supplies of bonds from profligate, populist, big spending governments here and around the world.
For the real story behind oil price spikes and inflation – see:
Maybe I will take a look at fixed rate bonds again in a few years.
Exchange Rates
The Aussie dollar was stronger against the USD and other major currencies (except it was flat against the Yen and RMB) in May. For the 2026 calendar year to date it is also up against just about all other currencies, echoing the US global share boom:
As the Aussie dollar is a ‘risk currency’, it always sells off in a global crisis, regardless of local conditions. In the March share sell-off the AUD fell against all major currencies, especially the US dollar (ie the usual pattern). This partially cushioned price falls on ‘unhedged’ foreign shares when converted back into Aussie dollars for portfolio reporting.
Then in April and May the AUD has rebounded along with the share rebound (also the usual pattern). Year to date is up strongly, as is the US/global share market.
Conversely, the US is the global ‘safe haven’ currency (and has been since WW1), so it (almost) always rises in global crises, even if the US is the cause of the panic (for example in the GFC). As global investors (ie primarily US investors) panic sold just about everything in March and retreated home, the US dollar strengthened against all other major currencies (the usual pattern).
I have a 40% hedge ratio on international shares in my long-term portfolios, so I have profited from the general rise in the AUD over the past year, but also obtain a decent partial cushion in sell-offs.
There has been a lot of nonsense in the populist media about the impending ‘end’ or ‘death’ or ‘decline’ or ‘demise’ of the US dollar. For the big picture on the strong US dollar and why Trump is understandably trying to talk it down, see:
Commodities
The good news for the big Aussie miners was rising prices of iron ore and copper, offsetting the fall in oil prices in May, while gold was flat:
On iron ore - spot prices have been more or less flat for the past year. China has been trying to reduce over-production of steel and is also using its market power (which it should have done years ago) to strong-arm BHP, RIO and FMG on pricing.
The bigger problem is that ore grades in the Pilbara are declining, and new supply is now coming out of Simandou, Guinea (RIO), further putting pressure on Pilbara volumes and prices. On top of all that, the Aussie iron ore producers are being hit by rising operating costs: wages, fuel, compliance, red/black/green tape, and now a return to 1970s-style militant industrial action after Labor’s winding back of three decades of IR reforms.
Iron ore has been the stand-out windfall for Australia since 2003, but the days of peak Pilbara iron ore are behind us.
Meanwhile, seeing this trend, BHP has turned itself into primarily a copper play – with the growth and jobs mainly in Latin America.
On gold – I hold gold in my long-term ETF portfolios, and it has doubled in the past couple of years, but is up ‘only’ 7% in 2026 to date. It the best performing holding by far.
Bitcoin fell back in May. The Bitcoin price is basically just a bet on the US tech hype cycle, as I demonstrate here –
However it has lagged everything else over the past 12 months (lower chart above).
Trump’s agenda?
The following is what I said in my end of March report:
The most important factor for the direction of short-term investment markets prices will be Trump’s twists and turns on the war front (or tariff front, or any of his other hobby horses du jour). Not even Trump knows what he will say or do one minute to the next, so it is pointless trying to guess.
However, I have two fairly sound reasons for being relatively positive for share markets in the coming months.
First - Trump probably has one central aim in the short term: to retain MAGA votes in the November mid-term elections. To do that he must (1) get oil prices down, and (2) minimise the number of Americans coming back in body bags.
This points to a relatively quick end to the war. Or at least an end to disruptions in oil/gas supplies, which means opening the Strait of Hormuz to restore normal shipping.
Second – in the event of a sharp economic recession, governments of all flavours in the US, Australia and just about everywhere else no longer have any notion of fiscal discipline. They have shown in the GFC and Covid that they will literally throw ‘free’ money at anything and everything in order to retain populist votes. Politicians no longer have the stomach nor the intellectual framework for ‘tough medicine’, ‘business cases’, trade-offs, or discipline.
The longer-term consequences and downsides will be even higher debts and widening intergenerational inequity, but it supports asset prices in the short-medium term. The current global tech/everything boom is being held up by hopes of endless monetary and fiscal profligacy.
This theory remains my Base Case scenario. Trump is desperate to get out but it must be with him ‘winning’. The problem is finding something to call a ‘win’. He is now reduced to a rather tiresome tirade of threats, then backdowns, then mysterious alleged ‘negotiations’ with nameless parties on behalf of Iran about a so-called ‘deal’, then more threats, and more back-downs.
The most likely outcome is probably yet another humiliating US withdrawal dressed up as a ‘win’, but leaving a festering mess behind.
What to do in portfolios?
Let me start by repeating exactly what I wrote in my end of February 2026 monthly report, which was BEFORE the US started bombing Iran in the latest war:
“I see several themes driving markets in the medium term:
- Continued shift from rules-based order and win-win multi-lateral trade to power-based order and win-lose trade deals. Trump did not start this. The shift started in the 2010s with US/Europe letting Putin take Crimea in return for cheap gas for Germany/Europe, and US/Japan letting China militarise the South-China Sea. It has certainly accelerated under Trump. Lower cross-border trade & investment, more reliance on government subsidies & distortions, inflationary on-shoring of uneconomic industries.
- Sticky inflation - political pressure on central banks to keep rates low – populist pressure on governments to keep deficit spending. Tariffs + onshoring adding to costs/prices. Bond yields to stay elevated or even drift up further, risk of bond yield spikes, or sudden need for rate hikes, unsettling / breaking share markets.
- Share markets continue to be supported by good profit growth for now. Shares everywhere are expensive but buoyed by loose monetary & fiscal policies, plus a near certainty that governments will throw ‘free’/borrowed money at any problem.
- Commodities rally gathering pace – rising demand soaking up over-supply, ai / data centre boom (industrial metals, energy, water, land), global re-armament – especially Europe, Japan, Canada. This should support ASX market, as long as banks avoid a local recession.
- De-dollarisation fears are probably over-done, but is driving up gold, silver, but not bitcoin. US treasury yields not at risk for now (and even fell in February).
- The current boom will end one day of course. All markets everywhere, including and especially Australia, are over-priced on fundamentals, not just US-big tech. However, each boom is different and the triggers for the inevitable bust are different each time. See my recent 6-part series on share market over-pricing.
- I have not changed my asset allocation in portfolios (my own and for investment committees) and it has done rather well – beating Big Super by about 2% pa, thanks mainly to two themes - having Gold, and zero interest duration (no fixed rate bonds). A lot has happened in that time, and I have left it alone to do its work. That’s the point of an ‘all-weather’ portfolio – I don’t need to constantly worry and fiddle with it. When I get some time in the coming months, I will certainly take a look and see if I need any adjusting.”
Now, the question I posed in my end of March 2026 report – ‘Has the new war on Iran changed any of that?’
Probably not, except for two things. First, the war adds weight to my pre-existing medium-term inflation fears.
Second, the war and oil price spike just may be the trigger for the inevitably unwinding of the speculative tech boom. We know the boom will end of course, but we did not yet have a sufficient trigger.
The background for the big correction may be US/global slow-down caused in part by higher fuel prices / inflation / interest rates. The trigger may be a sudden realisation in the emptiness of the extraordinary hype over tech / ai profitability, probably accompanied by contagion withing the private credit / private equity funds that are holding mountains of unsustainable debt extended to tech / ai / data centre operators, perhaps leaking into / across the US banking sector.
It will be a big correction in the order of 40-60% crashes in share markets everywhere and trillions of dollars of debt written off as worthless. What we don’t know is when.
Meanwhile, life goes on. Looking beyond the daily noise and gyrations, I am sticking to my portfolio holdings, and I will report on returns when I get some free time (a tad busy with cancer & chemo rounds these days!)
‘Till next time – safe investing and stay healthy!