Global markets rebounded in May following April’s volatility, as trade tensions eased, and economic data remained resilient. While concerns lingered early in the month following President Trump’s sweeping tariff announcements, diplomatic progress led to a significant de-escalation in tensions, particularly between the US and China. A breakthrough came on 8 May with the announcement of a new US-UK trade deal, followed on 12 May by a 90-day reduction of US-China tariffs to 30%, down from 145%.

Regional equity markets posted broad-based gains, supported by stronger economic data and reduced US-China trade friction. The US performed strongly (5.4%), followed by Europe (3.9%) and the UK (3.8%), while Emerging Markets also advanced (3.0%). Within Europe, technology (+7.6%)
and energy (6.9%) led gains, with healthcare (-1.2%) the only sector to decline.

Economic indicators showed resilience to start the month, with US employment data and the ISM services index demonstrating robust growth,
helping alleviate concerns of an immediate economic impact from the prior month’s trade tensions. Inflation data in the US was also a cause for optimism, as the headline year-on-year rate fell to 2.3%. Amid these economic reports, the Federal Reserve held rates steady in its May meeting. However, the month’s positive momentum was tempered by mounting concerns over US fiscal health, with uncertainty surrounding the extension of the previous Trump administration’s tax cuts which would add significantly to the budget deficit. In a notable development, Moody’s downgraded US government debt, becoming the last major rating agency to remove its highest credit rating on US debt. These concerns pushed the US 30-year Treasury yield above 5%. Bond yields also rose in other regions, with 30-year yields rising in German and Japanese government bonds. Indeed, during the month, Japan’s 30-year bond yield reached its highest level since these long-dated securities were first issued, in 1999.

The underweight position in Apple (-6.3%), was the top contributor to excess returns in the Trust. Despite the easing in announced tariffs, Apple manufactures a significant number of iPhones in China, and trade uncertainty has raised investor concerns. The overweight in NRG Energy (41.5%) was also a positive contributor. NRG announced an acquisition of 18 gas-fired
power plants for around $12 bn, with the fuel seen as key to meet electricity demand for data centres. The underweight in Microsoft (15.6%) was the largest detractor for the Trust. The company reported third-quarter results that beat expectations, with the cloud business continuing to be a beneficiary from demand for AI services.

We ended the month at a discount of 8.5%, narrowing modestly from 9.0% in April. Net gearing remained conservative, at 5.8% (with debt at fair value) at month end.

Unlsess otherwise stated all data is from Bloomberg.