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By   Yoram Lustig, CFA, PRM™

Monthly Asset Allocation Update – May 2026

Our latest market perspectives and portfolio positioning insights

May 2026

View Transcript

Hello, I’m Yoram Lustig. Here’s our May 2026 asset allocation update, where I’ll highlight the key investment themes shaping our outlook and how we’re positioning portfolios.

First, geopolitical risk in the Middle East.
The conflict involving Iran is disrupting global energy markets and adding uncertainty. Higher energy prices, along with pressure on other commodities, are contributing to inflation. This makes it harder for central banks to cut interest rates, and could weigh on global growth.

That said, markets remain resilient. Strong corporate earnings, continued AI-related investment, and the strength of the US economy are providing support. As a result, we remain modestly overweight equities and other risk assets, such as high yield—but we are watching closely, as markets may be underestimating risks.

Second, positioning for an energy shock.
Global investing gives us flexibility. We are tilted towards equity markets that are better able to absorb higher energy prices. The US, as a net energy exporter, is relatively well-positioned. China has also diversified its energy sources and can benefit from structural growth drivers like AI. In contrast, Europe remains more vulnerable due to its reliance on imported energy.

Third, higher government bond yields.
We expect ongoing pressure on government bonds, driven by persistent inflation and more hawkish central banks. Government spending may also have to rise to cushion economies against a more persistent energy shock. As a result, we remain underweight.

This creates a challenge for diversification, as both equities and bonds can struggle during inflation shocks. Our approach focuses on broad global diversification, active management, and alternative diversifiers such as the US dollar and gold.

In summary,
We remain cautiously constructive on risk assets, while staying alert to geopolitical and inflation risks.

Thank you for joining us—and we’ll see you again next month
 

Global asset allocation - as of April 2026

*For pairwise decisions in style, market capitalisation (size) and currencies, positioning within boxes represents positioning in the first‑mentioned asset class relative to the second asset class.
T. Rowe Price Europe and UK Regional Investment Committees inform the global asset allocation views. This material is not intended to be investment advice or a recommendation to take any particular investment action.
As of 30 April 2026.

Transcript

Hello, I’m Yoram Lustig. Here’s our May 2026 asset allocation update, where I’ll highlight the key investment themes shaping our outlook and how we’re positioning portfolios.

First, geopolitical risk in the Middle East.
The conflict involving Iran is disrupting global energy markets and adding uncertainty. Higher energy prices, along with pressure on other commodities, are contributing to inflation. This makes it harder for central banks to cut interest rates, and could weigh on global growth.

That said, markets remain resilient. Strong corporate earnings, continued AI-related investment, and the strength of the US economy are providing support. As a result, we remain modestly overweight equities and other risk assets, such as high yield—but we are watching closely, as markets may be underestimating risks.

Second, positioning for an energy shock.
Global investing gives us flexibility. We are tilted towards equity markets that are better able to absorb higher energy prices. The US, as a net energy exporter, is relatively well-positioned. China has also diversified its energy sources and can benefit from structural growth drivers like AI. In contrast, Europe remains more vulnerable due to its reliance on imported energy.

Third, higher government bond yields.
We expect ongoing pressure on government bonds, driven by persistent inflation and more hawkish central banks. Government spending may also have to rise to cushion economies against a more persistent energy shock. As a result, we remain underweight.

This creates a challenge for diversification, as both equities and bonds can struggle during inflation shocks. Our approach focuses on broad global diversification, active management, and alternative diversifiers such as the US dollar and gold.

In summary,
We remain cautiously constructive on risk assets, while staying alert to geopolitical and inflation risks.

Thank you for joining us—and we’ll see you again next month

Yoram Lustig, CFA, PRM™ Head, Global Investment Solutions, EMEA
May 2026 Investment Insight

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By   Arif Husain, CFA
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By   Sébastien Page, CFA, Colin McQueen, Christina Noonan, CFA

 

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