May 2026 Factor Performance Analysis

Market background

Global equity markets delivered positive returns in May, although performance generally moderated from the strong gains recorded in the previous month. Emerging markets were the strongest-performing region, significantly outperforming developed market peers, while the U.S. continued to generate solid returns despite a slowdown in momentum. European equities posted modest gains, supported by Growth, Momentum, and Volatility factors, whereas the UK and Canadian markets lagged other regions. Across markets, Growth, Momentum, and Volatility remained important drivers of performance, although their influence varied by region. Economic data remained broadly resilient, with stable labor market conditions across most major economies and mixed inflation trends. Overall, investor sentiment remained constructive, supporting positive equity market performance despite a more measured pace of appreciation compared to April.

Crude oil prices increased during May, rising from $83 per barrel at the end of April to $92 by month-end. Prices continued to climb in early June, reaching $96 per barrel before pulling back to $89, highlighting ongoing volatility in energy markets.

Gold prices weakened during May, declining from approximately $4,628 per ounce at the end of April to $4,505 per ounce by month-end. The pullback reflected reduced demand for safe-haven assets as investor sentiment improved and equity markets continued to post positive returns across most regions.

Factor summary

• US equities: Volatility outperformed.
• European equities: Growth and Volatility outperformed.
• UK equities: Growth and Volatility outperformed.
• Emerging markets equities: Value and Volatility outperformed.
• Canadian equities: Value and Yield outperformed.

US equities

The U.S. region delivered a positive return of 5.3% in May, although performance moderated from the 10.0% gain recorded in April. The decline reflects a shift in market leadership and a less broad-based rally compared with the previous month.

While returns remained positive, the market environment became more defensive, with Volatility emerging as the sole positive factor contributor. In contrast, the strong support previously provided by Growth and Momentum weakened during the month, contributing to the slower pace of appreciation. Quality and Yield continued to detract from performance, while Value remained negative but showed signs of improvement relative to April. Despite the moderation in returns, the U.S. region continued to contribute positively to overall portfolio performance.

U.S. economic data remained resilient during the period. Inflation rose to 4.2% in May 2026, its highest level since April 2023, while the unemployment rate remained stable at 4.3%. Manufacturing output increased by 0.6% in April, exceeding market expectations and marking the strongest monthly gain since February 2025.

Stocks with high daily volatility 1Y which contributed to the performance of U.S. equities in May include info tech companies Micron Technology (88% in May), and Advanced Micro Devices Inc (46% in May).

European equities

European equities delivered a positive return of 2.7% in May, driven primarily by Growth, Volatility, and Momentum factors. Compared to the previous month, Momentum and Volatility continued to be the leading contributors to performance, while Growth strengthened and made a larger contribution to returns.

In contrast, Value underperformed significantly relative to the prior month, detracting from overall factor performance. The results suggest a continued preference for growth-oriented and lower-volatility stocks, while value-oriented securities faced a more challenging market environment.

The factor performance reflects continued investor preference for companies with strong earnings visibility and resilient business. Growth and Momentum benefited from sustained market trends and positive sentiment, while the outperformance of Volatility suggests a continued focus on lower-risk stocks. In contrast, Value underperformed as investors remained cautious toward more cyclical and economically sensitive sectors.

Eurozone economic data was mixed in May. Inflation rose to 3.2% from 3.0% in April, while unemployment remained at 6.3%, slightly above expectations. Manufacturing activity continued to weaken, with production declining 2.4% year-over-year in March.

Key European stocks with strong momentum 12-1 that outperformed in the month of May include Italian financials company Unicredit SPA (+13% in May) and French info tech company ST microelectronics (27% in May).

UK equities

UK equities returned 1.0% in May, lagging both the previous month’s performance and that of other developed market counterparts. Despite the weaker overall return, performance was primarily driven by the Volatility, Momentum, and Growth factors, mirroring the pattern observed across the Eurozone.

Compared to the prior month, the most notable change was the stronger contribution from Growth, while Momentum and Volatility continued to be the leading drivers of performance. This factor profile suggests that investors maintained a preference for companies exhibiting resilient earnings prospects and lower-risk characteristics, despite the more subdued market performance in the region.

The continued outperformance of Momentum and Volatility reflects sustained investor preference for established market trends and defensive positioning. The improvement in Growth indicates stronger demand for companies with favorable earnings outlooks, while the region’s relatively weaker overall return compared to other developed markets suggest a more cautious investor sentiment toward UK equities during the month.

UK economic data presented a mixed picture during the period. Inflation slowed to 2.8% in April from 3.3% in March, while the unemployment rate edged up to 5.0%. Manufacturing production strengthened, rising 1.2% in March and significantly exceeding market expectations.

British stocks with strong momentum 12-1 that outperformed this month include industrials company Rolls Royce Holdings Plc (+12% in May); consumer staples company British American Tobacco PLC (+5% in May).

Emerging markets equities

Emerging market equities were the strongest-performing region in May, delivering a return of 9.0% and outperforming all other regions. Despite this strong result, performance moderated from the previous month, reflecting a slowdown from the exceptionally robust gains recorded in April.

Nevertheless, the region continued to benefit from positive market sentiment and remained a significant contributor to overall portfolio returns.

Emerging markets outperformed developed market peers during the month, supported by improving investor sentiment toward risk assets and continued strength in several large emerging economies. The region also benefited from its exposure to growth-oriented sectors, particularly technology-related industries, which continued to attract investor interest. In addition, expectations of a more supportive global monetary environment and a weaker U.S. dollar provided a favorable backdrop for emerging market equities, helping to sustain capital flows into the region.

Economic conditions across key emerging markets remained relatively stable during the period. In China, inflation held steady at 1.2% in May, while the urban unemployment rate declined to 5.2% in April from 5.4% the previous month. South Korea saw inflation accelerate to 3.1% in May from 2.6%, with the unemployment rate remaining low at 2.8%. In Taiwan, inflation increased to 2.2% in May from 1.74% in the prior month, while the unemployment rate edged down slightly to 3.34% in April.

Emerging markets equities that outperformed in the month of May, captured by momentum short term, include Taiwanese info tech company Mediatek Incorp (67% in May); and Hon Hai Precision Industry Co ltd. (33% in May).

Canadian equities

Canadian equities returned 1.4% in May, a notable decline from the 6.5% gain recorded in the previous month. Performance during the month was led by the Yield factor, followed by Value, reflecting a shift in market leadership compared to April.

While Volatility and Momentum were the primary contributors to returns in the prior month, both factors experienced weaker performance in May, contributing to the moderation in overall market returns. The change in factor leadership suggests a rotation toward income-generating and value-oriented stocks, as investors adopted a more selective approach following the stronger market gains seen in the previous month.

Canadian economic data showed signs of strength during the period. Inflation increased to 2.8% in April 2026, up from 2.4% in the previous month, while the unemployment rate declined to 6.6% in May from 6.9%, indicating an improvement in labor market conditions.

Stocks with strong dividend yield in the region include financials companies Toronto Dominion Bank (+7 % in May), and Bank of Montreal (+7% in May).