The core macro narrative for May was straightforward: a temporary easing of Middle East tensions and a massive surge in AI hardware demand.
Key Developments:
- AI Hardware Leads US Rally: Dell recorded its biggest single-day gain ever, surging nearly 33% post-earnings, bringing its YTD gain above 230%. Riding this wave, Samsung, Micron, and SK Hynix all crossed the $1T market cap threshold in the same week. The Dow closed above 51,000 for the first time at month-end.
- Oil Slumps: The US and Iran reached a 60-day MOU framework on the Strait of Hormuz passage. Although Trump has yet to sign and Tehran notes it is not finalized, markets front-ran the truce. Brent crude fell over 19% for the month, its sharpest monthly decline since March 2020.
- Record Yen Intervention: Japan's Ministry of Finance confirmed a massive ¥11.73T ($73.6B) currency intervention between April 28 and May 27, marking an all-time high.
- Divergence in Safe Havens: US Treasuries posted their best monthly performance since the conflict flared up, with the 10Y yield pulling back from monthly highs to around 4.45%. Gold held firm above $4500 but ended the month down roughly 0.8% under rate pressure.
- Crypto Hit: The US Treasury announced the seizure of approximately $1B in Iranian-held crypto assets.
Market Outlook: While fading geopolitical risks brought risk appetite back to the table, inflation alarms are still ringing. US April Core PCE ticked up to 3.3% YoY (Headline PCE at 3.8%), well above the Fed's 2% target. With the truce yet to be finalized and the true reopening of the Hormuz strait still uncertain, supply chain overhangs remain.
Bottom Line: The war premium is deflating, but inflation remains sticky. Central banks are unlikely to talk about cuts until the macro data truly bends.