Markets Continue to Trade the AI Boom Over the Geopolitical Shock

Janus Henderson argues that global markets largely looked through Middle East instability in May, as AI-driven earnings momentum and falling oil prices outweighed inflation and growth concerns. 

• Global equities extended their rally, led by AI-linked semiconductors and memory-chip manufacturers across the U.S., Taiwan, and South Korea.
• Bond markets remained volatile as yields initially surged on war-driven inflation fears before retreating on optimism around a potential U.S.–Iran agreement reopening the Strait of Hormuz.
• Market leadership began to broaden late in the month, with equal-weight benchmarks and cyclical sectors outperforming after an earlier period dominated by mega-cap AI names.

The key question now is whether the market is entering a healthier broadening cycle — or merely extending an increasingly concentrated AI-driven expansion.