Market Overview
Global equity markets advanced in May, as the artificial intelligence (AI) trade and strong earnings results offset concerns about the economic fallout from the war in Iran.
During the month, all eyes were on the Middle East, where the Strait of Hormuz remained effectively closed to commercial traffic as the U.S.-led war in Iran dragged on, with the fragile ceasefire that has been in place since early April punctuated by bouts of military skirmishes and hints that a peace deal was at hand. Investors eventually became inured to the twists and turns of the conflict and remained hopeful that an agreement would ultimately be reached that would re-open the strait, ending what the International Energy Agency had called the biggest oil-supply disruption in history and removing a significant risk hanging over the global economy.
Despite the uncertain trajectory of the Iran war, evolving sentiment about AI continued to provide support for global stock markets. Investors’ earlier concerns about the lavish spending by technology companies to build out AI infrastructure gave way during the month to a powerful rally for chip stocks, as a global shortage of memory chips generated huge profits for semiconductor makers worldwide. Notably, of the top 10 contributors to the MSCI All Country World Index’s performance in May, six were stocks from chipmakers and accounted for 37.6% of the index’s overall gain.
While stock markets around the world waited patiently for an end to the Iran war, the conflict’s economic impact became increasingly evident during the month, as surging energy costs and the risk of a prolonged disruption in oil supplies triggered a sharp increase in global inflation. Amid these developments, government bond markets turned volatile on growing expectations that major central banks might be forced to raise interest rates to quell rising prices. In the U.S., economic reports indicating that prices at the wholesale and consumer levels in April had accelerated at their fastest pace in several years stoked concerns about a lasting inflation shock. At the end of the month, traders in futures markets were betting that the Federal Reserve would hold interest rates steady throughout 2026 and pricing in a 53% probability of a rate hike in January 2027 - a significant shift from the two rate cuts anticipated before the war began on the last day of February. The yield on the benchmark 10-year U.S. Treasury note ended May at 4.44%, 7 basis points (bps) higher than a month earlier
Across the Atlantic, data released during the month indicating that economic activity in the eurozone in May had shrunk at its fastest rate since October 2023 led the European Central Bank (ECB) to warn that the fallout from the Iran war had elevated the vulnerability of the common currency bloc’s financial stability. At the end of May, markets were pricing in nearly three ECB rate hikes over the next 12 months. In the U.K., the Bank of England (BOE) stated that it was willing to tolerate domestic inflation that was above the British central bank’s 2% target and would adopt a cautious approach to any rate hike due to the country’s weak economy. Despite these assertions, expectations were growing that the BOE would deliver a 25-bp rate increase before December. Elsewhere in Europe, Norway’s central bank raised interest rates 25 bps, as domestic inflation remained elevated and the impact from the Iran war clouded the country’s economic outlook, while Sweden’s central bank held rates steady for a fifth consecutive policy meeting, as the country’s economy grappled with falling inflation and stagnant growth. The yield on the 10-year German Bund, Europe’s principal safe-haven asset, ended May at 2.94%, 10 bps lower than a month earlier.
Meanwhile, in Japan, which imports 95% of its crude oil from the Middle East, concerns were growing that the Bank of Japan’s wait-and-see approach to hiking interest rates was amplifying the risk of tipping the country’s economy into a recession. Elsewhere in Asia, China’s central bank instructed banks to increase lending as the Chinese government sought to support a domestic economy grappling with higher energy costs and persistently weak consumer demand.
With the latest earnings season in full swing, data from FactSet painted a mostly encouraging picture of how company profits have held up amid stiff macro headwinds. In the U.S., 84.6% of the companies in the S&P 500 Index that reported results topped consensus estimates, outperforming the long-term average of 67%. The first-quarter earnings growth rate is estimated to have increased 28.7% from a year earlier. In Europe, 52.6% of the companies in the STOXX 600 Index that reported results posted better-than-expected earnings, below the 54% that do so in a typical quarter. The year-over-year first-quarter earnings growth rate is expected to have increased 11.1%. In Japan, 63.0% of the companies in the TOPIX reported positive earnings surprises, surpassing the 58% beat rate over the past four quarters. The earnings growth rate for the January-March period is estimated to have increased 37.6% from a year earlier. In Hong Kong, 44.1% of the companies in the Hang Seng Index registered better-than-expected earnings, lagging the 54% beat rate over the past four quarters. The first-quarter earnings growth rate decreased 17.4% from a year earlier.
Against this backdrop, equity markets in the developed and developing worlds both recorded gains in May, with the latter outperforming the former. In the U.S., the S&P 500 Index outperformed, thanks to strong earnings results, especially from index heavyweight Big Tech companies. In Europe, the STOXX 600 Index rose but underperformed the broader global index, as the Continent’s limited exposure to major AI stocks and concerns about prolonged inflationary pressure dampened risk appetites. In Japan, the TOPIX modestly underperformed despite recording a new all-time high, as the chip rally was partially offset by concerns about the country’s economic outlook. Meanwhile, in the developing world, Taiwan’s Taiex and Korea’s Kospi soared, thanks to the frenzy over semiconductor-linked stocks.
Information technology was the best-performing sector in May, thanks to the strong chip rally. Energy was the worst-performing sector, as shares of oil producers fell in sympathy with the decline in crude oil prices. In May, the price of Brent crude oil fell 19%.
Outlook
Our outlook at the beginning of 2026 anticipated elevated uncertainty, and this view was reaffirmed in early March with the outbreak of war in Iran. The conflict has already had a profound effect on oil and other commodity prices, interest rates, and a wide range of financial assets. The situation remains highly fluid, with intermittent diplomatic efforts underway, and the economic and market implications will depend heavily on both the duration of the conflict and its ultimate resolution.
While the degree of uncertainty is greater than we initially anticipated, we believe patience is essential as events continue to unfold. Accordingly, we did not make major portfolio positioning changes during March in direct response to the conflict.
The most immediate financial market impacts have been the surge in fuel and other commodity prices, along with an increased risk of shortages in key inputs for agricultural and manufacturing activity. In our view, these developments will likely translate into higher input cost inflation in the near term. However, the magnitude and persistence of these effects will depend significantly on how long the conflict endures and the extent to which trade through the Strait of Hormuz remains constrained.
At the same time, a sustained increase in energy and commodity prices would likely exert a contractionary influence on global economic activity. On balance, we believe the risks to global economic growth over the next one to two years may outweigh the risk of sustained inflationary pressure, supporting a more defensive investment posture.
Unsurprisingly, the Midstream Energy sector has been a significant contributor to portfolio performance since the outbreak of the conflict and remains among the strongest sector contributors year to date. Recent developments have reinforced the importance of energy security and the critical infrastructure required to supply global energy demand. Unlike upstream and downstream energy businesses that may experience greater sensitivity to commodity prices and refining margins, midstream companies benefit primarily from fixed-fee, high-visibility revenue streams tied to essential infrastructure assets. As governments and markets increasingly prioritize energy security and supply reliability, we expect these characteristics to remain supportive for the sector.
Defensive utilities have been the largest contributor to year-to-date performance in both absolute and relative terms versus the benchmark. It is perhaps unsurprising that one of the most defensive sectors within our infrastructure universe has outperformed amid heightened uncertainty. We continue to view utilities as a core allocation while volatility persists. At the same time, the sector is benefiting from powerful secular trends, including electrification and rising electricity demand associated with technological innovation, data centre development, and electrified transportation. We expect these structural drivers to support sustained investment in power infrastructure and provide resilience even in the face of conflict-driven economic weakness.
Communication services have also provided stability, with largely resilient—and in some cases exceptional—year-to-date total returns among our holdings. In our view, the sector should retain its defensive appeal given generally undemanding valuations, ongoing industry consolidation, and continued exponential growth in global data creation and transmission needs. This dynamic also extends to telecommunication tower REITs, which have recently exhibited greater sensitivity to higher interest rates than we believe is fundamentally warranted. Should slower economic growth eventually lead to lower long-term interest rates, this dynamic could become a meaningful tailwind for the sector.
Transportation infrastructure remains the area most exposed, in our view, both to the direct impact of higher fuel costs and to potential slowing in global economic activity affecting trade flows, port volumes, and rail and ground transportation demand. That said, our experience has often shown that abrupt disruptions affecting critical transportation infrastructure can create attractive investment opportunities. Energy price shocks and cyclical slowdowns tend to be temporary, whereas the value of these assets is ultimately driven by long-life cash flows and supported over time by energy price normalisation, lower interest rates, and economic recovery.
In sum, while the outbreak of war introduces new risks and uncertainties into an already complex investment landscape, it also reinforces the defensive characteristics that make infrastructure securities an important component of diversified investment portfolios.
The current environment also underscores several of the key secular investment themes that the Caldwell-Lazard CorePlus Infrastructure Fund is designed to emphasize, including energy transition (encompassing both renewable development and energy security) and the strengthening of global supply chain resilience and efficiency.
We believe the portfolio remains well positioned to capitalize on these opportunities across real asset infrastructure businesses as well as key enabling industries—including materials, services, and technologies—that both support and benefit from continued investment in critical infrastructure.
The information contained herein provides general information about the Fund at a point in time. Investors are strongly encouraged to consult with a financial advisor and review the Simplified Prospectus and Fund Facts documents carefully prior to making investment decisions about the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.
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Allocations and security selection are subject to change. The performance quoted represents past performance. Past performance is not a reliable indicator of future results. Mention of these securities should not be considered a recommendation or solicitation to purchase or sell the securities. It should not be assumed that any investment in these securities was, or will prove to be, profitable, or that the investment decisions we make in the future will be profitable or equal to the investment performance of securities referenced herein. There is no assurance that any securities referenced herein are currently held in the portfolio or that securities sold have not been repurchased. The securities mentioned may not represent the entire portfolio.
Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in certain non-domestic countries may be less liquid, more volatile, and less subject to governmental supervision than in one’s home market. The values of these securities may be affected by changes in currency rates, application of a country’s specific tax laws, changes in government administration, and economic and monetary policy. Emerging markets securities carry special risks, such as less developed or less efficient trading markets, a lack of company information, and differing auditing and legal standards. The securities markets of emerging markets countries can be extremely volatile; performance can also be influenced by political, social, and economic factors affecting companies in these countries.
Securities and instruments of infrastructure companies are more susceptible to adverse economic or regulatory occurrences affecting their industries. Infrastructure companies may be subject to a variety of factors that may adversely affect their business or operations, including additional costs, competition, regulatory implications, and certain other factors.
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Published on June 16, 2026.