Macro Musings: The Only Game in Town – June 2026

(performance data as of May 31, 2026)

The Quick-Hits

• AI momentum continued to push equity markets higher again in May
• After several months of broadening returns, narrow leadership is back in the U.S. and EM
• Can improvements in global oil intensity spare us from the worst of a supply shock?
• Bond markets signalling caution through higher long-term yields – some are expecting 6%
• Time to say goodbye to the era of cheap money?
• Quote of the month:
  

  “Investors should position for persistently higher rates for the short, medium and long term.”
  – Torsten Sløk, Chief Economist & Partner at Apollo Global Management

Macro Musings

Equity market momentum from April certainly carried through to May, with investors shrugging off geopolitical concerns and doubling down on stocks within the Artificial Intelligence (AI) ecosystem. Despite warning signs from the bond market, equity investors dare not look down and seem poised to take more than just SpaceX to the moon.

Indeed, the unprecedented profitability we’re seeing from Information Technology (Info Tech) juggernauts is tamping down worries about uncertainties and disruptions elsewhere. In other words, AI earnings are trumping macro headwinds. It seems the entire global economy now is one big bet on the success of AI. And while there are compelling arguments on both sides of the discussion as to whether these stocks continue to climb, what makes this rally different than past cycles (particularly the Info Tech boom and bust of the dot-com era) is that this one is backed by strong profit growth and margins today, rather than purely on price-to-earnings (P/E)¹ multiple expansion (future earnings expectations). Yes, investors are expecting big things from these companies in the future, but the fact that they’re underpinned by such strong earnings and profits to help fund their considerable capital expenditures goes a long way in helping to ease anxieties.

If there are, in fact, any anxieties, they’re coming from the bond market. But more on that later. You can look to a recent ETF filing in the U.S. to get a sense for the sort of hype and excitement surrounding opportunities in and around the AI theme. Roundhill Memory ETF (ticker: DRAM) was listed on April 2 and, in just 50 days on the market, had garnered US$10 billion in assets, likely making it one of the best early success stories in ETF history. By comparison, there’s also the iShares AI Innovation and Tech Active ETF listed in the U.S., which also recently crossed the US$10 billion AUM threshold, but it took 556 days to get there². Perhaps one of the reasons DRAM took off the way it did was due to its targeted exposure. As its name suggests, it specifically targets memory chip companies (semiconductor stocks). In fact, over 70% of its exposure is currently in three companies – SK Hynix, Samsung and Micron. Whereas investors in the past who were looking to get exposure to a theme might buy a specific sector-based ETF, there seems to be more and more appetite for thematic positions, perhaps based in part by the fact that sector classifications are becoming somewhat less relevant as companies evolve and the boundaries of their business operations begin to blur the lines.

Perhaps in an era of increasing “casino-fication” – that is, greater appetite for leverage, bitcoin, prediction markets, sports betting – this sort of highly concentrated investing makes sense. Younger investors who don’t have the capital to invest in the “normal stuff” increasingly feel priced out of traditional wealth-building activities (i.e., homeownership) may be trying to chart a new course for themselves. To be clear, though, the hype we’re seeing behind AI investment opportunities isn’t just a fantasy world of rainbows and lollipops. Companies are spending money – loads of it. And while the companies spending all the money to build capabilities (AI enablers) today might not ultimately be rewarded for their considerable capital expenditures, the money they’re spending is directly benefitting the profitability of other companies – think chipmakers, commodity companies, industrial equipment manufacturers, and so on (often referred to as the “picks and shovels” companies of the AI boom, likening them to the periphery companies involved in the gold rush). Goldman Sachs estimates that US$7.6 trillion will be spent on building AI data centres alone in the next five years, with the bulk of that expenditure on the computing power provided by the semiconductors (chips) needed to train and run AI models³.

While it’s easy to sit on the sidelines and cry “bubble”, some investors are putting their money on the line betting against this upward trajectory. According to Goldman Sachs, hedge funds have increased their short exposure to the highest level in at least a decade⁴.

Under the layer of AI euphoria, though, geopolitical and inflationary concerns stemming from the continued conflict in the Middle East still linger, but macroeconomic data remains quite solid. And while investors late in May seemed to increasingly price in an imminent resolution, I think we can all agree that we’ve seen this movie before. My money is on continued head fakes, with a defiant Iran likely to dismiss nuclear concessions and efforts to reopen the Strait of Hormuz – two of their main (only?) bargaining chips ensuring they remain a going concern. Nevertheless, the solid macro data we’ve seen of late has come from areas like the labour market – U.S. nonfarm payroll data showed 172,000 jobs added in May, more than double consensus estimates. Corporate earnings, as previously mentioned, not only remain strong across sectors of the U.S. market, but also across geographies. And, even in the midst of an energy shock, the global economy has seemed quite resilient – at least in terms of immediate damage – which just reinforces investor risk appetite.

As we’ve discussed in past months, outside of maybe an abrupt halt to AI capex, the looming oil supply crisis is perhaps the biggest threat to global markets. This past month, Indian Prime Minister Narendra Modi called for Indians to stop driving cars and work from home. While we in the West feel the impact in prices at the pump and grocery stores, other parts of the world are facing real shortages. It has been said of late that the IT and services-driven economy of the developed world is far less susceptible to oil shocks since “global oil intensity” has come down, relative to the past. A recent article in the Financial Times outlined this point in detail. They describe global oil intensity as the amount of oil necessary to produce a certain amount of economic output, noting that it has improved over past decades. According to their findings, in 1973 it took 131 litres of oil to produce $1,000 of GDP. In 1980, it took 116 litres. Last year, it was just 52 litres, or 60% less than 50 years ago. The problem, they note, is that while improvements in oil intensity have been made, current consumption is more concentrated in high-value areas where there are no substitutes – things like road or air freight or maritime shipping. These are foundational functions of the global economy that, unlike discretionary or consumption-oriented drivers of growth, are far less price-sensitive, meaning disruptive price changes that occur are likely to ripple through to nearly all parts of the economy⁵.

Equities

Equity markets picked up right where they left off in April, with the same AI narrative driving the NASDAQ 100 Index⁶ and the MSCI Emerging Markets Index⁷ to the top of the leaderboard, both of which now surpass the other indexes we track on a year-to-date basis.

We noted last month that recent performance within Emerging Markets (EM) has been very narrowly driven by Taiwan Semiconductor Manufacturing Corporation, SK Hynix and Samsung. That narrow leadership has not only continued within EM, but also in the U.S., as investors double down on companies within the AI ecosystem. From October 2025 through to the end of February 2026, we saw a broadening out of market performance. Over that time, the top 10 largest stocks⁸ in the S&P 500 Index⁹ were down 6.6%, while everything else in the index was up 5.7%. Since March, however, the tide has turned sharply as geopolitical uncertainties have taken a back seat to AI earnings exuberance. For the three months ended May 31, 2026, those same top 10 largest stocks in the S&P 500 Index were up 17%, while the remainder of the index was “only” up 5.8% – still a very healthy return for the “everything else” bucket that annualizes to over 20%, but dwarfed by the big AI players. In environments such as these, where a narrow group of stocks performs so well, it’s nearly impossible for active managers to outperform – not because they purposely avoid these stocks, but because outperformance would require inordinately large overweight positions in stocks that are already outsized weights in the index. For now, passive investors have had the edge, as active managers prudently prioritize risk management and diversification. The three best-performing stocks in the NASDAQ 100 Index in May were Micron Technology (+88%), Datadog Inc. (+87%) and ARM Holdings (+68%). In the broader S&P 500 Index, only the Info Tech sector return of 16% outperformed the index-level return of 5%. Eight sectors experienced negative returns, with Energy down the most at – 5.5%.

Canada was a relative underperformer again in May, but even with Energy headwinds it still posted a gain of 2.5%, with Communication Services, Materials and Financials leading the way. After climbing 63% in April, Blackberry was once again the best-performing stock in the S&P/TSX Composite Total Return Index¹⁰ in May, up another 68%. Investors are looking at this stock less as a “failed handset provider” and increasingly as a company with a credible recovery plan and robust profitability improvements. The biggest growth driver for the company today appears to be its QNX operating system, which runs things like car infotainment systems, driver-assistance systems, medical devices, industrial robots and aerospace/defence systems. Rounding out the top three performers were MDA Space (+48%, and a main holding of Guardian Canadian Focused Equity Fund) and Badger Infrastructure Solutions (+34%).

International equities, as measured by the MSCI EAFE Index¹¹, outpaced Canada by about 1%, up 3.7% in May. Similar tailwinds and headwinds were at play, with the Info Tech sector up big (+17%), with Energy at the bottom, down 6%. Top performers included Murata Manufacturing (Japan, +87%, and a main holding in Guardian International Equity Select), Delivery Hero (Germany, +80%) and Kioxia Holdings (Japan, +75%).

From an equity factor standpoint, it was a Momentum and Growth-oriented month with Dividends out of fashion. Small caps underperformed large caps, and gold declined ~USD$90/oz for a return of – 2%.

On the currency side, declining oil prices in May and hopes for an upcoming resolution in the Middle East were both a boon for the U.S. dollar, which rose 1.6% vs. the Canadian dollar and 0.9% vs. a basket of global currencies.

Fixed Income

After a relatively flat month of April, bond markets rallied in May, with the broad FTSE Canada Universe Bond Index¹² leading the way up 1.4%, trailed just slightly by investment-grade corporates. The relationship was flipped in the U.S., as risk-on sentiment led to some slight outperformance of high-yield bonds relative to the Bloomberg US Aggregate Bond Index¹³.

Bond yields in Canada came down in May, reflective of more tepid economic growth forecasts. Contrast that to the U.S., where yields rose across all tenors as inflation concerns are more of an issue. At one point during the month, inflation fears drove the yield on 30-year U.S. Treasuries to 5.2%, which was the highest level since 2007. While not the experience in Canada, the rise of longer-dated bonds was a global phenomenon in May driven by war-induced inflation concerns. Because of these concerns at the fore, odds of a U.S. rate hike before year-end rose above 40% on prediction market Kalshi, up from 15% a month ago¹⁴. Recently reported jobs numbers will likely only take that 40% prediction even higher. With 30-year U.S. Treasury yields at or above 5%, HSBC calls this the danger zone, where levels this high are likely to stress other parts of the market. Somewhat more alarmingly, a recent Bank of America survey says 62% of fund managers expect the 30-year yield to hit 6% this year, the highest since 1999¹⁵.

“Goodbye to cheap money” was the headline in the Financial Times on June 1, 2026, in an article suggesting that with yields above 5%, investors finally seem to be coming to grips with the fact that the era of “cheap money” (low interest rates) is over, entering instead into a new world with many more places for inflation to work its way into the system than in the past. The cause for this, as discussed previously, is certainly higher energy prices and goods prices related to the war and tariffs. But don’t discount the impact of reindustrialization (i.e., populism, the desire to onshore the production of “important” goods) and rising defence spending. Plus, as behemoths in the AI ecosystem increasingly scoop up new land (real estate), chips, water and electricity, it will likely make the price of each rise for everyone. The Financial Times also notes that lower demand for U.S. Treasuries doesn’t help to keep inflation in check either¹⁶.

This sentiment about the end of cheap money was also shared by Torsten Sløk, chief economist at Apollo, in a recent client note stating that investors should position themselves for a persistently high interest rate environment for the short, medium and long term¹⁷.

So, the “macro disconnect” continues as equity investors seem exuberant, while bond investors signal caution. And while that can play out over shorter periods, the greater the time bond investors maintain this sentiment or push yields higher still, the bar gets set even higher for equity returns to meet investors’ expectations.

¹ The price-to-earnings (P/E) ratio compares a company’s share price with its earnings per share (EPS).
² Financial Times, Companies and Markets, Equities, Chipmaker ETF rides AI excitement to quickest $10bn valuation on record, May 27, 2026,
https://www.ft.com/content/95415dfc-904e-4ce5-a457-f50041c07ec9?syn-25a6b1a6=1 [Pay to read.]
³ Ibid.
⁴ Goldman Sachs Prime Services, May 18, 2026 (full report not for public dissemination)
⁵ Financial Times, An oil price crunch is looming, May 5, 2026, https://www.ft.com/content/5ecb0e34-9470-402a-8e81-678f36b42b3b [Pay to read.]
⁶ The Nasdaq-100 Index® includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market
capitalization.
⁷ The MSCI Emerging Markets Index captures mid- and large-cap representation across 27 Emerging Markets countries.
⁸ The top 10 by market cap as of February 28, 2026: NVIDA, Apple, Microsoft, Amazon, Google, Broadcom, Meta, Tesla, Eli Lilly, and Berkshire Hathaway (sourced
from Eikon)
⁹ The S&P 500 is an index of 500 stocks designed to reflect the risk/return characteristics of the large-cap US equity universe.
¹⁰ The S&P/TSX Composite Index is the benchmark Canadian index, representing roughly 70% of the total market capitalization on the Toronto Stock Exchange (TSX)
with about 250 companies included in it.
¹¹ The MSCI EAFE Index is a stock market index that is designed to measure the equity market performance of developed markets outside of the U.S. & Canada.
¹² The FTSE Canada Universe Bond Index is the broadest and most widely used measure of performance of marketable government and corporate bonds outstanding
in the Canadian market.
¹³ The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate
taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and
CMBS (agency and non-agency).
¹⁴ Vox Media, Prof G Markets Podcast, Bond investors are panicking- and they may be right, May 25, 2026, https://open.spotify.com/episode/5RtfP73cojl9emTKP3qv6a?si=gBoM3YSZSsuSKR-K6TofFg
¹⁵ Ibid.
¹⁶ Financial Times, Opinion, Business, Goodbye to cheap money, June 1, 2026, https://www.ft.com/content/2facf908-9265-47b5-9574-ee316ff3b8ee?syn-25a6b1a6=1
[Pay to read.]
¹⁷ Ibid.

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Published: June 10, 2026