Arta Market Brief – May 2026: Earnings Resilience Amid Policy Uncertainty

Written by Brandon Ho, CFA, Head of Investment Advisory SG Commentary as of 5 May 2026

April’s market environment may feel familiar to investors. While headlines continued to shift between escalation and tentative de-escalation in the Middle East, the underlying drivers of markets have been more consistent. Corporate earnings, particularly in the US, have remained resilient, inflation has stayed above central bank targets, and policymakers have largely maintained a cautious stance. This combination has meant that, despite periods of volatility, the broader investment backdrop has not materially changed over recent months.

1. Macro Backdrop

April unfolded against a backdrop of geopolitical uncertainty and evolving monetary policy expectations.

The Middle East conflict remained central to the macro narrative. Early in the month, a temporary ceasefire led to a sharp pullback in oil prices¹ and a rebound in risk assets. However, negotiations remained fragile, with intermittent escalations keeping energy markets sensitive to supply disruptions. This resulted in oil prices staying elevated relative to pre-conflict levels, contributing to ongoing inflation concerns.

In the United States, economic data continued to point to resilience, although with signs of moderation. Labour market conditions appeared stable but gradually cooling², while consumer activity held up despite higher energy costs. At the same time, inflation remained above central bank targets³, reinforced by supply-side pressures including energy and tariffs.

Monetary policy reflected this balance. The Federal Reserve held rates steady⁴, with internal divergence highlighting the challenge of navigating inflation risks alongside growth considerations. Other major central banks also leaned towards a cautious pause, although some may face pressure to tighten further if inflation persists.

2. Market Developments: Volatility Meets Recovery

Against this macro backdrop, markets moved distinctly over the course of April, with an initial risk-off reaction followed by a rapid recovery as earnings and sentiment improved.

Equities initially reacted negatively to the escalation in geopolitical tensions and rising oil prices. However, as ceasefire discussions emerged and earnings season progressed, markets rebounded strongly. By the end of the month, major equity indices had largely recovered earlier losses, with US equities indices reaching new all time highs⁵.

A key driver of this recovery was corporate earnings. Early results from the first quarter showed a high proportion of companies exceeding expectations⁶, particularly within the technology sector. Earnings revisions have also trended upward, which is somewhat atypical during reporting seasons and suggests underlying business conditions remain supportive.

At a sector level, performance remained uneven. Semiconductor and infrastructure-related companies continued to benefit from sustained artificial intelligence related investment, while some segments of the software space experienced valuation adjustments as investors reassessed growth expectations.

In fixed income, yields moved in response to shifting inflation expectations⁷ and policy outlooks. While bonds provided some diversification during periods of risk aversion, persistent inflation pressures have limited the extent of yield declines.

3. Asset Class Perspectives

Equities

Corporate earnings remain a key anchor for equity markets. The technology sector continues to lead earnings growth⁸, supported by strong capital expenditure linked to artificial intelligence and early signs of monetisation. That said, market leadership has been relatively concentrated, and there are emerging signs of a gradual broadening in participation across sectors.

Fixed Income

Yields remain elevated compared to the past decade, offering more meaningful income opportunities. However, the path forward is closely tied to inflation dynamics and central bank policy. A prolonged period of higher inflation could keep yields higher for longer, while any signs of economic slowdown may support bond prices.

Commodities and Real Assets

Energy markets remain sensitive to geopolitical developments, with supply disruptions continuing to influence price movements. Gold, meanwhile, has continued to attract attention as a potential diversifier during periods of uncertainty, although its performance has also reflected changing expectations around interest rates and inflation⁹.

4. A Few Things To Watch

• Geopolitical developments: The trajectory of the Middle East conflict and the stability of energy supply routes remain central to market sentiment.

• Inflation persistence: Ongoing supply-side pressures could keep inflation elevated, influencing both policy and asset valuations.

• Policy uncertainty: Diverging central bank responses and evolving fiscal policies may contribute to volatility across asset classes.

• Earnings sustainability: While current earnings trends are supportive, markets may increasingly scrutinise the durability of growth, particularly in AI-related sectors.

5. Behavioural Perspective: Loss Aversion in Volatile Markets

April’s market swings illustrate the influence of loss aversion, where the discomfort of short-term losses can outweigh the potential benefits of staying invested.

Periods of geopolitical stress often lead to sharp but short-lived market reactions. Historically, some of the strongest market rebounds have occurred during times of heightened uncertainty. This creates a challenging environment where reacting to near-term declines may risk missing subsequent recoveries.

Maintaining a disciplined approach, anchored in long-term objectives rather than short-term headlines, may help mitigate the impact of emotionally driven decisions during such periods.

6. Looking Ahead

Looking ahead, this brings us back to a broader theme seen in recent months, where underlying fundamentals have remained more stable than headline volatility might suggest. Corporate earnings, particularly in the US, continue to provide a degree of support for markets, even as uncertainty around inflation and policy direction may contribute to intermittent swings in sentiment.

In this environment, short-term market movements may at times appear disconnected from underlying fundamentals. Such conditions can be challenging, particularly when markets react sharply to evolving headlines. Maintaining a longer-term perspective and a disciplined approach could help investors navigate these periods more effectively.

A balanced perspective remains important as well. While there are areas of resilience, risks have not fully receded, and maintaining diversification across asset classes and regions continues to be relevant in navigating this environment.

¹ Bloomberg; US Energy Information Administration (EIA).

² US Bureau of Labor Statistics.

³ US Bureau of Labor Statistics; Federal Reserve Bank of St. Louis (FRED).

⁴ Federal Reserve; CME FedWatch Tool.

⁵ Bloomberg; S&P Dow Jones Indices.

⁶ FactSet data.

⁷ Federal Reserve Bank of St. Louis (FRED); Bloomberg.

⁸ Company earnings reports; Bloomberg Intelligence.

⁹ World Gold Council; Bloomberg.