A month ago, markets were leaning on hopes that the US-Iran conflict would ease. Those hopes have not materialised. The war continues with little sign of de-escalation, and yet global equities have stayed surprisingly composed. Bond markets have been less forgiving: yields have pushed well above pre-war levels as fiscal worries override the old safe-haven instinct.

If April was about markets steadying, May is about the world adjusting to a harder reality, one where inflation, not growth, sets the agenda.

This month's Investing Pantheon steps back from the daily noise to examine five forces we believe will shape the months ahead:

Global capital is rotating between themes. Infrastructure and AI continued to draw the strongest and most consistent inflows. The notable shift was defense, which led inflows for twelve months but saw its largest outflow yet in May, a sign that investors are starting to question how long stretched government budgets can keep funding it. Clean energy, meanwhile, kept attracting steady interest.

Inflation has taken the wheel from growth. Elevated oil prices are tilting the global economy toward a higher-inflation, slower-growth mix. In a US 105/bbl oil scenario, headline inflation could climb toward 6% while growth slows to around 2.5%. The consequence is already visible at the US Fed: markets that once expected two rate cuts in 2026 now price none, and Kevin Warsh has stepped in as Chair into an environment where even hikes are back on the table.

US real estate has split into two stories. Higher-for-longer rates have trapped housing in an affordability squeeze, where elevated mortgage rates keep buyers renting and rents sticky. Data centres and digital infrastructure sit on the other side of that divide, insulated by structural AI-driven demand rather than the rate cycle, a contrast captured by digital-infra exposure far outpacing homebuilders this year.

Industrial metals are catching an inflation tailwind. As the bond market prices in rising inflation expectations, industrial metals like copper and aluminium are moving in step. If elevated oil prices persist alongside a softer dollar, that momentum could continue, though the relationship now sits near levels that have historically warranted caution.

Space is emerging as a long-term theme. What was once a government-funded strategic domain is turning into a commercial economy. Falling launch costs, accelerating private capital, and rising sovereign defense spending are opening up new frontiers, from satellite connectivity and Earth observation to orbital data centres and in-space manufacturing.

Across cycles like this one, thoughtful asset allocation remains the most reliable way to future-proof a portfolio.

The full May edition of Investing Pantheon walks through the data, charts, and reasoning behind each view.

Read the May Pantheon: Here