Equity markets rebounded sharply in May, buoyed by stronger economic data and an easing of trade tensions. Tariffs between China and the USA were reduced from 125% to 10% for American goods imported into China and from 30% for Chinese goods imported into the USA, but the climate remains volatile. Relative macro-economic stability in the eurozone, combined with a cautious monetary policy, makes European markets a good alternative to stressed US markets.

The Stoxx 600 rose by 4.02%, buoyed by a season of better-than-expected quarterly results, with all sector indices ending the month up. Cyclical sectors in particular lifted the index, with Travel & Leisure (+10.76%), Industrials (+8.6%) and Banks (+8.17%). Some stocks did particularly well, notably Renk in the defense sector, buoyed by strong sales momentum and a significant improvement in profitability.

On the other side of the Atlantic, the Nasdaq rose by 9.04% and the S&P 500 by 6.15%, good performances driven by the improvement in tariff discussions between China and the USA, the positive surprise of the US CPI, which held steady at 2.8%, and positive first-quarter publications. Indeed, in the S&P500, nearly 80% of US companies beat earnings expectations by an average of 8%.

Overall, the environment remains volatile, but the return of a "soft landing" scenario is supporting risky assets. We have kept our equity exposure* stable compared to the end of April, at 67%.

Among our positive contributors are two US stocks, Meta and Microsoft. Meta reported better-than-expected first-quarter results, with organic revenue growth of 19% above its guidance of 11-18%. Against all expectations, the group raised its annual capex guidance from $60-65bn to $64-72bn, reflecting additional investments in datacenters to support their efforts in artificial intelligence, as well as higher infrastructure hardware costs. Renk, a European stock in the defense sector, posted an impressive monthly increase (+48.2%), supported in part by solid quarterly results, notably on the order book, which came in at €549 million, i.e. a better-than-expected book-to-bill of 2x. The Group also made a good start to the year in terms of profitability, with adjusted EBIT 4% above expectations at 35.4M€. The month ended with equally solid results from Nvidia, the fourth-largest contributor to performance, which continues to gain momentum despite export restrictions to China. Lastly, Lottomatica, which we strengthened as we went along, notably through an investment at a 4.5% discount, also made a positive contribution to performance. Results were solid, with management highlighting the sector's resilience, as well as market gains that are potentially not counted in the group's annual guidance.

Our three main detractors are Sanofi (mixed clinical trial results for its experimental drug Itepekimab), Alibaba and CRH. We have also removed Alstom from the portfolio due to a disappointing publication, particularly in terms of its lower-than-expected FCF 2025/26.

On the bond front, we increased our exposure to IG corporate bonds with Nomura 3.45% 2030 (A-) and Aeroporti Di Roma 3.625% 2032 (BBB-).

*Equity exposure: the level of exposure is rebased in relation to total portfolio exposure.