5 June 2026
Weekly Market View
Resilient fundamentals meet investor froth
US forward earnings estimates have been upgraded across sectors in Q2, providing a strong fundamental backdrop to the equity rally.
However, proposed new US tariff threats, major IPOs and investor froth in pockets of the market add to Mideast tensions, clouding the near-term outlook.
Against this backdrop, we stay diversified as extremely stretched investor positioning in US equities raises the risk of a short-term pullback.
Besides the outcome of US-Iran talks, US payrolls and inflation data are next catalysts. Another month of strong payrolls and acceleration in inflation would likely shift the stance of more Fed policymakers from broadly neutral to hawkish.
The ECB is expected to deliver a 25bps “insurance” hike next week. However, weaker growth indicators since the start of the Middle East conflict argues against follow-up rate hikes.
Within tech, rotate from semiconductors to internet on stretched positioning
Rangebound EUR/USD: ECB to deliver one insurance hike, then pause
Accumulating gold on dips: continued central bank reserve diversification
Charts of the week: Strong earnings vs. stretched positioning
Earnings upgrades support the equity rally over the medium term, but stretched investor positioning raises near-term risk
US consensus 12m forward earnings estimates across sectors

US equity positioning and historical S&P500 index returns*

Source: Bloomberg, Standard Chartered, Vanda Research; *highlighted segment reflects current US combined equity market positioning
Editorial
Resilient fundamentals meet investor froth
Strategy summary: US forward earnings estimates have been upgraded across sectors in Q2, providing a strong fundamental backdrop to the equity rally. However, proposed new US tariff threats, major IPOs and investor froth in pockets of the market add to Mideast tensions, clouding the near-term outlook.
Against this backdrop, we stay diversified as extremely stretched investor positioning in US equities raises the risk of a pullback. Besides the outcome of US-Iran talks, US payrolls and inflation data are next catalysts. Another month of strong payrolls and acceleration in inflation would likely shift the stance of more Fed policymakers from broadly neutral to hawkish.
Avoiding concentration risks in equities and tech. Global equities scaled record highs this week, despite renewed Middle East tensions and US proposal to impose 10-12.5% tariffs against trade partners. The AI supercycle continues to drive risk appetite as the consensus lifts AI capex assumptions and AI-related price targets. Our AI capex upgrade in April was a measured 5-10ppts amid concerns including funding constraints – witness the latest surge in debt issuance and IPOs – and execution bottlenecks around power and infrastructure.
We remain long-term bullish on the AI supercycle but short-term cautious, given extremely stretched investor positioning, which raises the risk of a 5-10% pullback. We prefer the equal-weighted global equity index in the near-term and diversification in the tech sector from AI-enablers such as semiconductors and hardware to AI adopters, such as internet and software.
Trillion-dollar IPOs to strain near-term liquidity. Three major upcoming trillion-dollar IPOs – SpaceX, OpenAI, and Anthropic – are expected to reshape index weights and market liquidity. Index providers are fast-tracking inclusion rules. Near-term liquidity impact is estimated at USD 140-280bn. This argues for reducing concentration risk and bracing for volatility.The ECB expected to deliver a 25bps “insurance” hike next week. Euro area headline inflation rose to 3.2% in May, strengthening the case for a hike in June, but core inflation was
relatively subdued at 2.5%. Weaker growth – reflected in negative economic surprises readings, contracting PMIs and slump in consumer confidence and retail sales since the Middle East conflict started – argues against rapid follow-up rate hikes. A prolonged Strait of Hormuz closure could force further action though. Against this backdrop, EUR/USD is likely to trade within the 1.15-1.18 range, with volatility at its lowest since 2020.
The Fed’s Beige Book signalled slight-to-moderate growth across ten of twelve districts, with improving momentum despite the energy shock. Manufacturing strengthened in nine districts, boosted by defence and data centre demand. Consumer sentiment stayed mixed, maintaining the wide gap between low- and high-income households, with rising credit card use and weaker discretionary outlays. Labour markets remained in a “low-hiring, low-firing” mode, which was also reflected in the JOLTS job openings report. Prices rose moderate-to-strong, pressured by energy spillovers, compressing margins.
US payrolls, inflation data are next macro catalysts: Latest US activity data and subdued jobless claims suggest US payrolls for May are likely to post another month of solid gains (consensus: 88,000), potentially pushing the jobless rate down. However, beneath the job market’s resilience, real disposable incomes are falling and the savings rate has dropped below 3%, close to the lowest in recorded history, signalling stress among households amid rising energy costs. Given these conflicting pressures, we expect the Fed to stay on hold for now.
Avoid duration risk in bonds, stay with 5-7-year maturities. A solid US payrolls data, followed by any further acceleration in inflation (consensus for core CPI: 0.3% m/m) would strengthen the hawks in the Fed policymaking committee. US government bonds face tension between firm economic data and inflation and fiscal policy risks and crowded short positioning. We continue to prefer 5-7-year maturities in our bond allocations, while hedging inflation risks with inflation-protected bonds. We continue to see value in AUD bonds, given RBA rate hikes have been largely priced, and our constructive view on AUD.
— Rajat Bhattacharya
The weekly macro balance sheet
Our weekly net assessment: On balance, we see the past week’s data and policy as negative for risk assets in the near-term
(+) factors: Strong business confidence indicators in the US and China; US-Iran truce optimism
(-) factors: US-Iran, Lebanon ceasefires strained; hawkish central banks

US manufacturing sector business confidence and new orders continued to rise amid pick up in defence spending and AI-related investment
ISM manufacturing PMI and ISM new orders PMI

The acceleration in Euro area headline inflation raises the odds of a 25bps ECB rate hike next week, although still-subdued core inflation reduces the chance of follow-up rate hikes in H2
Euro area headline and core consumer inflation

China’s manufacturing sector business confidence rebounded amid strong external demand, although services sector confidence remains subdued
China private sector manufacturing and services PMIs

Top client questions
Amid tech sector equities’ continued outperformance, what fundamental drivers support a broadening trade across the rest of the market?
Our view: Maintain a diversified equity portfolio; rotate from semiconductors into Internet names within technology.
Rationale: We remain structurally positive on AI, but our near-term stance has turned more cautious on stretched positioning following the semiconductor sector rally. Combined US equity positioning is now at extreme levels (over +1.75 std deviations). Historically, this pattern suggests potential drawdowns of around 10% in the SPX Index over the next three months. Furthermore, consensus AI capex assumptions have grown progressively aggressive, leaving the trade vulnerable to any shift in narrative, particularly if geopolitical risks or AI funding concerns intensify.
Amid this, we advocate broader equity portfolio diversification. Within tech, we prefer reducing semiconductor exposure for Internet names, where risk-reward appears more attractive. In addition, our MSCI World Equal Weight opportunistic idea is supported by lower concentration risk ahead of US mid-term elections (historically a volatile period, with an average peak-to-trough drawdown of 16.3% since 1990) and more exposure to the physical economy and cyclical sectors (e.g., industrials, financials, materials), which should benefit in a soft-landing scenario underpinned by resilient macro data.
— Michelle Kam, CFA, Investment Strategist
The Global Equal Weight Index skews towards cyclicals, supported by resilient macro backdrop
Sector weights across MSCI World and Equal Weight indices

How should investors position themselves ahead of the mega tech initial public offerings (IPOs)?
Our view: Reduce US technology concentration risk and broaden exposure.
Rationale: The US equity market faces a wave of trillion-dollar listings that could become the next major catalyst for stocks, reinforcing confidence in AI as a durable, investable theme across the broader technology sector. However, index implications are likely to trigger near-term volatility. As exchanges fast-track inclusion rules, benchmark composition could shift meaningfully. Rotation effects are expected to intensify, with more investors trimming existing positions to allocate to new listings. Insiders will also likely reduce their positioning gradually post-listing as lock-up restrictions expire, adding another potential volatility catalyst.
The ongoing upward revisions to AI capex assumptions ahead of the mega IPOs also signal growing funding challenges. AI spending is increasingly reliant on debt or equity issuance, which is complex in a mixed macro environment. Our June 2026 AI Bubble Meter has also moderated from ‘better’ to ‘good’ risk-reward, implying a more limited upside of 0-5% over the next 3-6 months. We continue to favour US technology but prefer to dial down concentration risk.
— Jason Wong, Senior Equity Analyst
Our June 2026 AI Bubble Meter has moderated from ‘better’ to ‘good’ risk-reward
AI Bubble Meter for June 2026

Top client questions (cont’d)
Would strong US job openings data alter your outlook on the US 10-year government bond yield?
Our view: Stronger-than-expected US nonfarm payrolls would likely result in the US 10-year government bond yield retesting May’s 4.6-4.7% highs in the short term.
Rationale: US nonfarm payroll growth has been weak and volatile over the past year, with monthly gains averaging only around 22,000 – consistent with a stagnating, rather than expanding, labour market – with job gains in one month often reversed in the next.
Against this backdrop, a positive May payrolls print would mark a third consecutive month of gains, signalling a more hawkish tone for markets. However, the broader labour picture remains mixed. April job openings rose sharply to 7.62mn, well above expectations. The quits rate stayed low at 1.9%, suggesting workers remain reluctant to change jobs, which tempers the strength implied by the openings data. In addition, recent payroll gains lack breadth. April hiring was concentrated in transportation and utilities, while several major sectors shed jobs. Unless May hiring is broad-based, the policy signal for the Fed will remain limited. An in-line or softer print would keep yields within our near-term 4.25-4.5% range.
— Ray Heung, Senior Investment Strategist
Would accelerating EU inflation prints alter your view of one ‘insurance’ hike by the ECB before year-end 2026? What would be the implications for the Euro (EUR)?
Our view: Our view of one 25bps June ECB hike, followed by a pause, remains. EUR/USD likely to remain within 1.1510-1.1780.
Rationale: Euro area inflation accelerated further in May, with headline Harmonised Index of Consumer Prices (HICP) rising to 3.2% and core inflation at 2.5%. The broadening price pressures strengthen the case for a June ECB hike, but weaker growth signals and softer medium-term expectations argue against a rapid follow-up move. This is reflected in continued negative Economic Surprise Index readings, a contracting Purchasing Managers’ Index (PMI) and declining industrial production since the Middle East conflict began. The risk to this one-hike-and-pause stance is a prolonged Hormuz strait closure beyond our expected few more weeks, which could spike energy prices and force the inflation-targeting ECB’s hand.
EUR/USD is expected to remain within a narrow range. Nonetheless, any Euro strength is likely to be countered by persistent USD resilience. Recent US labour data has reinforced expectations of a Fed on hold. Since mid-May, EUR/USD has traded in a tight band, with FX volatility at its lowest since 2020. Near-term direction will hinge on nonfarm payrolls and next week’s consumer inflation data, and US-Iran developments. Technically, the pair remains rangebound with bearish bias below key moving averages.
— Ray Heung, Senior Investment Strategist
— Iris Yuen, Investment Strategist
A strong US jobs print and a break away from the ‘low-hiring, low-firing’ mode are conditions likely needed for the US 10-year government bond yield to move sustainably higher
US 10-year government bond yield

Euro area economic data began weakening shortly after the start of the Middle East conflict
Citi Economic Surprise Index – Euro area

EUR/USD has been hovering around its 50-day moving average (DMA), remaining rangebound
EUR/USD and technicals

Top client questions (cont’d)
How should investors read the ECB’s June 2026 report that gold has overtaken US government bonds as the world’s largest reserve asset?
Our view: Gold’s rise reflects continued demand for reserve diversification. We expect this structural bid to persist but view any near-term dips in gold towards USD 4,100-4,400/oz as accumulation opportunities.
Rationale: The ECB’s 2 June report marks a notable milestone: at market prices, gold has overtaken US Treasuries as the world’s largest reserve asset. We do not view this as a break in the global reserve order, but rather a reflection of the combined effect of higher gold prices and sustained central bank purchases over recent years. In our view, the USD remains core to the international reserve system.
That said, the broader trend in gold demand remains intact. Amid heightened geopolitical fragmentation, sanctions risks and concerns over the long-term US fiscal outlook, gold’s appeal as a reserve asset with no sovereign issuer is expected to remain strong. We believe gold’s share of global reserves will continue to rise gradually over time, reflecting ongoing reserve diversification rather than USD displacement.
Near-term, however, the path may be less linear. Gold is testing a critical technical level near USD 4,400/oz (200DMA), risking a breach and a deeper correction towards USD 4,100/oz. We would treat any pullback into this range as an accumulation opportunity.
— Anthony Naab, CFA, Investment Strategist
The rising gold price is lifting bullion’s share of global official reserves
Share of Euro, US Treasuries and gold in official reserves

Note: Year-end 2025 reserve holdings held constant; gold revalued at end-period LBMA PM Fix for each year shown
Market performance summary*

*Performance in USD terms unless otherwise stated, 2026 YTD performance from 31 December 2025 to 4 Jun 2026; 1-week period: 28 May 2026 to 4 Jun 2026
Our 12-month asset class views at a glance

Economic and market calendar

The S&P500 has next interim resistance at 7,726
Technical indicators for key markets as of 4 Jun close

Investor diversity has normalised across asset classes
Our proprietary market diversity indicators as of 4 Jun close


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As a Professional Client you will not be given the higher retail client protection and compensation rights and if you use your right to be classified as a Retail Client we will be unable to provide financial services and products to you as we do not hold the required license to undertake such activities. For Islamic transactions, we are acting under the supervision of our Shariah Supervisory Committee. Relevant information on our Shariah Supervisory Committee is currently available on the Standard Chartered Bank website in the Islamic banking section. For residents of the UAE – Standard Chartered UAE (“SC UAE”) is licensed by the Central Bank of the U.A.E. SC UAE is licensed by Securities and Commodities Authority to practice Promotion Activity. SC UAE does not provide financial analysis or consultation services in or into the UAE within the meaning of UAE Securities and Commodities Authority Decision No. 48/r of 2008 concerning financial consultation and financial analysis. Uganda: Our Investment products and services are distributed by Standard Chartered Bank Uganda Limited, which is licensed by the Capital Markets Authority as an investment adviser. United Kingdom: In the UK, Standard Chartered Bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. This communication has been approved by Standard Chartered Bank for the purposes of Section 21 (2) (b) of the United Kingdom’s Financial Services and Markets Act 2000 (“FSMA”) as amended in 2010 and 2012 only. Standard Chartered Bank (trading as Standard Chartered Private Bank) is also an authorised financial services provider (license number 45747) in terms of the South African Financial Advisory and Intermediary Services Act, 2002. The Materials have not been prepared in accordance with UK legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Vietnam: This document is being distributed in Vietnam by, and is attributable to, Standard Chartered Bank (Vietnam) Limited which is mainly regulated by State Bank of Vietnam (SBV). Recipients in Vietnam should contact Standard Chartered Bank (Vietnam) Limited for any queries regarding any content of this document. Zambia: This document is distributed by Standard Chartered Bank Zambia Plc, a company incorporated in Zambia and registered as a commercial bank and licensed by the Bank of Zambia under the Banking and Financial Services Act Chapter 387 of the Laws of Zambia.