Opinion Flash | May 2026

The Economy

Watching Geopolitics Closely

• The conflict between the U.S./Israel and Iran has introduced an energy supply shock that may alter global economic prospects. However, economic growth in Q1 2026 has posted robust figures in the U.S. (+0.5%) and also in Europe (+0.1%).
• The impact of energy prices is more significant in Europe and, above all, in Asia, where the supply of Iranian oil is considerable.
• The increase in oil prices, as well as natural gas, is driving inflation spikes, the persistence of which will depend on how the crisis in the Middle East evolves, which remains unclear at this stage.
• Although the U.S. is energy self-sufficient, rising prices are already impacting recorded inflation data (+3.3%) and, more importantly, expectations, as oil prices affect the costs of many industrial and agricultural products.
• In this regard, uncertainty surrounding the leadership of the Federal Reserve adds a period of questions regarding the direction of monetary policy in the country, given past government interference under President Trump.
• China remains in an observational role, although the cooling of global trade is weighing on its exports.

Markets

Equities Recover, but Bonds Do Not

• The most notable development in April has been the recovery of U.S. indices (S&P 500 +10.5% during the month), once again led by technology, as well as smaller-cap companies (Mid / Small Caps), long neglected by investors.
• This trend has also been followed—though less strongly—by European stock markets, which belong to an economic area more vulnerable to developments in the war.
• Equity indices in the U.S., with the S&P 500 (+5.5% YTD), and in Europe, with the MSCI Europe (+4.2% YTD), reflect optimism regarding expected earnings growth: U.S. (+13%, FactSet consensus) and Europe (+8%, IBES/J.P. Morgan consensus).
• Structural concerns about rising public debt persist, and the prolongation of the war in Iran adds uncertainty to sovereign debt markets. Yields on longer maturities (10 years) are now significantly above levels seen at the end of January (4.4% U.S. Treasury 10Y).
• The dollar-euro exchange rate is moving within an uncertain environment, driven by news related to the war in Iran—reflecting the unpredictability of the Trump administration.
• Gold is trading at $4,600 per ounce and oil exceeds $100 per barrel.

Investment Policy

The Key Concept: Diversification

• In recent months, we have introduced significant changes in managed portfolios, guided by geographic and sector diversification criteria.
• The new allocation aims to navigate with lower volatility in an environment of high uncertainty across multiple fronts: geopolitical, military, and technological—not to mention the elevated concentration risk in major indices.
• Equity portfolios continue to focus on high-quality companies, with recurring cash generation and limited exposure to energy costs.
• At the same time, we have taken advantage of the extreme undervaluation of small- and mid-cap companies (Mid / Small Caps), which reduces price risks in a potential broad market correction scenario.
• Undervaluation also affects many other high-quality companies, where the decline in share prices appears unjustified, as it does not reflect their long-term valuation. We have taken advantage of these irrational movements to invest in them, some of which have been long-standing targets.
• So far, earnings per share (EPS) reports from companies in our equity portfolios continue to inspire confidence. A visual presentation of some of them is included in the appendix.
• In fixed income, we continue to favor intermediate durations (3–5 years), maintaining necessary caution in longer maturities while political and monetary uncertainty persists.
• Gold, despite its correction from highs, maintains its structural role in the current environment of institutional, political, and economic uncertainty.

Appendix

Corporate Earnings and Market Reactions Q1 2026

Note: Companies listed in certain European markets only report revenues and not earnings per share (EPS).

LEGAL CONSIDERATIONS

1)    This information is intended for advertising and informational purposes only. It does not constitute and should not be considered investment advice or legal opinion, nor is it intended to replace the necessary advice in these matters or constitute an offer to sell or a solicitation of an offer to buy.

2)    All opinions and estimates provided are based on sources considered reliable. However, EDM Gestión, SAU, SGIIC cannot guarantee their accuracy or completeness and assumes no responsibility for any direct or indirect loss that may result from the use of the information provided in this document.

3)    EDM Gestión, SAU, SGIIC warns that past performance is not a reliable indicator of future results.

4)    EDM Gestión, SAU SGIIC is a Spanish public limited company registered in the Special Register of Management Companies of Collective Investment Institutions of the CNMV under number 49 and in the Madrid Commercial Registry, volume 36,739, folio 52, sheet M-658.326, with tax ID: A-58.217.175. Its activities include, among others, the representation, management, and administration of Funds and Investment Companies domiciled and regulated in Spain, as well as discretionary portfolio management.