May 2026 QiM Fact(or) Sheet
MSCI All Country World: Return contribution by Sector, May 2026
Source: SEI QiM, using data from MSCI and FactSet. Data as of May 31, 2026. Past performance is not an indication of future performance.
AI euphoria outweighs all worries
- Equity markets focused on a strong earnings season, largely overlooking concerns around persistent inflation and delayed monetary easing.
- AI-related infrastructure spending remained the dominant theme, with semiconductor companies continuing to drive market leadership.
- Higher oil prices reignited inflation concerns, contributing to a rise in bond yields.
- Robust earnings - particularly in Technology and Semiconductors - reinforced bullish sentiment.
- Sectors: Information Technology, the epicentre of the AI trade, significantly outperformed, beating all other sectors by c.15%. Energy gave back some earlier gains amid US–Iran de-escalation. Defensive sectors lagged in the risk-on environment.
- Countries: Taiwan and South Korea led performance, driven primarily by TSMC, SK Hynix, and Samsung. China underperformed as domestic growth remained uneven, while the UK lagged given its energy- and staples-heavy, and AI-light, market composition.
- Market breadth: leadership remains narrow and driven by a AI-linked theme.
- Factor leadership: Momentum outperformed as the AI rally extended. Improved earnings expectations and easing geopolitical concerns further supported rotation away from defensives, weighing on Low Volatility.
Factor families
Exhibit 1: May 2026 Investable factor proxies versus respective capitalization weighted indexes.
Source: SEI, based on data from MSCI, Axioma and FactSet. Data as of May 31, 2026. Returns quoted in USD. Metrics are composites of underlying ratios that SEI has determined to be appropriate measures of each factor. Data refers to past performance of top-tercile factor-proxy portfolios vs. the capitalisation-weighted benchmark and rebalanced quarterly. Returns are for illustrative purposes only and do not represent actual fund performance. Excess returns measured against (in descending order): MSCI ACWI Large Cap, MSCI USA Large Cap, MSCI EAFE Large Cap, MSCI EM Large Cap, MSCI USA Small Cap, MSCI EAFE Small Cap Indexes. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance is no guarantee of future results.
Outlook
Emphasizing Value family of factors based on:
- Wide valuation spread.
- Higher long-term interest rates (vs long-term average).
Over the quarter we have:
- Trimmed overweight to value.
Exhibit 2: May 2026 Active factor family positioning.
Source: SEI, the axis displays z-score exposure versus benchmark, as of May 31, 2026. Long term average exposure from January 31, 2003, to current. Benchmark: MSCI World Index.
Z-scores tell us how exposed a portfolio is to a factor, compared to a benchmark, based on what's normal for that factor. It is a common "currency" of portfolio exposures, making unrelated raw metrics like P/E or ROE comparable to each other.
A value of zero means the portfolio is neutral to the benchmark for that factor.
Higher values mean the portfolio has more exposure to that factor than the benchmark.
Economic indicators
US.: Inflation pressures show through data
Jobs: Employment growth slows but conditions remain stable
- Nonfarm Payrolls: at 115K, below expectations and prior month. (185)
- Unemployment Rate: 4.3%, in line with expectations and prior month.
- Initial Jobless Claims: 208.7K monthly average, broadly in line with previous monthly average of 207.5K.
Inflation: Core inflation reaccelerates
- Core CPI: 2.8% (YoY), above expectations and prior month. (2.6%)
- Core PCE Deflator: 3.8% (YoY), in line with expectations but above prior month. (3.5%)
- Hourly Earnings (preliminary): 3.6% (YoY), below expectations but above prior month. (3.4%)
Consumer: Spending moderates as sentiment remains weak
- Retail Sales: 0.5% (MoM, SA), in line with expectations and below prior month. (1.6%)
- Michigan Sentiment (preliminary): 48.2, below expectations and prior month. (49.8%)
- Consumer Confidence: 93.1, marginally above expectations and in line with prior month.
Manufacturing and Services: Economic activity remains expansionary
- Markit PMI Manufacturing SA (preliminary): 55.3, above expectations and prior month.
- Markit PMI Services, SA (preliminary): 50.9, marginally below expectations and prior month.
- Empire State Index, SA: 19.6, above expectations and prior month.
The rest of the world
China: Growth steadies, but remains uneven
- Exports: 14.1% (YoY), above expectations and prior month. (2.5%)
- PMI manufacturing: 52.2, above expectations and prior month. (50.8)
- PMI services: 52.6, in line with expectations and prior month.
- CPI: 1.2% (YoY), above expectations and prior month. (1.0%)
Japan: Activity remains resilient as inflation moderates
- CPI Core National: 1.4% (YoY), below prior month. (1.8%)
- Manufacturing PMI (preliminary): 54.5, in line with prior month.
- Services PMI: 55.1, in line with prior month.
Germany: Growth shows tentative stabilisation
- CPI EU Harmonized: 2.9% (YoY), in line with expectations and prior month.
- Markit Manufacturing PMI (preliminary): 49.9, marginally below expectations and above prior month.
- Markit Services PMI (preliminary): 47.8, improved modestly but remained contractionary.
U.K.: Inflation moderates as activity weakens
- CPI Core: 2.5% (YoY), below expectations and prior month. (3.1%)
- Services inflation dropped from prior 4.2%to 3.2% suggesting the underlying domestic inflation easing materially. however, goods inflation and producer prices reaccelerated, highlighting continuing import-cost pressures.
- Markit Manufacturing PMI (preliminary): 53.7, in line with expectations and prior month.
- Markit Services PMI (preliminary): 47.9, below expectations and prior month. (52.7)
Earnings Season Update
- Out of 97% of S&P 500 that reported, 85% beat EPS and 81% beat Revenue (above 10Y average).
- Reported growth remained strong: blended EPS 28.6% YoY; driven by tech.
- Positive EPS surprise increasing of 1.3% vs to previous 1.0%
- Estimated Growth for CY 2026 jumped from 13% as of prior quarter to 21%.
- Energy was the standout mover from +5% to +63%
- Tech also moved from 23% to 43%
- Semis (from 43% to 82%)
- Tech Hardware (from 6% to 25%) drove most of the revisions
- IT Services remained flat at 6%, and Software moved only from 14% to 17%.
- Defensive sectors (Consumer Staples and Health Care) remained low and were revised down.
- Record Capex Growth
Source: FactSet. Past performance is not a reliable indicator of future results
Sector and country returns
Exhibit 3: MSCI All Country World Index
Source: SEI, MSCI. As of May 31, 2026. Past performance is not a reliable indicator of future results.
Glossary and index definitions
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