May 2026 Market Commentary: Markets Remain Strong, AI IPOs set to take the stage

Ethan Pollard

Markets picked up where they left off in April to post another strong monthly return in May. Watch our latest market update for more information.

 

 

We saw no changes in our data-driven Three Dials allocation framework during the month of May, as we summarize below.

 

TECHNICAL

The S&P has not seen a weekly decline since the March lows of the Iran conflict, its longest weekly winning streak since December of 2023. Chip makers continue to power this current rally, with the S&P Global Semiconductor Index surging +28% in May and nearly doubling since the start of the year. With that, we continue to leave our Technical Dial in a Positive position.  

 

ECONOMIC

New home sales for April fell well short of expectations, down -11% from the same month last year due to higher mortgage rates and persistent inflation. Meanwhile, Q1 GDP was revised downward by -0.4% as consumption came in even weaker than initial estimates. Given the continued level of economic uncertainty, our Economic Dial remains in a Negative position. 

 

VALUATION

SpaceX looks set to become the latest company to test the limits of this bull market, with investors ready to value the as-yet-unprofitable company at close to $2 trillion, or nearly 100x trailing revenue. With such extreme optimism rampant, we continue to take a cautious approach and leave our Valuation Dial in a Negative position. 

 

MARKET COMMENTARY

Markets picked up where they left off in April to post another strong monthly return in May. The S&P 500 added another +5% in May to post its best two-month return since the post-COVID snapback in 2020, with the blue-chip index now up +11% year-to-date. Smaller company stocks also posted another strong return on the month, advancing +4% in May for a +18% gain so far this year. International stocks added another +5% in May (+13% year-to-date), with Taiwanese and Korean chip stocks continuing to lead the way. Within fixed income, bond prices remained somewhat muted, as the 30-year Treasury yield touched 5% for the first time in a year before coming back down as inflation fears moderated toward month-end. On balance, the Bloomberg Aggregate Bond Index ended the month up +0.3% for a +0.4% full-year return. The Bloomberg Commodity Index fell -4% (+25% YTD), as WTI oil prices fell back below $100 while gold prices also fell on the month.