June 2026
US Economy: Cooling, Not Cracking.
The U.S. economy continued to expand in May, though at a moderating pace, supported by steady job growth and a resilient but softening consumer. Nonfarm payrolls rose by 115,000 in April while unemployment held at 4.3%. Inflation reaccelerated, with CPI up 0.6% and producer prices rising 1.4%, driven largely by energy. While retail spending increased 0.5% MoM, modest wage growth of 0.2% lagged inflation and borrowing costs remained elevated, with 30-year mortgage rates near 6.5%.
US Stocks: Earn, Baby. Earn.
U.S. equities moved higher in May, driven by strong corporate earnings pushing the S&P up over 11% YTD. Large-cap technology and semiconductor companies led the rally, with the technology sector up 16% as investors gained confidence that heavy AI-related spending is translating into revenue and profit growth. Performance across the broader market remained narrow, however, with mega-cap names accounting for a disproportionate share of returns, as the next-closest sector, health care, rose just 3%.
Foreign Stocks: Tech Demand Lifts Global Markets.
Non-U.S. equities rose supported by improving sentiment and easing geopolitical tensions. Developed markets (+3.1%) posted solid gains, though they lagged the U.S. amid weaker earnings. Emerging markets (+9.7%) outperformed, driven by strong demand across global technology supply chains. Both developed markets and particularly emerging markets have been meaningful contributors to portfolios so far this year, up over 9% and 25% respectively. Regional performance was mixed, with South Korea (+27.1%) and Taiwan (+14.2%) benefiting from semiconductor strength, while China (-4.5%) and Brazil (-8.9%) declined on trade pressures and weaker exports.
Fixed Income: Higher For Longer Reemerges.
U.S. fixed income markets faced a more volatile backdrop in May as renewed inflation pressures pushed Treasury yields higher and reinforced expectations for a longer period of restrictive policy. Mid-month, yields rose sharply on stronger inflation data before partially retreating as investors clinged to the belief of geopolitical tensions easing. The yield curve flattened modestly, reflecting continued uncertainty around growth and the path of Fed policy. Despite this volatility, credit markets remained priced to perfection, with both investment-grade and high-yield spreads at historically tight levels.
Real Assets: Oil Swings Reshape Outlook.
Real assets delivered more muted performance in May following their strong showing in March and April while still posting a 9.1% return so far this year. As the perception of geopolitical tensions easing took hold and oil prices pulled back from recent highs, the urgency around inflation hedging diminished. Broader commodity markets still posted gains, but at a slower pace, reflecting a moderation in inflation expectations and, surprisingly, not considering supply disruption due the continued blockage of the Strait of Hormuz. Overall, real assets played a less dominant role in portfolios, as market leadership shifted back toward equities and growth-oriented sectors.
Alternatives: Generally Supportive.
Steady economic data, easing recession concerns, and continued strength in AI- and technology-linked equities supported equity hedge (+2.9%) strategies, particularly those positioned toward growth-oriented sectors. Private credit continued to benefit from elevated base rates and relatively resilient corporate fundamentals, supporting attractive income generation, though investor attention remained focused on fundraising dynamics and liquidity structures in the semi-liquid space, alongside ongoing scrutiny around valuation transparency in parts of the market. Private equity valuations meanwhile were modestly supported by stronger public market comparables, while deal activity showed signs of stabilization but remained selective.
Equities Total Return
| MAY | YTD | 1 YR | |
|---|---|---|---|
| U.S. Large Cap | 5.3% | 11.2% | 29.7% |
| U.S. Small Cap | 4.4% | 18.3% | 43.2% |
| U.S. Growth | 7.2% | 8.8% | 29.1% |
| U.S. Value | 2.9% | 13.9% | 29.1% |
| Int’l Developed | 3.1% | 9.4% | 22.8% |
| Emerging Markets | 9.7% | 25.6% | 54.3% |
Fixed Income Total Return
| MAY | YTD | 1 YR | |
|---|---|---|---|
| Taxable | |||
| U.S. Agg. Bond | 0.3% | 0.4% | 5.1% |
| TIPS | 0.2% | 1.6% | 4.9% |
| U.S. High Yield | 0.5% | 1.6% | 7.4% |
| Int’l Developed | 0.7% | (0.4%) | (1.0%) |
| Emerging Markets | 0.3% | 0.7% | 2.2% |
| Tax-Exempt | |||
| Intermediate Munis | 0.2% | 0.6% | 4.6% |
| Munis Broad Mkt | 0.4% | 1.3% | 6.8% |
Non-Traditional Assets Total Return
| MAY | YTD | 1 YR | |
|---|---|---|---|
| Commodities | (3.6%) | 25.0% | 40.5% |
| REITs | 0.1% | 13.2% | 13.6% |
| Infrastructure | (2.4%) | 8.6% | 17.6% |
| Hedge Funds | |||
| Absolute Return | 0.2% | 0.5% | 3.9% |
| Overall HF Market | 1.6% | 4.1% | 10.1% |
| Managed Futures | 0.3% | 10.6% | 20.6% |
Economic Indicators
| MAY-26 | NOV-25 | MAY-25 | |
|---|---|---|---|
| Equity Volatility | 15.3 | 16.4 | 18.6 |
| Implied Inflation | 2.4% | 2.2% | 2.3% |
| Gold Spot $/OZ | $4540.3 | $4239.4 | $3289.3 |
| Oil ($/BBL) | $92.1 | $63.2 | $64.2 |
| U.S. Dollar Index | 119.3 | 121.4 | 122.3 |
Our Take
May was a month where strong market performance stood in contrast to a more complicated economic backdrop. Investor confidence was supported by better-than-expected corporate earnings, particularly in semiconductors and other AI-related areas, reinforcing the idea that businesses are continuing to grow despite a higher interest rate environment. As a result, market attention shifted away from macro and geopolitical concerns and back toward company fundamentals.
A key driver of this strength was artificial intelligence. Companies continued to invest heavily in data centers, semiconductors, and supporting infrastructure, while investors began to see some evidence that this spending is translating into real business outcomes for the traditional economy but mostly for the infrastructure suppliers. Each member of the Magnificent 7, aside from Tesla, reported broadly positive earnings. What had previously felt like a future growth driver is increasingly being recognized as a present one, supporting both revenues and margins across narrow parts of the market.
Under the surface, however, inflation remains the key tension. Recent data showed a renewed pickup in price pressures, with consumer prices rising and producer prices posting one of their largest gains in several years. Much of this pressure continues to be driven by energy and supply-related factors, highlighting the role of geopolitics in shaping today’s inflation environment. Even as oil prices pulled back from recent highs, elevated costs related to many of the other inputs (whose supply had been disrupted due to the war) continue to filter through to the broader economy. This leaves new Fed Chair Kevin Warsh with a difficult balance between substantial demand in the AI-related economy; slowing demand from most consumers other than the top 10%, nominal wage growth below the Fed funds rate (a yellow flag for consumption), resilient markets creating a wealth effect, and persistent inflation.
This leaves markets in a somewhat unusual position. Currently, economic growth appears to be intact, corporate earnings are strong, and financial conditions have loosened alongside rising equity prices. Yet inflation is still above target, central banks are signaling caution and the Strait still isn’t open. Rather than a clear path toward rate cuts, markets are increasingly pricing in the possibility that tightening could be required if inflation proves persistent. All told, May reflects a market being pulled in two directions: strong earnings and AI-driven growth on one hand, and unresolved inflation, supply disruption and policy uncertainty on the other.
From a portfolio perspective, this is an environment that rewards discipline. Strong markets can make it tempting to chase recent winners, particularly in areas tied to AI and growth, but the broader macro backdrop argues for balance. Trimming winners (i.e. rebalancing), diversifying across asset classes exposures, including those that may respond differently to inflation, like real assets, and periods of equity volatility, like hedge funds, are still key to navigating this environment. It is also worth reinforcing the importance of global diversification, as the U.S. relationship with its allies and trading partners continues to be re-engineered.
The regime change we identified nearly five years ago, the shift toward a more multipolar world, continues to unfold. We remain focused on positioning portfolios to capture the opportunities created by these longer-term trends while thoughtfully managing the risks that come with a more volatile economic and geopolitical backdrop.
As your advisor, our role extends beyond portfolio construction. We know you rely on us to stay disciplined and unemotional, especially in an environment where headlines and daily commentary can move markets in meaningful ways. Helping you interpret fast-changing developments and guiding decisions with a steady hand, while not easily quantifiable, is critical to avoiding reactive choices that can permanently impair capital.
