May Market Recap
Rarely has the stock market demonstrated such a wide gap between the winners and losers as what we saw in May.
The S&P 500 gained 5.15% last month, building on the positive momentum that began with a US-Iran ceasefire in early April. But the majority of individual stocks actually finished negative. For most of the month, the S&P’s market breadth was heavily biased to the downside, meaning more stocks going down than up.
Eight of the 11 sectors in the S&P 500 were lower in May. Of the three that moved higher, Health Care (+2.3%) and Consumer Discretionary (+2.6%) delivered only modest returns. Technology stocks (+15.9%), however, were enough of an outlier to drag the major benchmarks to record highs.
Energy (-6.1%) and Utilities (-5.5%) were the biggest laggards.
Benchmark Returns: May 2026 | YTD 2026
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Dow Jones
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S&P 500
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NASDAQ
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+2.78% | +6.18%
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+5.15% | +10.73%
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+8.36% | +16.05%
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|---|
In many ways, the disconnect between benchmark performance and the return of the “average stock” is reflective of the current gap between the US stock market and the US economy. The geopolitical outlook didn’t become any clearer in May. The ceasefire in Iran has been extended several times, but no formal deal has been reached to end the war.
Oil shortages caused by a mostly-closed Strait of Hormuz have led global economic forecasts to darken. At the World Economic Forum in May, a resounding 89% of chief economists predicted global growth would weaken over the coming 12 months. 20% of those projected growth would weaken “significantly.”
Inflation has re-emerged as a problematic trend. Two months ago, most prognosticators expected annual inflation would steadily decrease toward the Federal Reserve’s long-term target (2%). The most recent projections now show we are moving in the opposite direction. The latest Consumer Price Index (CPI) revealed 3.8% annual inflation (up from 3.3% a month ago).
Gasoline prices remain nearly 50% higher than they were before the war began. The national average price for unleaded gas sits at $4.32 per gallon (compared to $4.39 a month earlier). Consumer confidence readings also slipped in May as many Americans deal with an affordability crisis.
The stock market, meanwhile, has shown incredible resilience. The S&P 500, Dow Jones Industrial Average, and NASDAQ all ended May at or near all-time highs. And the vast outperformance of technology stocks is a sign that much of the optimism is being pinned on expected productivity gains made possible by A.I.
Corporate earnings continue to do their part to stoke that optimism. With 97% of companies having reported for Q1, the blended year-over-year earnings growth for S&P 500 companies is a staggering 28.6%. That’s the highest annual earnings growth in more than four years (Q4 2021).
For the second consecutive month, Emerging Market equities outperformed. The MSCI Emerging Markets index rose 7.2% in May. Non-US Developed Markets returned 2.4%. Small-cap stocks also performed well. The Russell 2000 increased 4.3%.
Kevin Warsh officially became new Chair of the Federal Reserve, succeeding Jerome Powell on May 22. He was officially confirmed by the US Senate on May 13. The first Fed meeting with Warsh as chair will occur on June 17-18.
Although consensus expectations call for few changes to Fed policy between now and year-end, bond markets will be paying close attention to Warsh. Bonds experienced a bout of volatility in May. Ten-year US Treasury yields ended the month at 4.45%, but climbed to their highest point of the year (4.69%) mid-month.
Ben Marks
Chief Investment Officer
Brett Angel
Senior Wealth Advisor
Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.
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Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets. No strategy assures success or protects against loss. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Past performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price to-book ratios and higher forecasted growth values.
Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
MSCI EAFE Index consists of the following developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
VIX-The Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options. It is calculated and disseminated on a real-time basis by the CBOE, and is often referred to as the fear index or fear gauge.
