May 11, 2026

“Let there be peace on Earth and let it begin with me.”

St. Francis of Assisi

Happy Mother’s Day!

Well, it seems peace is at hand with the ceasefire in the Ukraine and the Iranians running out of options, but first here are the numbers. Another good week with the S&P 500 gaining 2.36%, the Dow Jones Industrial Average added .39% and the Nasdaq soared up 4.52%. Internationally the FTSE 100 had a bad week, down 1.38% but the MSCI-EAFE was up 1%. The 2-Year Treasury paid 3.889% and the 10-Year yield was 4.36%.

It seems the market knows more than the pundits when it comes to the progress in the ongoing wars. As Barrons Alex Rule surmises “Broken Record. We’re running out of superlatives for this market. The S&P 500 and Nasdaq Composite closed Friday at new highs once again. It’s their 15 and 11th record closes of the year, respectively.”

The Market heard all kinds of good numbers last week starting with the much-anticipated jobs report. The U.S. economy added 115,000 jobs in April, while unemployment remained stable at 4.3%. On the positive side, that’s well ahead of the 65,000 expected. And the previous month’s numbers were also adjusted upwards.

On earnings, as we are near the end of earnings season, 84% of S&P 500 companies have now exceeded earnings estimates for the first quarter, according to FactSet, with nearly 90% of companies in the index having reported their results. Even more impressive, overall earnings growth stands at 27.7%. That’s the best rate since the fourth quarter of 2021, more good news.

On the not-so-positive side (for stocks and mortgage rates), the solid numbers did nothing to help the chances of an interest rate cut at the next meeting. In fact, the market still sees a very low probability of the Federal Reserve cutting any time this year, despite the change in leadership. We shall see if world events, (namely the opening of the Straits of Hormuz and the end of the war bring gas prices down). For stocks, the rate won’t matter much if corporate America continues to knock it out of the park.

Overall, economic data released in April was broadly supportive, with first-quarter gross domestic product (GDP) rebounding, strong corporate earnings, significantly falling jobless claims and stable retail sales. But consumer confidence continued to slide, oil prices remained high and inflation continued to climb, particularly among measures that include the more volatile food and energy sectors. The Magnificent Seven accounted for nearly half of the S&P 500 Index’s monthly gain, the Nasdaq Composite Index surged 15.29% and the Russell 2000 Index of small-cap stocks rose 12.16%, outperforming the S&P 500 Index and signaling broader enthusiasm for equities.

Bonds: Benchmark 10-year Treasury yields rose modestly in April, and shorter-dated Treasury yields rose as market expectations for further interest-rate cuts in 2026 were effectively eliminated. The U.S. Federal Reserve (Fed) kept interest rates unchanged at its April meeting but revealed disagreement over the appropriate level for interest rates amid rising inflation and relatively stable employment. The Bloomberg U.S. Aggregate Bond Index, which is predominantly comprised of Treasuries, investment-grade corporate bonds and U.S. mortgage-backed securities, rose 0.11% in April.

What’s not to like? Inflation, ok here is the bad news. March’s Core Consumer Price Index (CPI) rose 2.6% from March of last year, while headline CPI (which includes the more volatile food and energy sectors) rose 3.3%, its largest rise since 2024, as energy prices rose. March’s Core Personal Consumption Expenditures (PCE) Price Index, which is the Fed’s preferred measure of inflation, continued to climb, rising 0.3% relative to February and 3.2% relative to March 2025. While the PCE figures were generally in line with expectations.

Consumer confidence? No surprise it took a hit. The University of Michigan Consumer Sentiment Index fell in April to 49.8 from 53.3 in March, its weakest reading on record as middle- and moderate-income households struggle with rising inflation, particularly in fuel prices. Despite low confidence, retail sales increased in March, with total purchases rising 1.7% from February, fueled by a record increase in gasoline spending. Excluding gasoline purchases, the index rose 0.6%, near February’s revised 0.7% gain.

So, what does it all mean? Our outlook for 2026 is still bullish and it seems the adage of “go away in May” was ill advised, the strong corporate earns and the return of the Mag 7 suggesting Artificial Intelligence spending fears were overdone. If Iran does fold and the ceasefire in Ukraine lead to positive outcomes, the Treasury Secretary Scott Bessent predictions for a robust second half of the year will be actualized. I cannot help but think that the recent court decision both the US and the Virginia Supreme Court’s rulings bolstering Republican changes to hold both houses and grow the majority, has something to do with Wall Streets optimism. Why? Because if the Republican control after the midterms, the Trump economic policies will face far less headwinds and allow the completion of the transition both of the economy and world order. Regardless, it will be very interesting but overall good for stocks going forward.

Mike