| “Everyone has the brainpower to make money in stocks. Not everyone has the stomach.”
Peter Lynch
As we begin June, markets continue their upward trend. Here are the key numbers: The S&P 500 gained 0.91%, the Dow Jones Industrial Average added 0.68%, and the Nasdaq rose 1.44%. Internationally, the FTSE 100 fell 0.16%, while the MSCI EAFE gained 0.90%. The 2-year Treasury yielded 4.01%, and the 10-year yielded 4.99%.
Wall Street is betting that ongoing negotiations with Iran amid the U.S. blockade’s impact will soon reopen the Strait of Hormuz, allowing oil to flow freely and easing pressure on U.S. gas prices. This optimism helped major U.S. indexes finish May at record levels, with the Nasdaq posting its best two-month stretch in decades.
The rally was driven by strong tech earnings and AI enthusiasm, pushing the S&P 500 to eleven all-time closing highs and a 5% monthly gain. Information Technology surged 16% and was the only sector outperforming the benchmark. Mid- and small-cap stocks lagged (S&P MidCap 400 +2%, S&P SmallCap 600 +1%), while Energy dropped 6% amid falling oil prices.
Several factors supported the positive sentiment: First-quarter earnings beat expectations, oil prices are on track for their largest monthly decline since 2020 (WTI under $90, Brent down nearly 20% in May), and consumer spending remains resilient. Lower oil prices are improving consumer confidence, even if gas pump relief has been modest so far. So, it is no surprise people are feeling better about the economy and the markets. The CBOE Volatility Index, known affectionately as the stock market’s ‘fear gauge,’ is falling 3.1% as the Big 3 market indexes head for record highs.
On the economic front, first-quarter GDP growth was revised slightly lower, but inflation data drew more focus. Core PCE rose 0.24% in April (milder than expected), though 3- and 6-month annualized rates stood at 3.8% and the year-over-year figure at 3.3%. These readings (which exclude food and energy) suggest some broader price pressures.
Incoming Fed Chairman Kevin Warsh indicated during confirmation testimony that the Fed may place greater weight on the Dallas Fed’s trimmed-mean PCE, which discards extreme price movements for a smoother measure that tends to read lower during inflationary periods.
Internationally? Europe still is a good bet and has performed well. The S&P Europe 350 rose 3% in May, led by Information Technology (+14%). Smaller-cap indices also gained, with Momentum as the top performing factor.
Mortgage rates and housing? Rates saw a slight uptick last week, staying in the mid-6% range. Freddie Mac reported the 30-year fixed at 6.53% (up from 6.51% the prior week and down from 6.89% a year ago), while the 15-year fixed averaged 5.87%. The housing market remains balanced but cautious. Pending home sales fell 1.5% week-over-week (second straight decline), mortgage applications dropped to their lowest since early April, and higher rates (with median payments around $2,637) cooled demand. Inventory is slowly rising above year-ago levels, with homes staying on the market about one day longer. April existing home sales edged up modestly to a 4.02 million annualized pace, with 4.4 months’ supply.
Overall, affordability pressures and rates are restraining stronger demand, but gradual inventory gains are helping some buyers in this spring market.
In closing, the bull market is intact but maturing. We expect modest to moderate gains for major U.S. indices in Q3 which could deliver low- to mid-single-digit returns with higher volatility than recent quarters. A resolution in the Middle East or better-than-expected inflation data would be bullish catalysts, while prolonged oil shocks or earnings misses could trigger a 5–10% pullback.
So enjoy the ride, 2026 continues to reward those with the stomach to endure the swings.
Mike
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