Strong Earnings, Market Recovery, and Broadening Leadership in the May Outlook

May 2026 has opened against a backdrop of meaningful market recovery. Major equity indices saw a significant rebound, with the S&P 500 posting a gain of more than 10% in April 2026 alone, its strongest monthly performance in more than five years (Source: CNBC, Bloomberg). From a low point on March 30, 2026, markets climbed approximately 14%, more than recovering the prior decline of roughly 7.8% from the start of the Iran conflict (Source: CNBC). On May 6, 2026, the Dow Jones Industrial Average rose more than 600 points amid reports of a possible agreement between the United States and Iran, with oil prices declining on the news (Source: Yahoo). Markets appear to be looking past the geopolitical backdrop and refocusing on corporate fundamentals.

 

A central driver of that optimism is the strength of corporate earnings. First-quarter 2026 results have come in well ahead of expectations, with earnings growth for the S&P 500 tracking at approximately 19%, materially above the 13% initially projected and roughly double the historical average rate of growth (Source: FactSet). This marks the second consecutive quarter of double-digit earnings gains for the year, a combination not seen since 2011 (Source: FactSet). A significant contributor has been the ongoing buildout of artificial intelligence infrastructure, with four of the largest technology firms alone committing an estimated $700 billion in capital expenditure, a level of private-sector investment that has functioned as a meaningful source of economic stimulus (Source: CNBC). Broader economic data has supported a similarly constructive picture, with unemployment edging down to 4.3% as of May 6, 2026, near historically low levels, and the prior monthly jobs report for March 2026 showing 178,000 positions added (Source: BLS).

 

Oil prices remain above pre-conflict levels, with West Texas Intermediate crude trading near $100 per barrel as of May 6, 2026 (Source: Tradingview). Historically, oil price shocks tied to geopolitical conflict, including those that accompanied the Kuwait conflict in 1990, the Iraq conflict in 2003, and the Russia-Ukraine conflict in 2022, have generally subsided within approximately six months (Source: Morningstar, Bloomberg). The United States is now the world’s largest energy producer and a net exporter, a structural shift that provides additional insulation from global supply disruptions (Source: EIA). Against that backdrop, a recession does not appear likely in the near term.

 

Beneath the headline indices, market leadership has continued to broaden. Small-cap stocks are up approximately 15%, international equities have gained roughly 9%, and emerging markets have risen approximately 18% as of May 6, 2026, with South Korea a notable contributor given its significant semiconductor industry presence (Source: Yahoo Finance). Within technology, a notable divergence has emerged: semiconductor and hardware-oriented companies are up approximately 44% from the March 2026 lows, while software companies remain down approximately 17% year to date (Source: Yahoo Finance).

 

The experience of recent months has reinforced, once again, the importance of remaining disciplined and diversified through periods of volatility. The sharp recovery in April followed a period of significant uncertainty, demonstrating how quickly market conditions can shift and how difficult it is to time those turning points. Staying invested across asset classes and geographies, rebalancing when appropriate, and maintaining a long-term perspective remain the most effective tools for navigating environments like this one.

 

Important Disclosures:

• This commentary is for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security.
• Forward-looking statements are based on current market conditions and are subject to risks and uncertainties. Actual results may differ materially.
• Past performance does not guarantee future results. All investments involve risk, including possible loss of principal.