Market Update
The U.S. stock market continued its April momentum through May. The May rally was largely dominated by the information technology sector, particularly AI shares. An exceptional Q1 corporate earnings performance helped support Wall Street's May surge. The S&P 500 and the NASDAQ each set new records in May, and while the Dow lagged somewhat behind those benchmarks, it nonetheless rose well past the 50,000 threshold. However, while headlines throughout May focused on stocks at record highs, the broader economy showed signs of stagflation.
Wall Street's rally in May was driven by tech and AI stocks, while heavily dominated the market share of gains. Health care and consumer discretionary shares also helped drive the overall market, which also saw gains in communication services, industrials, and real estate. Utilities, energy, consumer staples, financials, and materials lagged.
While equities soared, the bond market exhibited anxiety over inflation and fiscal sustainability. Slowing wage growth and higher fuel costs helped weaken consumer spending and disposable income, which fell to its lowest level since February 2025.The labor market continued to show signs of moderate strengthening. Overall, the labor market presented a picture of stability, with signs of moderation, marked by steady unemployment and modest job gains. The Federal Reserve noted that the labor market remained stable but slower than in prior years.
Corporate earnings in Q1 showed very strong performance from S&P 500 companies, marking the fastest earnings growth since 2021, with gains spreading across several sectors. Earnings growth surged to 28.4% year over year according to FactSet, with 84% of S&P 500 companies beating earnings per share (EPS) estimates. All of the "Magnificent 7" companies beat EPS expectations, with their earnings exceeding estimates by 32.5%, roughly twice the S&P 500 average.
International Markets
The European stock market delivered strong gains in May, led by tech-driven momentum, AI earnings growth, and geopolitical optimism. Asian markets were much more diverse last month. While tech-heavy exporters rose to historic highs fueled by an AI surge, other markets, particularly in China, faced headwinds from shifting geopolitical events and energy market volatility. For May, the STOXX Europe 600 Index rose 2.4%; the United Kingdom’s FTSE ticked up 0.4%; Japan’s Nikkei 225 Index jumped 11.5%; while China’s Shanghai Composite Index fell 1.1%.
On a Personal Note
Jeff and Peggy went to Madison, Indiana for a day and spent the night in a B&B. A very quaint town with a lot of activities going on. In May, Drew's oldest daughter came home from college and his youngest daughter started a summer college course. It felt like everyone was home and both daughters were in college at the same time. Much of Chris's month was spent traveling to various soccer fields in the Ohio and Indiana areas, as well as preparing for summer break for his kids. Lisa headed to the lake for a long weekend with the girls. The weather wasn't the best, but when you put a group of friends together with good food, drinks, and zero responsibilities, sunshine becomes optional. The lake may not have been the highlight of the weekend, but the laughter certainly was. Sam completed his first triathlon at Iron 70.3 Chattanooga in May. Crossing the finish line after months of training was so rewarding that he's already thinking about the next one! Taylor's daughter is officially walking which means Peter and Taylor are in for a wild summer full of fun, adventures, and unfortunately – some toddler tantrums. Looking forward to making some memories this summer!
